
SECURE 2.0 Modifies Rules for Special Needs Trusts
How SECURE 2.0 Enhances Special Needs Trust Options
The SECURE Act reshaped the way inherited IRAs distribute assets. It replaced the stretch IRA for most beneficiaries with a 10-year payout limit. For individuals with disabilities or chronic illnesses, however, there were exceptions. One of those exceptions involved the use of applicable multi-beneficiary trusts (AMBTs). The SECURE 2.0 Act, signed into law in December 2022, makes key changes to those exceptions.
These updates are significant for anyone planning estate transfers involving special needs beneficiaries. They simplify the inclusion of charities in trust planning, while still protecting access to long-term IRA distributions.

Background: Stretch IRA Rules and Special Needs Trusts
Before 2020, many beneficiaries could stretch required minimum distributions (RMDs) over their life expectancy, reducing annual tax burdens and allowing the account to grow longer. The original SECURE Act ended this for most non-spouse beneficiaries. Instead, inherited IRAs must now be fully distributed within ten years of the account holder’s death.
There are five exceptions to this 10-year rule. One of those exceptions includes disabled or chronically ill individuals, provided they receive the inherited IRA through an applicable multi-beneficiary trust.
An AMBT allows a primary beneficiary—such as a disabled child—to receive lifetime distributions based on their life expectancy. This structure helps preserve long-term income for vulnerable individuals while maintaining the tax-deferred status of the IRA for as long as legally allowed.
Previously, all beneficiaries of an AMBT had to be individuals. If a non-individual, such as a charity, was named, the stretch treatment was invalidated. The trust would instead face either the five-year rule or a limited single life expectancy payout, depending on the circumstances of the original IRA owner’s death.
SECURE 2.0 Updates Charitable Rules for AMBTs
SECURE 2.0 provides a welcome update. Under the new law, a charity can be a remainder beneficiary of an AMBT without losing the favorable distribution timeline for the primary special needs beneficiary. The law now treats a qualified charity as a designated beneficiary within the context of an AMBT.
This change is already in effect and eliminates a major concern for those designing long-term financial protections for a disabled or chronically ill family member. Donors no longer have to choose between maximizing lifetime IRA distributions and including charitable goals in their estate plan.
Example: How SECURE 2.0 Works in Practice
Let’s examine a common planning scenario:
Stephan creates a special needs AMBT to support his adult son Malik, who lives with a chronic medical condition. Stephan names the AMBT as the beneficiary of his IRA. Malik is the primary beneficiary of the trust during his lifetime. Upon Malik’s passing, Stephan wishes the remaining assets to go to a local nonprofit that supports housing for adults with disabilities.
Under the original SECURE Act: Naming the charity would have disqualified the trust from the stretch provision. Distributions would have followed less favorable rules, shortening the duration of IRA payouts and increasing tax liability.
Under SECURE 2.0: The local charity is treated as a designated beneficiary. IRA distributions can follow Malik’s life expectancy, providing stable, long-term financial support. After Malik’s death, the remaining balance transfers to the charity without disrupting the prior tax treatment.
Why the Change Matters
The update in SECURE 2.0 addresses a practical issue in estate planning for families with special needs. Many parents or guardians want to include charitable giving in their legacy plans. At the same time, they need to protect a disabled loved one’s access to stable income and potential government benefits.
Before this update, estate planners often had to avoid including charities as trust beneficiaries, even when it aligned with the donor’s wishes. Doing so risked collapsing the stretch period and potentially harming the disabled beneficiary’s financial security.
Now, charitable planning and special needs support can coexist in an AMBT structure, without compromising favorable IRA tax treatment.
Key Takeaways for Estate and Financial Planning
SECURE 2.0 adds flexibility for individuals using AMBTs in their estate plans. Families no longer face a penalty for combining charitable bequests with long-term support for a loved one living with a disability.
Summary of SECURE 2.0 Special Needs Trust Rule Changes:
- AMBTs can now name qualified charities as remainder beneficiaries.
- The life expectancy payout remains available for the disabled or chronically ill primary beneficiary.
- The change applies immediately and affects all newly created or updated AMBTs.
- Estate plans can now balance charitable giving with ongoing financial support for special needs family members.
FAQs
What is an AMBT under SECURE 2.0?
An applicable multi-beneficiary trust (AMBT) allows a disabled or chronically ill beneficiary to receive inherited IRA payments based on their life expectancy.
Can a charity be a beneficiary in a special needs trust?
Yes, SECURE 2.0 permits qualified charities as remainder beneficiaries in AMBTs without losing the stretch provision.
How can I preserve the stretch IRA benefit for my child with a disability?
You can name an AMBT with your child as the primary beneficiary to retain life expectancy-based distributions.
When did the SECURE 2.0 trust changes take effect?
These provisions took effect immediately after SECURE 2.0 was signed into law in December 2022.
Does SECURE 2.0 change how all trusts handle inherited IRAs?
No, these changes apply specifically to AMBTs for disabled or chronically ill individuals.
Final Thoughts on SECURE 2.0 for Special Needs Trusts
SECURE 2.0 makes an important correction that gives families more control over how they structure special needs trusts. By allowing charities to be part of an AMBT without losing the stretch IRA option, the law supports both philanthropic goals and the financial wellbeing of disabled or chronically ill beneficiaries.
Estate planners and families should review any existing AMBTs or IRA designations to see whether updates are appropriate. In many cases, incorporating a charitable component can now be done without negative tax consequences.
Work with a certified, reputable financial advisor to ensure your special needs trust and retirement plan follow current tax laws and protect your family’s long-term interests.