Frequently Asked Questions
1. What is the primary purpose of Trust I?
2. What are examples of how a trust can be used?
3. Can Trust I pay shelter expenses, such as rent, mortgage and utilities?
4. Does Trust I allow family members to be involved in deciding how the trust will be used?
5. How are requests for disbursement made?
6. After I die, another of my children will call to request disbursements for my daughter who is disabled. If my other child is not satisfied with the trust, can that child withdraw without penalty?
7. Are the people using Trust I satisfied with the service?
8. What are the fees?
9. When must the account be funded?
10. What if I want to fund the account in advance?
11. If I decide to fund the account in advance do I still pay an annual Renewal Fee?
12. How many people can fund a single account?
13. What if I need to go into a nursing home myself. Can I fund my child's account at that time?
14. After I enroll, what happens if I let my enrollment expire?
15. What if I enroll, but realize later I don't have enough money to fund the trust? Do I bear legal liability to contribute to the trust?
16. If I do not have enough money to fund Trust I, is there an alternative?
17. Can I delay enrolling until after my death?
18. When my child dies, what happens to money remaining in the account?
19. Does The Arc require that a percentage of any remainder in Trust I stay with The Arc?
20. If my child lives longer than her life expectancy and nothing is left in the account, what happens?
21. I have a trust for my child, with another of my children serving as Trustee. Why should I consider switching to The Arc Master Trust I?
22. Why is reporting so important?
23. Does The Arc make these reports?
24. I have a trust for my child, with a bank named as Trustee. Why should I consider switching to Trust I?
25. Is it possible for The Arc to change Trustees?
26. I want to keep the trust account I already have, but I also want a Trust I account. Can I have both?
27. How much money should I put into the trust?
28. Does the amount I leave to the trust determine how much will be spent each year for my child?
29. Is there a minimum deposit to fund a Trust I account?
30. What rate of return is assumed from investments?
31. What happens if the rate of return is more or less than seven percent (7%)?
32. Does Trust I assume guardianship?
33. What if my child moves to another state?
34. What effect will participation in Trust I have on estate, gift and death taxes?
35. If I fund Trust I while I am alive, can I take this as a tax deduction or a gift tax exclusion?
36. Can a government agency challenge in court my child's eligibility for public benefits by virtue of his or her participation in Trust I?
2. What are examples of how a trust can be used?
The trust can pay for dental care, eye care and nursing care when such care is not available through Medicaid or other medical insurance programs. Payment for school tuition, communication aids, cable television, phone service, vehicles for transportation, clothing, house wares, furniture, vacations, outings, gifts for a Beneficiary, gifts in the Beneficiary's name to others, and church contributions are other examples of how the trust is often used.
3. Can Trust I pay shelter expenses, such as rent, mortgage and utilities?
On occasion, when appropriate and affordable, the Trust has paid for shelter expenses. Payment for shelter expenses is appropriate when it does not reduce shelter assistance from other sources, such as HUD, SSI or government funded residential programs. Our trust is intended to supplement, not replace, such assistance. Payment is allowable if your child's account is sufficient to maintain on-going shelter assistance. However, often, the amount a Donor can leave is not sufficient to routinely pay shelter expenses over an extended period of time.
4. Does Trust I allow family members to be involved in deciding how the trust will be used?
Yes. We encourage active participation and advice from Key Persons, who often are family members. Family members do not, however, need to learn government regulations regarding trust matters. These responsibilities are The Arc's. Although the Key Person does not have an official legal role in the administration of the trust, The Arc Trust pays great deference to the opinions, insights and directions given by Key Persons when making decisions on behalf of the Beneficiary.
5. How are requests for disbursement made?Requests are usually made over the phone and can only be made by the Key People. When appropriate, requests can also be made by the Beneficiary.
6. After I die, another of my children will call to request disbursements for my daughter who is disabled. If my other child is not satisfied with the trust, can that child withdraw without penalty?
A funded Trust I account is irrevocable, meaning it cannot be changed or cancelled. If your other child is dissatisfied, that child can request a review of the grievance. The grievance is reviewed by the Trust's Advisory Committee, The Arc's Board of Directors, or our Trustee, The National Bank of Indianapolis.
7. Are the people using Trust I satisfied with the service?
We regularly survey the families and individuals using our service, and we consistently receive high grades. Please contact us for the results of our most recent survey. We would be proud to share them with you.
Following is a brief description of each of our fees:
In most cases, the Trust will be funded at the death of the second parent or grandparent. Generally, it will be funded through a will, living trust or through a retirement plan or life insurance specifically designated for this purpose.
10. What if I want to fund the account in advance?
If you want to fund the account in advance, you can do so. 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 the money no longer legally belongs to you. It can only be used for your child.
11. If I decide to fund the account in advance do I still pay an annual Renewal Fee?
No. There is no annual Renewal Fee after you fund the account, regardless of when you fund it. However, your child's account is subject to either a Consulting Fee or Maintenance Fee. The Consulting Fee is assessed if disbursements are authorized to be made; the Maintenance Fee is assessed if disbursements are deferred until a future date.
12. How many people can fund a single 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 siblings. Regardless of the number of Donors, only one enrollment fee is charged.
