The purpose of the Special Needs Trust is to hold the assets in a manner whereby those assets are not counted as “available resources” of the minor or ward when determining the individual's eligibility for governmental need-based assistance.

Definition of a complex trust The trust must retain some of its income and not distribute all of it to beneficiaries. The trust must distribute some or all of the principal to the beneficiaries. The trust must distribute some funds to charitable organizations.

To qualify for the special needs trust exception, the trust must be established for the benefit of a disabled individual under age 65. This exception does not apply to a trust established for the benefit of an individual age 65 or older.

Supplemental Needs Trust (SNT) The SNT is a Medicaid planning tool used to shelter a disabled person's assets for: Maintaining eligibility for governmental benefits like Medicaid. Enhancing the disabled person's quality of life by paying for needs Medicaid does not cover.

Key Takeaways. A qualified disability trust (QDisT) is a special needs trust that qualifies for a federal tax exemption. Most special needs trusts meet the requirements to be treated as qualified disability trusts, and can be reported as such at tax time.

A simple trust must distribute all its income currently. Generally, it cannot accumulate income, distribute out of corpus, or pay money for charitable purposes. If a trust distributes corpus during a year, as in the year it terminates, the trust becomes a complex trust for that year.

For complex non-grantor trusts, the tax may be paid by the beneficiaries, the trust itself, or a combination, depending on the circumstances in any given year. While the maximum rates are the same for a trust and an individual, trusts are taxed more aggressively than individuals.