A Special Needs Trust (SNT) is a vital tool for families raising a loved one with special needs. It can provide for the individual's care and quality of life while also protecting government benefits. However, there may come a time when terminating the trust is in the best interest of the beneficiary. In this blog post, we'll discuss when and how to terminate a SNT.
When to Consider Terminating a Trust
Terminating a trust should be done carefully, as it can have huge financial and legal implications. It is recommended to consider terminating a trust when the objective of the trust has been achieved, or its purpose is no longer desired, or the assets in the trust are no longer available due to a change in market conditions.
In some cases, an executor may need to dissolve a trust due to increasing taxes or fees that seem to outweigh the benefits of keeping it open. The decision should never be taken lightly and should involve thoughtful consideration from an experienced professional such as an attorney or accountant.
How To Go About Terminating a Trust
Terminating a trust can be challenging, but by approaching it properly, you can ensure that the termination process runs as smoothly and efficiently as possible.
The first step is to submit a formal written termination notice to the trust's grantor, beneficiaries and trustees; be sure to include details such as the date of termination and any instructions for distributing remaining trust assets.
Once the legal paperwork has been taken care of, it is important to locate all of the trust's financial records in order to create a final accounting statement. This should include an entry for each asset and the liabilities in the estate at the time of closure.
Finally, make sure that all taxes are paid before dispersing funds or property within the trust's estate. By carefully completing each step outlined and keeping detailed records, terminating a trust can be done carefully and responsibly.
Speak With a Skilled Financial Professional
If you are the trustee of a special needs trust and are considering terminating it, there are a few factors to take into consideration. Be sure to speak with a skilled financial professional experienced in handling special needs trusts about your specific case before making any decisions, as this is just general advice.
You should also be aware that there may be tax implications for both you and the beneficiaries of the trust, so again, seek professional help before taking any action. With that said, if you do decide to terminate a trust, there are certain steps you must take in order to do so legally.
Once you have considered all your options and made the decision to go ahead with termination, follow these steps:
- Give notice to all interested parties.
- Settle all debts and liabilities of the trust.
- Distribute assets according to the terms of the trust or the law.
- File the necessary paperwork with the court.
- Apply for discharge from your duties as a trustee.
Terminating a trust can be complicated, but understanding the process and working with professionals can help make it go more smoothly.
We Can Help
If you need help terminating a special needs trust, our team can help. Reach out right away to learn more.
Call Legacy Enhancement Trust today at (888) 988-5503 or fill out the online contact form to learn how we may assist you!