Everything You Need To Know About Disability Trust And Tax Refund

What Is Disability trust?

As the name suggests, a disability trust is a special needs trust fund that is designed for taking care of a disabled individual if the caretaker dies. There are other benefits to be had from a qualified disability trust, including:

  • Full income tax exemption for income earned from the trust
  • Additional protection and betterment of trust beneficiaries
  • Retaining access to other public assistance benefits like social security, Medicare, and other such social programs

Meeting the Requirements: Qualifying for Disability Trust and Make It Work For You

Certain requirements must be met to qualify for disability trusts. Some requirements include the following:

  • Ensuring that each person is a registered beneficiary of social security assistance for living expenses and medical expenses
  • The trust is irrevocable, any asset added cannot be removed nor can the trust be cancelled by the trustor, only the trustee who is responsible for monitoring the trust
  • Income tax must be paid on the total value of assets deposited into an irrevocable trust
  • Only the disabled beneficiaries can receive funds from the trust
  • Trust beneficiaries should be younger than 65

Advantages and Disadvantages of Disability Trust

Both the advantages and disadvantages of disability trust lies in the structure of the trust. Some of the primary advantages include:

  • Allowing a standard income tax exemption instead of trust income exemption. The difference between the two options is significant and can be used to put more assets into the trust.

Primary disadvantages include:

  • The fact that it is not easy to get a disability trust for your children. In many ways, parents have to proverbially jump through hoops. For starters, the child must be receiving some form of Medicare.

Tax refunds: What They Are and How to Benefit from Them

A tax refund is what you get when you have paid more in taxes to the state or federal government than your actual tax liability. This often occurs through income tax withholding. Any amounts you have overpaid will be returned to you via a cheque from the government.

To receive any tax refunds that may be owed to you, you first have to file a tax return. Your tax return is the form you fill out at the end of the year – clearly outlining your expenses, income, investments, and other relevant information. Amounts owed will be determined from the information you have provided within the same.

The Link between Tax Refund and Disability Trust

The common link between tax refunds and disability trust lies in what you get back from the trust exemption. Your disability trust would qualify as information that would be included in your tax return filing. Also, the type of disability trust you have, as intimated prior, will determine the amount of total exemption you would benefit from in addition to the tax refund.

Getting the Help You Need

If sorting through the rigours of a disability trust and/or filing your tax returns should prove to be too much for you, know that you are not alone. There is a lot of help available in this regard. For starters, there are frequently asked questions that you can work your way through to gain clarity on some of the matters you are still unsure about.

Additionally, some professionals and experts are more than willing and able to walk you through the necessary precepts and processes. Sitting with a professional can help you to both understand and follow through on all you need to do to benefit from all that is possibly available to you at the moment.

Simply put, with the right kind of help, you are that much closer to the right kind of results. After all, much of the guesswork will be handled for you and you will be able to get things moving in the right direction the first time.


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Written by rudyard

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