FREQUENTLY ASKED QUESTIONS
THE ARC MASTER TRUST
Trust I
FREQUENTLY ASKED QUESTIONS
THE ARC MASTER TRUST
Trust I
1. What is the primary purpose of Trust I?
The primary purpose of Trust I is to enhance your child’s material quality of
life and do so without endangering benefits like Medicaid, Supplemental Security Income
(SSI), and Indiana’s Supported Living Program. While alive and healthy, you
supplement these benefits. The trust is intended to continue this effort after you have
died or become incapacitated.
2. What are examples of trust usage?
The trust has paid for dental care, eye care, and nursing care when such care was not
available through Medicaid or other medical insurance programs. Payment for communication
aids, tuition, vehicles for transportation, clothing, household and entertainment items,
furniture, vacations, day outings, gifts for a beneficiary, gifts in the
beneficiary’s name to family members and friends, and church contributions are other
examples of how the trust is often used.
3. Can Trust I pay shelter expenses, for example, rent, mortgage, and utilities?
On occasion, when appropriate and affordable, we have paid shelter expenses. Payment
for shelter expenses is appropriate when it does not reduce shelter
assistance from other sources, such as HUD, SSI, and Supported Living. Our trust is
intended to supplement, not supplant, such assistance.
Payment is affordable if your child’s account is adequate to maintain on-going shelter assistance. Ask yourself, "Is the amount I intend leaving enough to routinely pay shelter expenses over an extended period of time?" For most Donors, the answer to this question will be "No." Often, the amount a Donor can leave is not sufficient to routinely pay shelter expenses over an extended period of time.
4. Is Trust I a new service?
Trust I began operation in October, 1988, so we are in our second decade. Several
hundred families are enrolled. We are probably the largest trust of our kind in the
country.
5. Does Trust I exclude family members from involvement in deciding how the trust will
be used?
No. We encourage active participation and advice. Family members do not, however, need
to learn government regulations and deal with bureaucrats on trust matters. These
responsibilities are The Arc’s.
6. How are requests for disbursement made?
Requests are easy to make. We want to be accessible. Requests are usually made over
the phone. They are made by people you have designated, such as family members or
professionals who work closely with your child.
When a call is made, we tape record the request. Calling, rather than writing, is easier for most people. It also lets us respond more quickly. The person making the request does not have to fill out a form, mail it, and wait weeks for an answer.
7. After I die, another of my children will call to request disbursements for my son
who is disabled. If my other child is not satisfied with the trust, can she withdraw
without penalty?
Once an account is funded it is irrevocable. If your other child is dissatisfied, she
can request a review of her grievance. Her grievance is reviewed by the trust’s
Advisory Committee, The National Bank of Indianapolis, or even The Arc’s Board of Directors for
whatever she believes is wrong.
8. Are the people using Trust I satisfied with the service?
9. What are the fees?
There are three fees. Here is a brief description of each:
a. The enrollment fee. This is a one-time fee paid by the person who will fund the trust. This person is called the Donor. This fee is paid when the Donor first enrolls in Trust I.
b. The renewal fee . This fee is paid annually starting one year after enrollment. This fee continues until the trust is funded. It ceases once the trust is funded.
c. The consulting fee. The Arc receives an annual fee for providing consultation to the trustee. This fee begins only when the trust is funded. It is assessed each year against each beneficiary’s account.
For more details on fees, contact The Arc.
Note: The Arc’s consulting fee is less than the trustee’s fee charged annually by most banks. You might want to compare our fee with that charged by banks in your community.
10. When must the account be funded?
Your child’s account does not need to be funded in advance. In most instances, it
will be funded at the death of the second parent. Generally, it will be funded through
your will or through a retirement plan or life insurance specifically designated for this
purpose.
11. What if I want to fund the account in advance?
If you want to fund the account in advance, you can do so. One reason might be to
assure that money will be available for your child who is disabled. Some parents worry
that a catastrophic illness or similar situation may wipe out their entire savings. They
worry that they might need nursing home care for themselves and have nothing left to leave
for their child’s trust.
