Taxation of Supplemental Needs Trust: A Federal Perspective

A supplemental needs trust (“SNT”) is an irrevocable trust created for an individual with a disability that provides him or her a pool of money to enrich their life while at the same time preserving their eligibility for “means-tested” benefits such as Medicaid and Supplemental Security Income.  

This is an intermediate program, presented by attorney George Gray, designed to provide a general overview of issues and strategies related to the federal income taxation of an SNT. Mr. Gray explores the various definitions of “income” and their effect on the beneficiary of an SNT; the federal income taxation of trusts in general and SNTs in particular; including need for a tax identification number, “qualified disability trust” status, and the “grantor” trust rules.  

This program will be most useful to attorneys who have a general knowledge of the creation, use and administration of an SNT but only limited familiarity with federal income tax rules in general or the taxation of trusts in particular. Mr. Gray is the author of a book entitled Special Needs Planning: A Simple Guide to Families in New York with a Loved One with a Disability, which was published by Graylake Publishing in October 2014.

Learning Objectives:

I.     Grasp three definitions of “income” and their varying effect on an SNT beneficiary

II.    Know when and how to get a tax identification number for an SNT

III.   Understand an SNT’s status as a “qualified disability trust”

IV.   Recognize the impact of the “grantor” trust rules on SNT’s