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I oversee my son's special needs trust fund. Left by my parents. Both deceased. I need to know how to file the taxes ???

Conroe, TX |

I did not do it the first year. This is the second year. Can I do it myself and what do I need?

Attorney Answers 3


I'm afraid tax issues are definitely not my forte, and I would actually suggest that you consult with a CPA, not an attorney on this. You never know, you might get lucky an find an attorney here who is comfortable providing some guidance, but that's just not the end of things we deal with. Out of personal curiosity, I did an Internet search an came up with the article in the following link, which comes from a group that might be generally helpful:

Obviously, I don't know anything about them or the accuracy of what theyre saying (and I really only skimmed the information), but it might give you a place to start. Rather like the law itself, though, tax regulations change constantly, though, so you might keep in mnd that what you find may not be current (again, I'd advise going with a CPA, who would keep up with that). Good luck.

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In a typical special needs trust in this situation, if the trust generates $100 or more in gross income (interest, dividends, and capital gains), you must file a Form 1041 as trustee, which is generally due on April 15 (or later if a weekend or holiday) of the next year unless you file for a five-month extension. If the taxable income is over this threshold, then I recommend obtaining the services of a CPA who has experience in preparing fiduciary income tax returns (i.e., not just 1040s). Depending on the nature of the assets and how good your records are, it may not be very expensive, and you can charge the tax preparation fees to the trust. That said, in my experience (as a CPA and an attorney), the Form 1041 is NOT a very intuitive return and there is no user-friendly software to prepare it.

I should also mention the way fiduciary income taxation works. If you make no distributions to or for the beneficiary during the calendar year, the trust pays the income tax. But to the extent you made distributions to the beneficiary, the beneficiary will recognize the net taxable income of the trust. Thus, the trust's Form 1041 may be needed to prepare the beneficiary's Form 1040.

If the gross income of the trust exceeds the $100 threshold and you need help finding a professional to prepare the return for the trust, send me an email and I can help you.

NOTICE: The foregoing is provided for general informational purposes only and is not intended to create, and should not be construed as creating, an attorney-client relationship. Legal advice that you rely upon in making important decisions should only be obtained from direct communications with a lawyer licensed in your jurisdiction after there has been a full disclosure of all of the relevant facts. That said, you should never provide information that you intend to be confidential or privileged on a forum such as this, and you should never rely on information provided here as a substitute for such legal advice. Also, please note that any U.S. tax information provided above is not intended to be used, and may not be used, for the purpose of avoiding penalties imposed under the U.S. Internal Revenue Code or for promoting, marketing, or recommending any portion of this communication to any party.

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You need to be filing a fiduciary income tax return a Form 1041 for the federal and if TX has one you must file there too. (However, if TX does not have an income tax then one may not be required.) Anyway, the trust reports its income and expenses on the return. If it pays out income to the beneficiary that amount is deducted. Once the distributable net income or DNI is distributed to the beneficiary it reduces the taxable income of the trust. The trust pays income on its net income and has compressed tax brackets. The beneficiaries receive a K-1 from the trust and report the income reflected thereon.

Hope this helps.

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Mr. Fromm is licensed to practice law throughout the state of PA with offices in Philadelphia and Montgomery Counties. He is authorized to handle IRS matters throughout the United States. His phone number is 215-735-2336 or his email address is , his website for more tax, estate and business articles is and his blog is

LEGAL DISCLAIMER Mr. Fromm is licensed to practice law throughout the state of PA with offices in Philadelphia and Montgomery Counties. He is authorized to handle IRS matters throughout the United States. His phone number is 215-735-2336 or his email address is , his website is and his blog is <> Mr. Fromm is ethically required to state that the response herein is not legal advice and does not create an attorney/ client relationship. Also, there are no recognized legal specialties under Pennsylvania law. Any references to a trust, estate or tax lawyer refer only to the fact that Mr. Fromm limits his practice to these areas of the law. These responses are only in the form of legal education and are intended to only provide general information about the matter within the question. Oftentimes the question does not include significant and important facts and timelines that if known could significantly change the reply or make such reply unsuitable. Mr. Fromm strongly advises the questioner to confer with an attorney in their state in order to ensure proper advice is received. By using this site you understand and agree that there is no attorney client relationship or confidentiality between you and the attorney responding. This site should not be used as a substitute for competent legal advice from a licensed attorney that practices in the subject area in your jurisdiction, who is familiar with your specific facts and all of the circumstances and with whom you have an attorney client relationship. The law changes frequently and varies from jurisdiction to jurisdiction. The information and materials provided are general in nature, and may not apply to a specific factual or legal circumstance described in the question or omitted from the question. Circular 230 Disclaimer - Any information in this comment may not be used to eliminate or reduce penalties by the IRS or any other governmental agency.

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