Annual Spending Projection
One unique feature of Trust I is the annual spending projection. The annual spending projection tells us how much money we can spend on the Beneficiary each year to ensure that there will be money in his or her account until the end of his or her 80th year. In most Trust I cases, we will annuitize the trust over the course of the Beneficiary's actuarial life span. In doing so, we assume an 80-year life expectancy, an annual 3% increase in inflation, an annual 7% return on Trust I investments, the appropriate Consulting or Maintenance Fee, and Tax Preparation Fee. We use an actuarial computer software program that accounts for all of the above factors, as well as the age of the Beneficiary, to generate a targeted spending amount. This type of trust strategy is sometimes called a "self-depleting" trust, because it is specifically designed to be depleted by the time the Beneficiary passes away. In rare cases, we may assume a lesser life span when calculating the annual targeted spending amount.
What happens if your child outlives his or her actuarial life span? One feature of The Arc Trust, that you are not likely to find anywhere else, is that when your child outlives his or her actuarial life span, The Arc will continue to make disbursements on his or her behalf, even when his or her own account has been depleted. How do we do this? The Arc of Indiana Master Trust maintains a Remainder Fund account, funded by remainder shares from our Trust II accounts, as well as by generous families who remember The Arc of Indiana when designating the Remaindermen of their Trust I accounts.
Parents of Trust I beneficiaries can rest assured that, should their children outlive their annuitized Arc Trust I account, they will continue to benefit from disbursements made on their behalf. In some situations, it may be possible to opt out of the Trust I annuitization. However, when a non-annuitized account is depleted, the Beneficiary will not receive the benefit of additional disbursements from the Remainder Fund account.
