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Special Needs Trust created, but I need disability verification of beneficiary

Discussion in 'Social Security, Disability & Health' started by HarriedParent, Dec 2, 2019.

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  1. HarriedParent

    HarriedParent Law Topic Starter New Member

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    We have created a Special Needs Trust in our Living Trust. My step-daughter, who will be the beneficiary, is mentally ill and very un-cooperative with our efforts. We _think_ she is getting SSI, ergo she is judged "disabled", but she will not divulge any real information. She refuses to provide the "Benefits Verification Letter" from SSA so I would know for sure.

    What legal jeopardy am I in if I go ahead and create a SNT and the IRS discovers she is not disabled? Even if I show several good-faith efforts to determine her status?

    Thanks.
     
  2. zddoodah

    zddoodah Well-Known Member

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    Merely creating the trust isn't going to create the potential for any "jeopardy," but why would you create it without having verification of her status? Have you funded the SNT? Did you create the SNT (or the "living trust" of which the SNT is apparently a sub-trust (?)) yourself, or did you hire an attorney to do it?
     
  3. HarriedParent

    HarriedParent Law Topic Starter New Member

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    Yes, an estate planning attorney wrote the Revocable Living Trust for us in 2004. It is quite comprehensive, and we looked forward to when she would possibly be formally disabled. My wife is now in the last stages of a 20-year battle with cancer, and it is now becoming clearer that we get all the details right. The SNT is a sub-trust created on the death of either of us. The SNT has not been instantiated, nor funded, at this time.
     
  4. army judge

    army judge Super Moderator

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    You initially reveal that you HAVE created a "special needs trust".

    By the way, the trust of which you speak "special needs trust" is also referred to as a "supplemental needs trust".



    You then ask in the following paragraph about legal jeopardy IF you create such a trust.

    Before you do anything, I suggest you consult an attorney proficient in the creation and operation of trusts.

    Most attorneys will meet with a prospective client at no charge to assess your predicament and discuss your options.

    Those meetings are time well spent.

    However, there is an agency in Washington (and all across the USA) that serves to support individuals and families with "special needs".

    This is their website discussing "special needs trusts" in your state:

    What’s Next? - The Arc of Washington State

    Additional information and resouces:

    http://www.nwrcwa.org/files/2012/03/FYI_Special_Needs_Trust_Web.pdf

    WashingtonLawHelp.org | Free legal help for Washingtonians who cannot afford a lawyer.

    Special Needs Trust | Newton Kight, LLP

    The Benefits of A Special Needs Trust for A Disabled Child - Elder Law Group - Asset Protection Estate Planning

    5 reasons to consider a special needs trust | WTOP

    Banks can also be excellent resources to assist you pursuing a "SNT":

    Administering Special Needs Trusts | Wealth Management | Washington Trust Bank




    You also need to deliberate becoming your child's "legal guardian".

    You MUST also plan for what will happen to your loved one IF something awful would happen to you.

    A lawyer or advocate for special needs people can assist you in developing and assessing your options and a strategy.

    Whatever you do, retain legal counsel to assist you in creating and establishing the "SNT".

    This is not a DIY effort.
     
  5. Tax Counsel

    Tax Counsel Well-Known Member

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    None. The IRS won't care so long as you properly report and pay the tax on the income of the trust. It is not the IRS rules that define what a SNT is and how it must be set up. That comes from the rules for whatever government benefits she will receive.The SNT is going to be taxed like other trusts, so you need to understand the rules for taxation of trusts as well as gift and estate tax rules as well for the gifts to the trust that you intend to make. I suggest you see a tax attorney about that. But whether she is disabled or not, the tax rules are going to work the same.

    Of course, to SSA and other government agencies providing benefits to disabled persons whether she is truly disabled or not makes a big difference.
     

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