Supplemental Needs Trust

[usound76]

What is the name of your state (only U.S. law)? Kentucky

I finally executed my will and set up a supplemental needs trust for my disabled daughter. I have a question on taxes. Are there tax forms I need to fill out for the trust itself and on my own taxes? There won't be much in the trust to start, only some savings bonds that I plan to get re-titled into the trust. I set it up mostly so it will be the beneficiary for my life insurance, pension, and 403 (b) upon my passing. I am set to be the trustee, then my parents should something happen to me. The attorney that set up the trust did not know about taxes either, she said she had never been asked about it. I just want to make sure I do all of this right.

Thank you in advance!

 

[OHRoadwarrior]

Usually, the person establishing the trust uses their SS# for tax purposes.

 

[tranquility]

When the trust has income, the trust may have to file a tax return.

 

[OHRoadwarrior]

You need to look into establishing a trust that will endure your death, rather than toll within so many years of it.

 

[usound76]

You need to look into establishing a trust that will endure your death, rather than toll within so many years of it.

Now I'm really confused. There is no SSN listed on the trust document. I thought that a Supplemental Needs Trust was to benefit the disabled person throughout THEIR lifetime, not just the lifetime of the person that set it up. I know that any monies placed into the trust cannot be counted as assets toward my daughter's Medicaid or Social Security, once she turns 18 and is eligible for SS. The attorney did say that I can set up a fiduciary account at a bank and place funds into the trust via that account. I'm new to all this trust stuff!

 

[OHRoadwarrior]

I didn't mean to confuse you. Unfortunately, my knowledge of trusts is very limited. I do know that some trusts toll on the death of the person establishing them others can be set up to endure. Be patient, I am sure someone with good knowledge will be by.

 

[mtpockets]

trust tax returns

What is the name of your state (only U.S. law)? Kentucky

I finally executed my will and set up a supplemental needs trust for my disabled daughter. I have a question on taxes. Are there tax forms I need to fill out for the trust itself and on my own taxes? There won't be much in the trust to start, only some savings bonds that I plan to get re-titled into the trust. I set it up mostly so it will be the beneficiary for my life insurance, pension, and 403 (b) upon my passing. I am set to be the trustee, then my parents should something happen to me. The attorney that set up the trust did not know about taxes either, she said she had never been asked about it. I just want to make sure I do all of this right.

Thank you in advance!

The trustee must obtain a taxpayer identification number for the trust when the trust becomes irrevocable. If it is already irrevocable, obtain the number now. Use Form SS-4, which can be obtained from the IRS site: http://www.irs.gov/uac/Forms,-Publications,-and-Other-Tax-Products.

Once the trust becomes irrevocable, the trustee must file a fiduciary income tax return -- Form 1041 -- for each calendar year in which the trust's gross income is at least $600.

 

[usound76]

OK, after more searching, I have found that the money put into the trust is considered taxable to me, correct? This is a Third-party trust and cannot be considered a Qualifying Disability Trust right now because she does not receive SSI or SSDI since I make too much money. Once she becomes a legal adult and qualifies for SSI, it can then be considered a QDiT with different personal exemption rules. I was going to open a fiduciary account at the bank and try to put $50-$100 a month into it, but after researching, probably not going to happen. I don't want to get taxed on the money from my paycheck, place it the the fiduciary account, then get taxes on it again at the end of the year. Doesn't seem quite right to me. I may not even re-title the savings bonds into the trust. Can I just let this trust sit dormant and unfunded for years? Do I even need to get the EIN and file anything if there are no assets or cash in the trust? I just want my daughter taken care of in the event of my death, I don't want to be taxed to death first!

 

[LdiJ]

Now I'm really confused. There is no SSN listed on the trust document. I thought that a Supplemental Needs Trust was to benefit the disabled person throughout THEIR lifetime, not just the lifetime of the person that set it up. I know that any monies placed into the trust cannot be counted as assets toward my daughter's Medicaid or Social Security, once she turns 18 and is eligible for SS. The attorney did say that I can set up a fiduciary account at a bank and place funds into the trust via that account. I'm new to all this trust stuff!

It really depends on the nature of the trust. If it is a grantor trust (which most trusts are when the person is still living) then the earnings, for tax purposes are treated as if they belonged to the grantor (which would be you if this is a grantor trust). However, if it was set up as some other kind of trust, then either your daughter might have to file a tax return on the earnings of the trust, or the trust might have to file its own tax return. You need to ask your attorney what kind of trust you set up. I suspect that you will find that its a grantor trust.