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Question

How are special needs trusts taxed?

Answer

Special needs trusts are typically taxed as either grantor or non-grantor trusts, depending on how they are structured. Income retained in the trust may be taxed at higher trust tax rates, while distributions used for the beneficiary’s benefit may shift the tax burden to the beneficiary, often at a lower rate.

Related FAQs

How are special needs trusts taxed?

How do I set up a special needs trust?

What is the difference between a special needs trust and an ABLE account?
Family & Health Dependents with Special Needs FAQs
Last Updated May 14, 2026
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