Anyone who has drafted a Medicaid asset protection trust, a supplemental needs trust, or even an intentionally defective grantor trust knows that tax treatment is not something you can afford to ignore. And it is not just about the current circumstances but what those circumstances might be in the future. The way a trust is taxed can either support or completely derail the goals the client is trying to achieve, whether that is preserving eligibility for public benefits, protecting assets from creditors, or keeping wealth in the family.
In this paper, we will walk through some of the tax issues that come up most often when drafting trusts in the elder law and estate planning context. This is not meant to be a deep dive into tax law or to prepare you to complete a 1041 correctly, but you do need to have a handle on the basics. That way, when you are drafting or dealing with the client’s CPA after the fact, you will have a basic understanding of the issues.
