Skip to main content

Should an annual tax return be filed, why or why not?

Detroit, MI |

Case: A Special Needs Trust (SNT) exists that is irrevocable. The trust is it's own entity and it has it's own TIN #. The trust exists to someday provide money for a disabled person who is the beneficiary of the trust for things that social security money does not provide; i.e. a handicap van for transportation. The SNT holds title to a Variable Live Insurance (VUL) policy. The VUL premiums are funded by 2 sources:
1. Tax free money (no 1099 is sent or received) that is given by the State to be used for the purposes of the disabled person ($200 mth) and
2. Gift money by friends and family for special occasionslikebirthdays (approx $200 a yr).
The above-desc money is deposited in an interest free checking account where it sits until it is automatically withdrawn monthly by the VUL

Attorney Answers 1

  1. As you correctly note, a special needs trust must obtain its own EIN and is a separate taxable enntity. The threshold for a trust to file an annual income tax return on Form 1041 is $600.00 of gross income (before deductions).


    Of the sources you describe, the gifts from individuals are clearly not income. I am not 100% certain about the money from the state. The absence of a Form 1099 is not necessarily determinative. There are exemptions for certain disability payments, however, and you should have your tax advisor check those.

Wills and estates topics

Top tips from attorneys

What others are asking

Can't find what you're looking for?

Post a free question on our public forum.

Ask a Question

- or -

Search for lawyers by reviews and ratings.

Find a Lawyer

Browse all legal topics