I helped implement a tax saving strategy for my recently deceased father-in-law that, given reasonable assumptions, will save our family $1,178,397 in taxes over our daughter’s lifetime. To oversimplify, I redirected what would have been my wife’s $500,000 inherited IRA to our daughter's Special Needs Trust (SNT).

Many grandparents of children with disabilities can take the same tax-cutting steps we did to help protect their grandchild’s long-term financial security and independence.

Please note this strategy could also have significant benefits to grandparents who don’t have a grandchild with a disability. Grandparents with children, who are in a substantially higher tax bracket than their grandchildren, can take similar tax-cutting steps.

If you are skeptical, please note that this strategy was published and attributed to me in The Wall Street Journal on December 22, 2025 in an article by Ashlea Ebeling.

The Common Default

Most grandparents with traditional families name their spouse as the primary beneficiary of their IRA and other retirement plans. Then, typically, they name their children equally as the contingent beneficiaries of their IRAs. That means if their spouse predeceases them, their children inherit the IRAs equally. You may also see the words "per stirpes" on the beneficiary form to indicate that if one of the children predecease their parents, then the share of the predeceased child goes to the child or children of the predeceased child.

The Improvement in the Common Default

I suggest adding flexibility to the documents by including “disclaimers” (see below) and in the case of a grandchild with a disability to allow a child to “disclaim” to a SNT.

Some estate attorneys have been using variations of this disclaimer strategy for more than 30 years. The objective has always been to allow grandparents to set up a flexible estate plan that could direct at least a portion of their IRA to a grandchild or to a trust for one or more grandchildren. Over that time many IRAs were directed or disclaimed to grandchildren, saving hundreds of thousands of dollars or more in taxes.

Disclaimer Planning to a SNT

A disclaimer is a legal way to refuse an inherited IRA (or a portion of an IRA or any other asset) so it passes automatically to the next contingent beneficiary named in the beneficiary designation. You aren’t changing the beneficiary form after death, just allowing a named beneficiary to step aside in favor of a contingent beneficiary. For most traditional families, I often prefer estate plans that have a series of disclaimers built in on several levels.

Specifically in the context of this article, I am recommending you consider giving your child the choice of accepting their share of their inherited IRA or disclaiming it into the SNT for their child.

Why IRAs and Retirement Accounts Are Especially Well-Suited for a SNT

IRAs and retirement accounts are fully taxable when distributed. Under the current law known as the SECURE Act, for deaths after December 31, 2019, subject to exception, inherited IRAs must be distributed and taxed within ten years after the death of the IRA owner. This often results in massive income tax acceleration for grown children who may already be in high-income tax brackets.

However, when an inherited IRA passes directly or via disclaimer to a SNT for a beneficiary with a disability who qualifies as an Eligible Designated Beneficiary (EDB), the beneficiary can "stretch" distributions—deferring taxes—over their actuarial life expectancy. For a child who likely will need lifetime support, this difference can be life changing.

In our family's case, we benefited in two ways. First, we avoided the standard ten-year distribution of the inherited IRA rule that would have forced my wife to pay income taxes on her portion of her dad's IRA over ten years. Instead, our daughter’s trust will enjoy a 50-plus-year “stretch” based on our daughter's life expectancy. In addition, our daughter, who will receive taxable distributions from the trust will be in a lower income tax bracket than my wife and I. Combining both tax benefits with reasonable assumptions*, our daughter will enjoy $1,178,397 in additional savings over her lifetime. (Please see the graph below for a timeline of the projected benefit of the strategy we recommend.)