Benificiary from Special needs trust

[AKtwins]

My brother in law passed away in Dec 2023. He had a special needs trust. We received the capital gains 1099B. We closed out the trust in March 2024. We saved money for the capital gains to pay. We transferred the remaining principal to his other brother who also has a special need trust. Who do I say is the beneficiary when I do 2024 taxes to close out the trust? Is it my brother in law that passed away or is it the other brother who inherited the trust?

[M-MTax]

Most likely the other brother if that person is the successor beneficiary for the brother-in-law's SNT.

[AKtwins]

I don't think a K1 is needed for the new beneficiary since the trust paid all taxes. We are actually closing out the trust this month.

[M-MTax]

You're absolutely correct; it's not needed if the trust paid all of the tax due and is distributing corpus.

[AKtwins]

Thank you for your answers. For the final return for the Special Needs trust for 2024. My brother in law passed (Tom) away on 12/24/23, so there is no beneficiary for the special needs trust in 2024. Is this correct?

We want to pay taxes as a trust, before the trust is distributed to his other brother. Do we need to include how the trust is being distributed on the final tax return?

[M-MTax]

No.

The trust would pay any income tax due and distribute the principal (corpus) tax-free to the brother's trust.

[AKtwins]

 My brother in law passed (Tom) away on 12/24/23, so there is no beneficiary for the special needs trust in 2024? for tax purposes on the 1041 TY 2024?

[M-MTax]

It makes little difference if the trust pays any tax due on the income. The return can be marked as final, regardless of the bneficiary status.