Charitable Remainder Trusts for Disabled Beneficiaries

The IRS has approved charitable remainder trusts that pay income to a legally incompetent child for life, but with payments going to a special needs trust established for the child.  The IRS also has approved a plan where the charitable remainder trust was payable to a trust for the lifetime of a child who was merely “financially disabled.”

The IRS has indicated that such arrangements are appropriate where the income beneficiary, by reason of a medically determinable physical or mental impairment, is unable to manage his or her own financial affairs.  The trustee of the special needs trust could have broad discretion as to how much income or principal would be paid to the beneficiary, and could take into account government benefits to which the beneficiary may be entitled.  Assets in the special needs trust could pass at the beneficiary’s death either to charitable or family beneficiaries.  Proceeds from the charitable remainder trust would be paid, of course, for our benefit or to any qualified organization.

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