u/Additional-Refuse187

I’m having a hard time finding the right answer for this so putting this out there to see if anyone can help.

I have a client that passed away who owned a non-qualified annuity. One of the beneficiaries of the annuity is a special needs trust for the owners daughter.

When the contract owner died, this special needs trust became irrevocable. The annuity must be paid out to the trust either as a lump sum or the five-year deferral. No partial distributions allowed. The payment is made directly to the trust.

There is approximately $20,000 worth of gain in the annuity per beneficiary. While I know that it’s not a tremendous amount of gain, with the condensed trust tax brackets, the tax can add up and be significant.

I’m trying to find out if there is a way to have the gain be taxed at the individual federal level as opposed to the trust federal level.

If we take the lump sum payment and put it into a trust and then distribute the growth and use that for the benefit of the beneficiary for things that government benefits will not cover, will that make the gain be taxed at the individual level?

I do not want to cause harm to the benefits that the special needs trust beneficiary is receiving, and I know income can affect that. The trust distribution would be paid to places that would supplant the government benefits such as a new couch out for dental work their insurance will not cover. But the tax document would still show it being distributed to the beneficiary.

I hope this made sense. Am I missing something on this? Am I thinking about this correctly? I feel like the full amount of the distribution from the annuity is considered principal, and only the income generated, and then distributed would be taxed at the individual rate. I feel like there’s no way to avoid the trust tax rate in this situation.

Any help would be wonderful.

Does anyone know if there is a client friendly guide for the account view app?? I’ve found the account view guide for the full site but not the app.

I know it is a relatively straightforward app, but I also know that clients tend to forget where things are in the app if they’re not using it all the time.

My goal was to give clients something that they can refer back to if they need to find their tax forms or change their electronic delivery on something.

I couldn’t find one so I created one and submitted it to ART but they told me that I needed to use what was available in the resource center, and I just can’t find one.

Am I missing it altogether or is there not one?