Trusts: Special Needs Trusts

Description: This quiz will test your knowledge of Special Needs Trusts.
Number of Questions: 14
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Tags: trusts special needs trusts estate planning
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What is the primary purpose of a Special Needs Trust?

  1. To provide financial support for individuals with disabilities.

  2. To reduce the tax liability of individuals with disabilities.

  3. To protect the assets of individuals with disabilities from creditors.

  4. To provide a legal framework for individuals with disabilities to manage their own finances.


Correct Option: A
Explanation:

A Special Needs Trust is designed to provide financial support for individuals with disabilities without jeopardizing their eligibility for government benefits.

Who can establish a Special Needs Trust?

  1. Individuals with disabilities.

  2. Parents of individuals with disabilities.

  3. Legal guardians of individuals with disabilities.

  4. All of the above.


Correct Option: D
Explanation:

Special Needs Trusts can be established by individuals with disabilities, their parents, legal guardians, or any other individual or entity.

What types of assets can be placed in a Special Needs Trust?

  1. Cash.

  2. Real estate.

  3. Investments.

  4. All of the above.


Correct Option: D
Explanation:

Special Needs Trusts can hold a variety of assets, including cash, real estate, investments, and other property.

How does a Special Needs Trust affect the beneficiary's eligibility for government benefits?

  1. It disqualifies the beneficiary from receiving government benefits.

  2. It reduces the amount of government benefits the beneficiary receives.

  3. It has no impact on the beneficiary's eligibility for government benefits.

  4. It increases the amount of government benefits the beneficiary receives.


Correct Option: C
Explanation:

Special Needs Trusts are designed to supplement, not replace, government benefits.

What is the role of the trustee of a Special Needs Trust?

  1. To manage the assets of the trust.

  2. To make distributions to the beneficiary.

  3. To ensure that the beneficiary's needs are met.

  4. All of the above.


Correct Option: D
Explanation:

The trustee of a Special Needs Trust is responsible for managing the assets of the trust, making distributions to the beneficiary, and ensuring that the beneficiary's needs are met.

What are some of the advantages of using a Special Needs Trust?

  1. It provides financial support for individuals with disabilities without jeopardizing their eligibility for government benefits.

  2. It protects the assets of individuals with disabilities from creditors.

  3. It allows individuals with disabilities to maintain control over their finances.

  4. All of the above.


Correct Option: D
Explanation:

Special Needs Trusts offer a number of advantages, including providing financial support for individuals with disabilities without jeopardizing their eligibility for government benefits, protecting the assets of individuals with disabilities from creditors, and allowing individuals with disabilities to maintain control over their finances.

What are some of the disadvantages of using a Special Needs Trust?

  1. They can be expensive to establish and administer.

  2. They can be complex to manage.

  3. They can limit the beneficiary's ability to receive government benefits.

  4. All of the above.


Correct Option: D
Explanation:

Special Needs Trusts can have some disadvantages, including the fact that they can be expensive to establish and administer, they can be complex to manage, and they can limit the beneficiary's ability to receive government benefits.

What is the difference between a Special Needs Trust and a Pooled Trust?

  1. A Special Needs Trust is established for an individual beneficiary, while a Pooled Trust is established for a group of beneficiaries.

  2. A Special Needs Trust can hold a variety of assets, while a Pooled Trust can only hold cash.

  3. A Special Needs Trust is managed by a trustee, while a Pooled Trust is managed by a professional investment manager.

  4. All of the above.


Correct Option: A
Explanation:

The primary difference between a Special Needs Trust and a Pooled Trust is that a Special Needs Trust is established for an individual beneficiary, while a Pooled Trust is established for a group of beneficiaries.

What is the Medicaid payback provision?

  1. A provision that requires the state to be reimbursed for Medicaid benefits paid to a beneficiary of a Special Needs Trust after the beneficiary's death.

  2. A provision that requires the beneficiary of a Special Needs Trust to repay the state for Medicaid benefits received.

  3. A provision that limits the amount of assets that can be placed in a Special Needs Trust.

  4. None of the above.


Correct Option: A
Explanation:

The Medicaid payback provision is a provision that requires the state to be reimbursed for Medicaid benefits paid to a beneficiary of a Special Needs Trust after the beneficiary's death.

What is the Crummey power?

  1. A power that allows the beneficiary of a Special Needs Trust to withdraw a limited amount of money from the trust each year.

  2. A power that allows the trustee of a Special Needs Trust to make distributions to the beneficiary without regard to the beneficiary's needs.

  3. A power that allows the grantor of a Special Needs Trust to modify or revoke the trust.

  4. None of the above.


Correct Option: A
Explanation:

The Crummey power is a power that allows the beneficiary of a Special Needs Trust to withdraw a limited amount of money from the trust each year.

What is the difference between a d(4)(A) trust and a d(4)(C) trust?

  1. A d(4)(A) trust is a Special Needs Trust that is established for an individual with a disability who is under the age of 65, while a d(4)(C) trust is a Special Needs Trust that is established for an individual with a disability who is over the age of 65.

  2. A d(4)(A) trust is a Special Needs Trust that can hold a variety of assets, while a d(4)(C) trust can only hold cash.

  3. A d(4)(A) trust is managed by a trustee, while a d(4)(C) trust is managed by a professional investment manager.

  4. None of the above.


Correct Option: A
Explanation:

The primary difference between a d(4)(A) trust and a d(4)(C) trust is that a d(4)(A) trust is established for an individual with a disability who is under the age of 65, while a d(4)(C) trust is established for an individual with a disability who is over the age of 65.

What is the ABLE Act?

  1. An act that allows individuals with disabilities to save money in a tax-advantaged account without jeopardizing their eligibility for government benefits.

  2. An act that provides financial assistance to individuals with disabilities.

  3. An act that creates a national registry of individuals with disabilities.

  4. None of the above.


Correct Option: A
Explanation:

The ABLE Act is an act that allows individuals with disabilities to save money in a tax-advantaged account without jeopardizing their eligibility for government benefits.

What are some of the tax implications of Special Needs Trusts?

  1. Special Needs Trusts are exempt from federal income tax.

  2. Special Needs Trusts are exempt from state income tax.

  3. Distributions from Special Needs Trusts are not taxable to the beneficiary.

  4. All of the above.


Correct Option: D
Explanation:

Special Needs Trusts are exempt from federal income tax, state income tax, and distributions from Special Needs Trusts are not taxable to the beneficiary.

What are some of the ethical considerations related to Special Needs Trusts?

  1. The use of Special Needs Trusts can be seen as a way to avoid paying for government benefits.

  2. Special Needs Trusts can be used to protect the assets of wealthy individuals with disabilities from creditors.

  3. Special Needs Trusts can be used to ensure that individuals with disabilities have access to the resources they need to live a full and meaningful life.

  4. All of the above.


Correct Option: D
Explanation:

There are a number of ethical considerations related to Special Needs Trusts, including the fact that they can be seen as a way to avoid paying for government benefits, they can be used to protect the assets of wealthy individuals with disabilities from creditors, and they can be used to ensure that individuals with disabilities have access to the resources they need to live a full and meaningful life.

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