It’s that time of year when we all prepare for the future, and this year, there is even more uncertainty than usual. If you are preparing your estate and special needs plans for the new year, this episode will answer frequently asked questions and clarify details about the taxation of these special trusts.
The taxation of trusts can be confusing, especially in the case of special needs trusts.
One of the first issues that Annette addresses is the need for a beneficiary to file an individual tax return. Trustees should warn their beneficiaries of this requirement and ask them to refrain from submitting their tax returns until they hear from you and receive the information that you will share with them.
Annette sends out a letter at the beginning of each year to all of her beneficiaries to let them know that she will be following up with more data and information. More than this communication, you also need to decide if you are going to pay for the tax preparation or not. This is also a cost that the trust could pay for itself.
Another issue that Annette addresses is one of the most frequently asked questions: do you need a tax identification number for a D4A (Self-Settled Trust) or an SNT (Special Needs Trust) trust? Generally, the answer is no. However, you may need one later on when you activate or fund the account. If it sits unfunded, you do not need a tax ID number as you have no reason to activate the account at that time.
This process looks different for each person and each trust, so you should contact your tax specialist and/or estate planner for more information and advice. While this topic can be difficult, Annette hopes that these answers will help you make 2021 the best year yet.
2020 has been challenging to say the least, but with the hope that 2021 brings, there are ways that you can plan ahead to benefit your future self. You’ll be glad you did.
Happy Holidays and Happy New Year!
Annette Hines has been practicing in the areas of Special Needs, Elder Law, and Estate Planning for more than 20 years. Ms. Hines brings personal experience with special needs to her practice and podcasts as the mother of two daughters, one of whom passed away from Mitochondrial disease in November 2013. This deep, personal understanding of special needs fuels her passion for quality special needs planning and drives her dedication to help others within the special needs community.