If you fund Trust I while you are still alive, you are making Trust I a living, irrevocable trust. Keep in mind that once the trust is funded you cannot get the money back. It no longer belongs to you. It can only be used for your child.
12. If I decide to fund the account in advance, rather than at my death, do I still pay
an annual renewal fee?
No. If you fund your child’s trust in advance, there is no annual renewal fee.
However, your child’s account is subject to either a consulting or maintenance fee.
The consulting fee is assessed if disbursements are authorized to be made; the maintenance
fee is assessed if disbursements are not authorized. Contact The Arc for details.
13. How many people can serve as Donors? That is, how many people can fund an account?
There may be one or multiple Donors to a beneficiary’s account. Typically, if
both parents are alive, both will be listed as Donors. Multiple Donors might also include
other family members, such as grandparents and nondisabled siblings.
Regardless of the number of Donors, only one fee is charged. A separate fee is not paid by each Donor.
14. What if I need to go into a nursing home myself. Can I fund my child’s account
at that time?
Yes. If you need nursing home care for yourself, you can fund your child’s trust
and immediately apply for Medicaid for yourself. There is no three year look-back. An Arc
handout, "The Omnibus Budget Reconciliation Act of 1993," explains how Congress
allows you to transfer your resources into The Arc Trust for your child who is disabled
and then apply for Medicaid for yourself. Contact The Arc for a copy of this handout.
15. After I enroll, what happens if I let my enrollment expire?
To take advantage of Trust I, you must remain enrolled. This means that you must pay
the annual renewal fee. If you cease paying this fee, the trustee will be unable to accept
any funds you leave for your child.
If, for some reason, you cease paying the renewal fee and then want to reenroll, you can do so, but at higher enrollment and renewal fees.
If, for any reason, you terminate your enrollment, Trust I will not refund previously paid enrollment and renewal fees.
16. What if I enroll, but realize later I don’t have enough money to fund my
child’s trust? Do I bear legal liability to contribute to the trust?
No. Your enrollment lets you use Trust I if you want, but does not obligate you to do
so. Some parents may enroll as a hedge against other plans not working out. Of course, if
you do not fund the trust, then there will be no money to distribute.
17. If I do not have enough money to fund Trust I, is there an alternative?
Yes. We have a second master trust, called Trust II. If you enroll in Trust
I but do not have enough money to fund it, we can transfer the money into Trust
II. Several families have used this approach.
18. I do not want to enroll while I am alive. Can I delay enrolling until after my
death?
Nevertheless, if you want to delay, you can. But there is a cost. If someone enrolls for your child after your death and you are the last parent to die, a higher enrollment fee may be charged. This fee is currently three times the regular enrollment fee. Check with The Arc to see if this fee has changed.
19. When my child dies, what happens to money remaining in her account?
There is no guarantee that any money will remain. In fact, our intent is to spend the
entire amount during her actuarial lifetime. If your daughter who is disabled lives to
actuarial life expectancy, her trust should be completely depleted.
If she dies prematurely, money may remain. You, as the Donor, designate how this money is distributed.
20. Does The Arc require that a percentage of any remainder in Trust I stay with The
Arc?
No. At one time The Arc did have a remainder requirement for Trust I. That requirement
was eliminated in 1994. You can, of course, voluntarily designate a remainder percentage
to The Arc.
21. If my daughter lives longer than life expectancy and nothing is left in her
account, what happens?
To realize this goal, we need another source of revenue. This source is the remainder shares Donors voluntarily leave to The Arc. This money can be used to continue disbursements for your daughter.
22. Will my child be eligible for this extra money even if I choose against including
The Arc as a remainderman?
Yes, but remember, discretionary disbursements are made only if we have the revenue to
do so. Only by Donors voluntarily contributing will we have this revenue.
23. I have a trust for my child who is disabled, with another of my children
serving as trustee. Why should I consider switching to Trust I?
