Tax Facts

9089 / What is a qualified disability trust?

A qualified disability trust is a non-grantor trust (meaning that a qualified disability trust generally cannot be a grantor trust) where all of the beneficiaries of the trust are disabled at some point during the year, as determined at the close of the tax year by the Commissioner of Social Security.1 The trust must also qualify as one described in Section 1917 of the Social Security Act, meaning that it is a trust that was established solely for the benefit of an individual under 65 years of age who is disabled.2


As a rule, a qualified disability trust will be a discretionary trust, meaning that qualified disability trusts do not require distribution of all income each year.

A trust will not fail to qualify as a qualified disability trust merely because the trust assets will revert to an individual who is not disabled after the trust no longer has any beneficiaries who are disabled.3

See Q 9090 for a discussion of the tax treatment of qualified disability trusts. For a discussion of the ABLE account rules that allow taxpayers to create savings accounts for disabled individuals without jeopardizing qualification for Social Security and Medicaid benefits, see Q 386. See Q 9074 to Q 9076 for a discussion of domestic asset protection trusts generally.





1.  IRC § 642(b)(2)(C)(ii)(II).

2.  42 USC § 1396p(c)(2)(B)(iv).

3.  IRC § 642(b)(2)(C)(ii) (flush language).


Tax Facts Premium Tools
Calculators
100+ calculators specifically designed to help you easily assist clients with specific planning situations and calculations.
Practice Guidance
Designed to help you discover new ways for which to build and maintain client relationships.
Concepts Illustrated
Specifically designed to help you easily assist clients with specific planning situations and calculations.
Tax Facts Archives
Access to the entire library of Tax Facts dating back to 2012 allowing you to look up the exact tax figures from prior years.