Whether you are a trustee or a parent, it is a good idea to have the SNT reviewed periodically (ideally, annually) with your planning team. Some of the questions that should be reviewed include:
- Have there been any changes in the laws that affect the SNT?
- Do you need to make any changes to the trustees or trust advisors? Perhaps a successor trustee is ill or recently passed away and you need to designate a new successor trustee. Or perhaps you want to consider a corporate trustee if you have not previously designated one.
- Do you understand tax issues? It is important for you to understand how the income earned in the SNT is reported and on what type of income tax return. Questions you want to review are whether your trust is a “grantor trust” for income tax purposes or whether it is considered a “qualified disability trust.” Also, what are the gift tax reporting implications, if any, when a third party makes a gift to the trust?
- Is the trustee making any distributions that would cause the beneficiary to lose benefits? Constant monitoring and oversight must be made regarding SNT distributions. For example, if the trust is paying housing costs for the beneficiary, the beneficiary will suffer a reduction in his or her SSI benefit.
- Are the assets designated to pour into the SNT as intended? Your last will and testament will not control the disposition of certain assets, such as annuities, insurance policies, and retirement plans, if you designate beneficiaries other than the SNT. Your team can help you check and update your beneficiary designations on these assets to make certain that they pass to the SNT at your death, if intended.
This overview and list of questions to be reviewed with your planning team demonstrates that SNT’s are very complex and require careful consideration and planning to ensure that the appropriate SNT has been set up for the beneficiary. By understanding the terms and requirements of the SNT chosen for the beneficiary, you will be in a better position to help protect the beneficiary’s benefits and quality of life.