One reason is continuity. Parents want continuity. They want the trust
they create to last their disabled child’s entire lifetime. When another child serves
as trustee, continuity may be at risk. Will the nondisabled child move, die, or for any
other reason stop administering the trust? Trust I is a corporate entity. It does not
depend on one individual. Thus, continuity is more likely.
A second reason is reliability. In planning for your child’s future, you want a service that delivers on its promises. You want a service that meets the expectations it creates. Trust I has a history of reliability. On a regular basis, we meet the expectations we create.
A third reason is expertise. If another of your children serves as trustee, his or her most challenging responsibility may be learning and staying current with regulations, and making reports to agencies such as the County Division of Family and Children (CDFC), the Social Security Administration (SSA), the Division of Disability, Aging, and Rehabilitative Services (DDARS), and the Division of Mental Health (DMH).
24. Why is reporting so important?
Many people with disabilities rely on "means-tested" benefits to pay for the
basics in life. Examples of means-tested benefits include Medicaid, SSI, and
Indiana’s Supported Living Program.
Eligibility for means-tested benefits is based, in part, on income and resources. If your daughter’s income or resources exceed the maximum allowed, she is likely to be ineligible.
When your daughter first applied for a means-tested benefit, her income and resources might have satisfied the allowable limit. But, as the trust is used, income or resources might be created that exceed the allowable limit.
Whoever administers the trust must report each expenditure to every agency administering the means-tested benefits. These agencies then determine, based on their specific regulation (no two agency regulations are identical), if the trust has created excess income or resources. If excess income or resources have been created, eligibility might be lost.
25. Does The Arc help with these reports?
We make the reports. We know the regulations well and quote directly from them when
making our reports. Our knowledge minimizes potential challenges from government agencies.
Because we administer hundreds of accounts, we are constantly making reports and reviewing regulations. This daily routine enhances our effectiveness. It would be unreasonable to expect others who might serve as trustee (even bank trust departments) to have similar experience or expertise.
26. I have a trust for my child, with a bank named as trustee. Why should I consider
switching to Trust I?
Trust I uses a bank as its trustee - The National
Bank of Indianapolis.
a. Many banks in Indiana are reluctant to administer trusts of under $500,000. Trust I accepts much less. Contact The Arc for information on our current guaranteed minimum.
b. Our annual consulting fee (see Question 9) is almost always substantially less than the annual fee charged by banks for an individually managed bank trust.
c. A bank trust department might be compelled to terminate a trust if the trust’s principal or income is insufficient to justify the annual fee. This is something Trust I will not do. As long as funds remain, we continue administering your child’s account.
d. Few bank trust departments know the regulations for Medicaid, SSI, Supported Living, and other means-tested benefits. Why? Because these benefits are for low-income people. Bank trust departments generally do not deal with low-income people. Our trust service is specifically designed to help low-income people. As a result, we have a thorough knowledge of the regulations. And we take responsibility for reporting disbursements to the appropriate government entities.
Note: If you intend to use a bank as trustee, determine if the bank has the expertise
) or is fully prepared to develop such expertise ) and at no additional cost to you or your child who is disabled. Get the bank’s commitment to do so in writing. Make sure you and the bank agree on its liability. Make sure that the bank can discharge its responsibilities as you intend. Ask appropriate questions and get the answers in writing.e. When parents set up a trust for their child who is disabled, they frequently want more than professional management and expertise. They want insight into meeting their child’s personal needs. Few banks have this insight. We may. Our membership and governing Board is comprised mainly of family members and other people who routinely interact with people with disabilities. Because of our background, we may be more sensitive to what parents want.
27. Is it possible for The Arc to change trustees?
Yes. The
Arc has the flexibility to change the trustee if desirable.
28. I want to keep the trust I already have. But I also want to use Trust I. Can I have
both?
Yes. Several families have this kind of relationship with us. They want our experience
and expertise, but they also want family members to control the bulk of trust resources.
Both of these objectives can be achieved by using "tandem" trusts. If this
situation applies to you, request our handout describing tandem trusts.
29. How much should I put into the trust?
Note: These examples are not guarantees. They are for the purpose of illustration only.
