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Helse · 07-07-2009, 01:03 AM

KateEA Inquires: "Are you sure that is a special needs trust?"

"There is some confusion in the disability community about the terms to use for a
third-party established trust [emphasis added] created to provide resources to
supplement governmental benefits, such as Supplemental Security Income (SSI) and
Medicaid. Many use the term "special needs trust." This may cause some confusion,
because the federal government has used that term to mean a "self-settled" trust,
that is, using the beneficiary's own resources to establish the trust [grantor trust]."
http://www.paulnidich.com/id20.htm

Response based upon limited information regarding trust instrument's terms
disclosed by poster. In light of the quasifiduciary responsibility of a trustee's accountant,
information dissemination limitation understood.

Trust taxation 101: Trusts fall into 2 categories, grantor or nongrantor.
If grantor trust classification - (IRC §671-678) include income in individual return, similar to Single Member
LLC (SMLLC), without use of Schedule C. If separate entity classification, file form 1041 and distribute K-1 to
beneficiary(ies) receiving "income"* from trust, in capacity of beneficiary, 1099 to persons receiving non beneficiary
distributions.

Your question, if I may rephrase:
Trust was a grantor trust until death of beneficiary resulted in trust's classification as separate entity. I am
contemplating filing two 1041s in 2009 reporting income and distributions to deceased beneficiary and subsequent remainder
beneficiary. Comments?

A: "No", Deceased's estate reports 2009 income from grantor trust, 1041 for subsequent trust
distributions to remainderman (brother), apply for trust TIN via IRS Form SS-4

Or
Trust was a "1041 filer" (nongrantor trust) with a trust TIN (clue**). I am contemplating filing two 1041s in 2009 reporting income
and distributions to deceased beneficiary and subsequent remainder beneficiary. Comments?

A: "No", File single 1041 with attached 1041 K-1's:
K-1 deceased beneficiary or beneficiary's estate (probate quirk, separate union rules, consult probate administrator (if any))
K-1 alternate party(ies) receiving trust distribution (i.e., "normal brother", properly denoted remainderman)

*Similar to partnership taxation, trust distribution may be income, principal or a
combination thereof. Exclude distributions of capital from K-1 income reporting
** Exception to rule, grantor trusts may receive TINs for "information returns only".

Cerebral Inquiry Alert *** Nomination: Most Difficult Question of Month ***

07-07-2009, 01:03 AM	#7 (permalink)
Helse Status: Moderator Join Date: Dec 2008 Posts: 580 Blog Entries: 9 Rep Power: 26	Determination of 1041 Trust Filing Obligation (1041 K-1) KateEA Inquires: "Are you sure that is a special needs trust?" "There is some confusion in the disability community about the terms to use for a third-party established trust [emphasis added] created to provide resources to supplement governmental benefits, such as Supplemental Security Income (SSI) and Medicaid. Many use the term "special needs trust." This may cause some confusion, because the federal government has used that term to mean a "self-settled" trust, that is, using the beneficiary's own resources to establish the trust [grantor trust]." http://www.paulnidich.com/id20.htm Response based upon limited information regarding trust instrument's terms disclosed by poster. In light of the quasifiduciary responsibility of a trustee's accountant, information dissemination limitation understood. Trust taxation 101: Trusts fall into 2 categories, grantor or nongrantor. If grantor trust classification - (IRC §671-678) include income in individual return, similar to Single Member LLC (SMLLC), without use of Schedule C. If separate entity classification, file form 1041 and distribute K-1 to beneficiary(ies) receiving "income"* from trust, in capacity of beneficiary, 1099 to persons receiving non beneficiary distributions. Your question, if I may rephrase: Trust was a grantor trust until death of beneficiary resulted in trust's classification as separate entity. I am contemplating filing two 1041s in 2009 reporting income and distributions to deceased beneficiary and subsequent remainder beneficiary. Comments? A: "No", Deceased's estate reports 2009 income from grantor trust, 1041 for subsequent trust distributions to remainderman (brother), apply for trust TIN via IRS Form SS-4 Or Trust was a "1041 filer" (nongrantor trust) with a trust TIN (clue). I am contemplating filing two 1041s in 2009 reporting income and distributions to deceased beneficiary and subsequent remainder beneficiary. Comments? A: "No", File single 1041 with attached 1041 K-1's:** K-1 deceased beneficiary or beneficiary's estate (probate quirk, separate union rules, consult probate administrator (if any)) K-1 alternate party(ies) receiving trust distribution (i.e., "normal brother", properly denoted remainderman) Similar to partnership taxation, trust distribution may be income, principal or a combination thereof. Exclude distributions of capital from K-1 income reporting * Exception to rule, grantor trusts may receive TINs for "information returns only". Cerebral Inquiry Alert * Nomination: Most Difficult Question of Month * __________________ Last edited by Helse; 07-07-2009 at 11:36 PM..