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Currently, the only money a beneficiary receives is through disbursements from the trust.

In order to meet Social Security credit requirements, we are investigating the possibility of hiring the beneficiary to perform a service, and to pay the beneficiary in income rather than disbursements (about 1/3rd of the total amount would be in income, the rest disbursements). The trust allows the trustee to have discretion over the amount to be distributed to the beneficiary, so it seems the distribution can be reduced without concern.

Business-wise, it seems the best option would be to have the beneficiary have a sole proprietorship, as it requires the least amount of paperwork and other requirements.

The trust currently pays the beneficiary's annual income tax (fed and state). Given these proposed changes, would there be any issues with the trust continuing to pay his income tax (with an added schedule C) and also pay his self-employment tax (schedule SE)?

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