30. Does the amount I give determine how much will be spent each year for my child?
The amount you give provides the trustee with an annual target, but the trustee has
complete discretion and can spend more or less than this target.
31. Is there a minimum below which a Trust I account cannot be funded?
Yes. This minimum is expected to increase each year. However, once enrolled,
your minimum is guaranteed. While it does increase for families who enroll later,
it does not increase for you. For example, some families, because of when they enrolled,
have a guaranteed minimum of $15,000; others have higher minimums. The precise minimum is
based on when enrollment occurs. Check with The Arc for the current guaranteed minimum.
Note: If you enroll in Trust I but cannot fund it at the guaranteed minimum, the money can be transferred to Trust II. Thus, even if you are unable to fund at the Trust I minimum , you can still enroll and fund your child’s account under Trust II.
32. What rate of return is assumed from investments?
To provide examples of what might be available for your child, depending
on what you can leave, The Arc assumes a seven percent (7%) rate of return. This
rate is for illustration only. It is not guaranteed.
33. What happens if the rate of return is more or less than seven percent (7%)?
Earnings are allocated proportionately among all funded accounts. If earnings exceed
seven percent (7%), more will be available for distribution. If earnings are less than
seven percent (7%), less will be available for distribution.
34. Does Trust I assume guardianship?
No. If your child needs a guardian, someone other than The Arc should be chosen.
Whomever you choose should work cooperatively with the trust. On occasion, information available only to a guardian might be needed to administer the trust properly. In your written instructions to the guardian, stress the need to work cooperatively with Trust I so this information is available.
35. What if my child moves to another state?
If a similar trust is operating in the state to which your child moves and that trust
is willing to accept responsibility, a transfer will be made from our trust to the new
trust. If the new trust is not willing to accept assignment (or if there is no similar
trust), we retain responsibility for administering your child’s trust account.
36. What effect will participation in Trust I have on estate, gift, and death taxes?
For most families, participation should have little effect on their taxes because the
amount of money in their estate will be below that subject to substantial taxation.
Families need to consult directly with their own attorneys or tax advisors.
37. If I fund Trust I while I am alive, can I take this as a tax deduction?
No. Contributions to Trust I are not deductible as charitable gifts, or otherwise. The
Internal Revenue Code treats these funds as being of direct benefit to your child and not
disinterested general charity.
38. Will Trust I be used for funeral expenses?
No. If you want to arrange for prepayment, we have information on what you can spend
without endangering your child’s eligibility for Medicaid and SSI. This information
appears later in this booklet. If your child receives other means-tested benefits, contact
the appropriate government entity to confirm its allowable prepayment options.
39. Is Trust I intended to terminate in the future?
No. Trust I intends to last in perpetuity. Trust law, however, requires that trusts
like ours must terminate unless renewed periodically. (The law is known as the "Rule
Against Perpetuities.") Our trust document contains a stipulation that Trust I will
terminate on July 1, 2078, unless it is extended in writing by The Arc, and the trustee
accepts the extension. We anticipate no problem in securing this extension in 2078 and
extensions thereafter.
40. If Trust I is not extended, what happens to my child’s account?
The funds in the account will be distributed to the individuals and organizations
(excluding The Arc) that you have named as remaindermen for when your child dies.
41. What guarantee is there that some government agency will not challenge in court my
child’s eligibility for public benefits by virtue of her participation in Trust I?
There is no "guarantee" but we have taken every step to create and maintain
a trust that is not likely to be challenged and is likely to survive any challenge that
might be brought.
Prior to accepting any enrollments, we thoroughly researched our trust documents. They were drafted to reflect the thinking that courts used when ruling on similar trusts. Our documents are consistent with favorable court rulings.
Our documents are also consistent with favorable Congressional action. In 1993, Congress passed legislation allowing persons who are disabled to fund their own trusts without interfering with eligibility for Medicaid. Congress recognized the value of trusts such as ours. In fact, our trust was used as a model for one specific exemption.
In 1999, Congress acted again. This time, it passed legislation allowing persons who are disabled to fund their own trusts without interfering with eligibility for SSI.