Law Offices of Connie Yi, PC
Tell Us About Your Case
888-312-6978

For the safety of our community, clients and staff, we have suspended all in-person meeting effective March 17, 2020. All consultation meetings will be via Phone or Zoom Video Conferencing. Please contact us at (925) 484-0888 or email us directly at [email protected] to schedule the consultation.

View Our Practice Areas

Spotlighting tax duties re a special needs trust

Trusts are impressively flexible and creative estate planning instruments that provide varied benefits – including significant tax advantages – for their creators and beneficiaries.

Many trusts readily illustrate that utility, including a special needs trust. That trust vehicle enables a beneficiary to receive benefits under select government programs (for example, Medicaid and Supplemental Security Income) while protecting personal assets held in trust. Funds from a trust can be used for a beneficiary’s benefit without compromising needs-based eligibility.

How are trust proceeds taxed when a beneficiary dies?

Funds in a special needs trust are often earmarked for alternative parties when a beneficiary dies. How are they taxed?

An article focused on that question properly notes that the answer “depends on how the special needs trust was established and funded.”

If funds belong to the beneficiary as the result of, say, a personal injury settlement, monies sought to be passed along to remainder beneficiaries may be subject to an inheritance tax. Relevant assets will be afforded a so-called “step up basis” to reduce the brunt of any capital gains.

Conversely, funds held in a trust created by a third party for the benefit of a special needs beneficiary are not deemed to have been owned by the latter. The above article stresses that remainder beneficiaries receiving them “will have to pay [full] capital gains on appreciated property when they sell it.”

Securing guidance on tax treatment re a special needs trust

The information conveyed in today’s blog post might reasonably invite various questions concerning the establishment of a special needs trust and an understanding of tax consequences at a future date. An experienced estate planning attorney can provide guidance on those and related matters.

No Comments

Leave a comment
Comment Information

Contact Us

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Email Us For A Response

Office Locations

Law Offices of Connie Yi, PC
323 Ray Street
Pleasanton, CA 94566

Phone: 925-484-0888
Pleasanton Law Office Map

Cupertino
19925 Stevens Creek Blvd
Suite 100
Cupertino, CA 95014

Toll Free: 888-312-6978
Map & Directions

San Francisco
490 Post Street, Suite 508
San Francisco, CA 94102

Toll Free: 888-312-6978
Phone: 415-433-3350
Map & Directions