The Omnibus Budget Reconciliation Act of 1993 made it possible for persons who are disabled to fund a supplemental needs trust with their own money and still retain Medicaid. Then, in 1999,   The Foster Care Independence Act made it possible for persons who are disabled to fund a supplemental needs trust with their own money and still retain SSI.

In Indiana, these laws have been well utilized by hundreds of people with disabilities. People receiving an inheritance, or receiving a lump sum back payment from Social Security, or receiving a personal injury settlement can put their money into a supplemental needs trust rather than "spend-down" indiscriminately just to stay eligible for Medicaid and SSI.

For many people who are disabled, The Arc Trust has proven popular. But funding The Arc's original trust (now known as Trust I) could be financially difficult. Trust I has a minimum below which it cannot be funded. Many persons who are disabled have less than the Trust I minimum.

Recognizing this problem, The Arc created a second trust. We call it Trust II. Trust II has a much lower minimum than Trust I. Thus, it might be a good option for people who want The Arc's involvement and expertise, but whose resources are less than the minimum Trust I requires.

Trust II was created especially for persons who are themselves disabled and whose resources are insufficient to fund Trust I. Trust II can, however, be funded by anyone. Parents, for example, might want to fund Trust II if their resources are insufficient to fund Trust I.

Trust I began in 1988. Trust II began in 1995.

Who is the Trustee for Trust II?
The Arc of Indiana is Trustee and has custody of all the resources. The National Bank of  Indianapolis..

What kind of investments are made through Trust II?
Interest-bearing investments are limited to U.S. savings bonds, series EE. Unlike Trust I, no investments are made in stock or bond funds, so there is no potential for capital appreciation, nor the possibility of investment losses.

Must EE bonds be redeemed when a beneficiary wants to use Trust II?
Some of each beneficiary's trust is deposited into a noninterest-bearing checking account. Disbursements are usually made from this checking account.

Using the checking account is the quickest way to use the trust. We recommend that enough money be retained in the checking account to meet anticipated near-term withdrawals. If the checking account is not adequate to make a purchase, then bonds are redeemed.

How long must I wait before I can redeem the bonds?
There is a government required mandatory wait of six months from the time the bonds are purchased until they can be redeemed. For example, if the bonds are bought in January, they cannot be redeemed until July.

Can the beneficiary designate how much of his trust is put into EE bonds and how much is put into the checking account?
The first $300 must be used to purchase EE bonds. (This is the minimum mandatory remainder to The Arc.) After that, the beneficiary has full control. He decides how much to put into the checking account and how much to put into additional bonds.

Is there a minimum or maximum amount that can be put into Trust II?
There is no required minimum, but accounts are usually funded with several thousand dollars. However, an account can be started with as little as $300, plus our enrollment fee. Additional investments must be at least $100 per investment.

There is a maximum for Trust II. Check with The Arc on the current maximum.

Is there a limit to how often a Trust II account can be used each year?
A Trust II account can be used twelve times a year. This is different from Trust I, which has no frequency limit.

Are use limits ever exceeded?
They can be exceeded, either through prearranged agreement or in emergencies.

No. This is an example of a prearranged agreement. Prior to making these purchases we would agree that all purchases setting up the apartment count as one disbursement.

What are the fees for Trust II?
There are two fees. An enrollment fee is paid on joining. This is a one-time fee. The enrollment fee for Trust II is the same as the enrollment fee for Trust I.

The enrollment fee changes each November 1. Contact The Arc for the current fee.

The second fee is a consulting fee. The consulting fee for Trust II is based on a sliding scale. Contact The Arc for a copy of the sliding scale.

What would it cost if I went to a local attorney to have a trust drafted?
For a precise answer, you need to ask the attorney who would draft the trust. But, based on our understanding of costs, a trust comparable to ours is likely to cost two, three, or four times more than ours.

What happens if an account is not used during the calendar year?
Each year, beneficiaries of Trust II have the option of using or not using their trust during the calendar year. If the beneficiary chooses to not use the trust, then a reduced fee is assessed.

What if a beneficiary chooses to not use the trust during the calendar year, but later changes his mind?
He can change his mind and the fee is revised accordingly. In these situations, a transfer fee is also assessed. Contact The Arc for details.

Trust I has no remainder requirement to The Arc, but what about Trust II?
Both these options have a remainder requirement. At minimum, it is $300, but it could be more. Contact The Arc for further details.

How does The Arc use the remainder it retains?
The remainder is used to help individuals with disabilities and their families. Contact The Arc for examples of how remainder shares have been used.

I have applied for a Medicaid Waiver for my son.  He would be eligible for the waiver, but he has assets over the allowable limit. Can Trust II help?
Yes. You can put his money into our trust. Once the money is in our trust it no longer counts as an asset in determining his eligibility for the waiver. However, after his death, the state has a lien on a portion of the remaining trust property. Contact The Arc for details.

Because my son is a minor, are disbursements from his Arc Trust account considered differently than if he were an adult?
Parents of minor children have a legal duty of support. This duty ceases at age 18. Until your son becomes 18, the Trustee of The Arc Trust will expect you to meet your duty of support first before the trustee makes any disbursements.

Disbursements from your son’s trust can be made even though he is a minor, but they would have to be for extraordinary expenses, i.e., expenses unique to parents whose minor children are disabled, or very large medical expenses not covered by insurance and not easily afforded by the parents. For example, medical costs not paid by Medicaid could be paid through your son’s Arc Trust even though he is under age 18. These costs, however, must meet the legal standards.

If my son is a minor, or if he is an incapacitated adult, can I, as his parent or guardian, enroll for him?
You will provide pertinent information. But, to enroll, a court order is needed. This is required by Indiana law.

By using Trust II does a beneficiary incur taxes?
Taxes may be due on interest received when the EE bonds are redeemed. If bonds are not redeemed, then no tax is due.

Will The Arc prepare the necessary tax forms when bonds are redeemed?
The Arc prepares the tax forms for beneficiaries of Trust I, but does not prepare the tax forms for beneficiaries of Trust II. Instead, The Arc provides these beneficiaries with information on interest earned from the EE bonds. Trust II beneficiaries report this information, along with all other income, on the forms they already use.

Are all trust disbursements reported by The Arc?
Yes. An important part of our service is reporting disbursements and explaining why they do not interfere with eligibility for benefits like Medicaid, SSI, and Supported Living.

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