What is a Qualified Disability Trust?

The legal authority to create a Qualified Disability Trust (QDisT) falls under §642(b)(2)(C) of the Internal Revenue Code. To qualify as a QDisT, the trust must meet the following criteria:

As tuition and health care costs continue to soar, clients will be looking for ways to mitigate these financial burdens on their loved ones.

In a recent post, I discussed the concept of a Grantor Trust. Now I will take a brief look into Nongrantor Trusts. Although neither of these are client-facing terms that you’re likely to use as an elder law attorney, it is important to have a grasp on these concepts and to be able to offer an explanation to your clients.

Like the Grantor Trust, the term Nongrantor Trust is a tax term. It has little to do with the trust itself or who receives income or assets, and everything to do with the tax liability of the trust. A Nongrantor Trust is a trust that is not taxed to the grantor (the person that creates and donates assets to the trust). Again, this is an income tax concept only — not a gift tax or estate tax concept. In this type of trust, the grantor is not treated as the owner of any portion of the trust.