Special needs trusts are designed to provide for the special care and protection of a person with disabilities. In order to qualify as a special needs trust, you must have been disabled for at least two years prior to filing the application. A “disability” is defined as being unable to work or suffer from some medically determined impairment that limits the functions of daily living. Special needs trusts may be named in a will or filed by itself without any other formality. The grantor(s) can also appoint one or more trustees who administer the trust for their benefit and those of their family members if they wish.
What kind of taxes do I pay on my special need trust?
In most cases, there are no federal taxes due because qualifying assets within your estate (such as real property used only as a residence) cannot be counted toward an individual’s gross income under Internal Revenue Code Section 72(a)(7). However, even if there are no federal tax consequences, it is still advisable not to make gifts until after obtaining advice from an attorney regarding possible state inheritance tax consequences and/or probate fees related with making these donations before death. For example: If you leave all or part-of your taxable estate (excluding life insurance proceeds) directly to another person rather than setting up an irrevocable inter vivos gift during your lifetime; he/she would receive 100% of this amount whether this was done through oral statements about intentions made during life or written