13. What if I need to go into a nursing home myself. Can I fund my child's account at that time?
Yes. The Omnibus Budget Reconciliation Act of 1993 (OBRA '93) allows you to fund a Special Needs Trust for your child and immediately qualify for Medicaid, without being subject to the look-back period.
14. 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 re-enroll, 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.
15. What if I enroll, but realize later I don't have enough money to fund the 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.
16. 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 Trust I, we can transfer the money into Trust II. Several families have used this approach.
17. Can I delay enrolling until after my death?
When you enroll, we start a file of information about your child. We update this file annually. This is why we charge the annual Renewal Fee. We do this because your child's situation and what you want for your child may change over time. We want our information to reflect these changes. If you do not enroll, we do not receive routine updates on important information that affects your child's future.
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.
We charge a higher fee in this type of situation simply because we want to encourage families to enroll while they are living, so we can get to know them and make sure that the funding of the trust will go as smoothly as possible. If someone else, such as the executor of your estate, for example, enrolls in the trust on your behalf once you have passed, it can be confusing for all parties involved, and it is typically more difficult for The Arc Trust to obtain information about your child that is needed to safely and effectively administer the trust for his or her benefit.
18. When my child dies, what happens to money remaining in the account?
Our intent is to spend the entire amount for your child's benefit during his or her actuarial lifetime. If he or she lives to actuarial life expectancy, the trust should be completely depleted. Should any money remain, you, as the Donor, designate how this money is distributed.
19. Does The Arc require that a percentage of any remainder in Trust I stay with The Arc?
No. There is no mandatory remainder to The Arc for Trust I. You can, of course, voluntarily designate a remainder percentage to The Arc. We use this money to fund other programs for Hoosiers with disabilities, as well as to continue to make disbursements for Trust I beneficiaries, even when their annuitized accounts have been depleted.
20. If my child lives longer than her life expectancy and nothing is left in the account, what happens?
A goal of Trust I is to continue some level of disbursement for your child, even if your child's account is completely depleted. As long as money remains in our Remainder Fund, we will be able to continue this practice indefinitely.
21. I have a trust for my child, with another of my children serving as Trustee. Why should I consider switching to The Arc Master Trust I?
Many people rely on means-tested benefits to pay for the basics in life. Examples of means-tested benefits include Medicaid, SSI and Medicaid Waivers. Eligibility for means-tested benefits is based, in part, on income and resources. If your child's income or resources exceed the maximum allowed, he or she is likely to be ineligible.
When your child first applied for a means-tested benefit, his or her income and resources might have satisfied the allowable limit. But, if not properly administered, once 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 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 for benefits may be compromised or lost.
23. Does The Arc make these reports?
Yes, we make the reports. We know the regulations well. Our expertise minimizes potential challenges from government agencies. Because we administer hundreds of accounts, we are constantly reviewing regulations and making written reports. Our daily routine enhances our effectiveness. It is unlikely that others who might serve as Trustee (even bank trust departments) have experience and expertise comparable to The Arc's.
24. I have a trust for my child, with a bank named as Trustee. Why should I consider switching to Trust I?
25. Is it possible for The Arc to change Trustees?
Yes. Currently the Trustee is The National Bank of Indianapolis. While we anticipate no change The Arc does have the flexibility to change the Trustee if desirable.
26. I want to keep the trust account I already have, but I also want a Trust I account. Can I have both?
Yes. Several families 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, please request our handout describing tandem trusts.
27. How much money should I put into the trust?
No single answer is correct for everyone. Every family's situation is unique. We can, however, provide examples of what a trust, funded at a specific level, might provide. These examples are not guarantees. They are for the purpose of illustration only.
28. Does the amount I leave to the trust determine how much will be spent each year for my child?
The amount you leave provides the Trustee with an annual target, but the Trustee has full discretion to depart from this target, with good cause shown.
29. Is there a minimum deposit to fund a Trust I account?
Yes. This minimum amount increases slightly every three years. However, once enrolled, your minimum is guaranteed. While it does increase for families who enroll later, it does not increase for you. The precise minimum is based on the date enrollment occurs.
If you enroll in Trust I but find you cannot fund Trust I 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.
30. What rate of return is assumed from investments?
To provide examples of what might be available for your child, The Arc assumes a seven percent (7%) rate of return. This assumption is based on past performance since 1988. Past performance does not guarantee future performance.
31. 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.
32. 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 The Arc Trust staff so this information remains available to us.
33. 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 can 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.
34. 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. We recommend that you consult directly with your own attorney or tax advisor. We will be happy to work with him or her.
35. If I fund Trust I while I am alive, can I take this as a tax deduction or a gift tax exclusion?
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.
A contribution to Trust I for your child is not a "present interest" gift. Only present interest gifts are eligible for the gift tax exclusion.
36. Can a government agency challenge in court my child's eligibility for public benefits by virtue of his or her participation in Trust I?
We have taken every step to create and maintain a trust that is not likely to be challenged or, if challenged, is likely to survive any potential challenge. We thoroughly researched court rulings and legislature before preparing our trust documents to allow enrollment in 1988.