Special Needs Trusts: First-Party and Third-Party Reporting; Distribution Requirements

An SNT could be the entity that best fulfills the primary purpose of a trust, one person holding assets for the benefit of another. At the same time, its fiduciary and reporting responsibilities are among the most complex.

SNTs can be third-party or first-party SNTs. The former's income can be taxed at the beneficiary or trust level; the latter is always taxable to the beneficiary, even when there are no distributions. Understanding when to distribute income can provide significant tax savings or needed cash flow for a trust and its beneficiary. Like trusts in general, distributions from SNTs are authorized by the trustee.

First-party trusts are irrevocable and are usually established for the benefit of someone receiving government benefits. A third-party trust can be revocable or irrevocable, and its tax liability paid by parents or other grantors. Tax practitioners working with these trusts or who have clients that could benefit from an SNT need to understand the reporting responsibilities and planning opportunities that come with these trusts.

Listen as our panel of trust and estate experts details how to distinguish first- and third-party trusts, Form 1041 filing options for first-party trusts, coordinating SNTs with ABLE accounts, and distribution considerations for trust and estate advisers recommending and filing returns for SNTs.

I. Special needs trusts: an overview

II. First-party SNTs

A. Reporting requirements

B. Distributions

III. Third-party SNTs

A. Reporting requirements

B. Distributions

IV. Coordinating with ABLE accounts

V. Best practices

The panel will review these and other key issues:

• Recognizing first- and third-party SNTs
• Key reporting differences between first- and third-party SNTs
• 1041 filing options for first-party SNTs
• Coordinating an ABLE account and an SNT

Learning Objectives

After completing this course, you will be able to:

• Identify key differences between first- and third-party SNTs
• Determine distribution differences between first- and third-party trusts
• Decide how first-party trust income is reported on Form 1041
• Ascertain specific clients who may benefit from an SNT

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite:

  Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of estate, gift and trust taxation including various trusts types, the unified credit, and portability.

  
  

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).