Broker Check
SECURE Act 2.0 Includes New Provision On Special Needs Trusts

SECURE Act 2.0 Includes New Provision On Special Needs Trusts

March 12, 2024

Experts estimate there are more than 44 million people with disabilities in the U.S., representing 13.4% of the population.1

Many parents of children with disabilities choose to establish a special needs trust. This can help provide financial support for the child long after the parents or guardian has passed away. The passage of the SECURE Act in 2019 added complexity to how these types of trusts could be set up, resulting in some limitations regarding how they could be used as long-term financial solutions. However, the SECURE 2.0 Act included a modification to help rectify this situation.

It’s important to remember that using a trust involves a complex set of tax rules and regulations. When we help clients who are interested in a trust, we work with professionals who are familiar with the emerging rules and regulations.


The SECURE Act was hailed as the most substantial retirement legislation passed in over a decade. It contained important changes to individual retirement accounts (IRAs) and other qualified accounts intended to help investors save more and be better prepared for the future. Some of the more popular provisions of the Act raised the required minimum distribution (RMD) age, allowed first-time parents to take penalty-free withdrawals from their retirement accounts in certain instances, and removed the age limit for traditional IRA contributions if you have earned income.1

The SECURE Act also made significant changes to inherited IRAs by requiring beneficiaries to draw down their inherited IRA within 10 years after the IRA creator’s death. Lawmakers carved out exceptions to this rule for beneficiaries who are spouses, are minor children, or are experiencing disabilities.2

It’s important to note that once you reach age 73, you must begin taking RMDs from a traditional IRA in most circumstances. Withdrawals from traditional IRAs are taxed as ordinary income and, if taken before the age of 59½, may be subject to a 10% federal income tax penalty.


Although much of the SECURE ACT was well received, some unintended consequences and missed opportunities needed addressing. The SECURE 2.0 Act was signed on December 29, 2022, and included 92 new, modified, or clarified provisions to the original. One of these changes pertained to special needs trusts.3

Charities Are now Allowed to be Remaindermen of a Special Needs Trust

SECURE 2.0 resolved an issue with the SECURE Act and clarified that, in the case of a special needs trust established for a beneficiary with a disability, the trust may provide for a charitable organization as the remaining beneficiary without triggering the truncated payout period. This change offered a welcome, though limited, enhancement to special needs trusts designed to receive retirement benefits and qualify as see-through trusts under the SECURE Act provision for applicable multi-beneficiary trusts (AMBTs).3,4

Although this provision allowed most charities to be named as remainder beneficiaries after the death of a disabled or chronically ill beneficiary—without disqualifying that initial disabled beneficiary from stretching the IRA over their lifetime—grantors must be careful to avoid naming disqualified charities such as private foundations as the remainder beneficiary.4

Special Needs Trusts5

A special needs trust is a legal arrangement that allows a disabled or chronically ill person to receive income without reducing their eligibility for the public assistance disability benefits provided by Social Security, Supplemental Security Income, or Medicaid.

A grantor, such as a parent or guardian, creates a special needs trust and appoints a trustee to oversee the disbursement of assets from the trust to the disabled beneficiary. The trust is designed to supplement the beneficiary’s government benefits but not replace them.

A special needs trust is one strategy for those who want to help someone in need. The trust seeks to manage the risk that the person will lose their eligibility for government programs that require income or assets to remain below a certain limit.5

Many grantors will set up a special needs trust that names a charity as the remaining beneficiary in the event the original beneficiary dies before the funds are depleted. SECURE 2.0 now allows that practice to continue.

We Can Help

If you are currently caring for a child experiencing a disability or know someone who is, one consideration may be a special needs trust.

As financial professionals, we can provide some insights into how a trust works, and we can help you access more information that addresses specific needs. We also can help explain your financial situation if you choose to start working with an attorney to create a special needs trust.

It’s never too early to start a conversation on how your loved ones–especially those experiencing disabilities–can benefit from your care and financial legacy. Whether you’re a current client or considering working with a financial professional, don’t hesitate to reach out.

1, 2021
2, April 21, 2022
3, December 2023
4, August 1, 2023
5, July 12, 2022

Aviance Capital Partners, LLC (“ACP”) is an SEC registered investment adviser located in Naples, Florida. Registration as an investment adviser is not an endorsement by securities regulators and does not imply that ACP has attained a certain level of skill, training, or ability. While information presented is believed to be factual and up-to-date, ACP does not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. Not all services will be appropriate or necessary for all clients, and the potential value and benefit of the ACP’s services will vary based upon the client’s individual investment, financial, and tax circumstances. The effectiveness and potential success of a tax strategy, investment strategy, and financial plan depends on a variety of factors, including but not limited to the manner and timing of implementation, coordination with the client and the client’s other engaged professionals, and market conditions. This should not be construed as specific investment, financial planning or tax advice tailored to an individual reader. ACP suggests that readers consult a financial professional, attorney or tax advisory professional about their specific financial, legal or tax situation. Past performance does not guarantee future results. All investment strategies have the potential for profit or loss, and different investments and types of investments involve varying degrees of risk. There can be no assurance that the future performance of any specific investment or investment strategy, including those undertaken or recommended by ACP, will be profitable or equal any historical performance level. The index and sector performance data appearing or referenced above has been compiled by the respective copyright holders, trademark holders, or publication/distribution right owners. Historical performance results for investment indexes or sectors represented are for illustrative purposes only and do not represent actual portfolio performance. The indexes or sectors represented generally do not reflect the deduction of transaction and custodial charges, or the deduction of an investment-management fee, which would decrease historical performance results. Investors cannot invest directly in an index. ACP makes no warranty, express or implied, for any decision taken by any party in reliance upon such index information.


The S&P 500 is the Standard & Poor’s index calculated on a total return basis. Widely regarded as the benchmark gauge of the U.S. equities market, this index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 focuses on the large-cap segment of the market, with over 80% coverage of U.S. equities, it also serves as a proxy for the total market. The Dow Jones is a price-weighted market index that tracks 30 large, blue-chip companies. The NASDAQ is the second-largest stock and securities exchange and attracts more technology-focused or growth-oriented companies. The Russell 2000 Index is a small-cap stock market index that makes up the smallest 2,000 stocks in the Russell 3000 Index. Bond Aggregate is represented by the iShares Core U.S. Aggregate Bond ETF.


Additional information about ACP, including its Form ADV Part 2A describing its services, fees, and applicable conflicts of interest and its Form CRS is available upon request and at For current ACP clients, please advise us promptly in writing, if there are ever any changes in your financial situation or investment objectives, if you wish to impose any reasonable restrictions to our management of your account, or if you have not been receiving at least quarterly account statements from your account custodian.