FAQ

Trust I can pay for disability related and non-disability related expenses. It is impossible to draft an all-inclusive list of what goods and services can and cannot be purchased with a special needs trust. Following are items that are routinely covered.

Goods

Furniture * Personal Care Items * Clothing * Mattress/Box Springs * Vehicles * Television/Stereo, etc. * Eyeglasses/Contacts * Toys * Vacations * Hobby Supplies * Gasoline * Essential Dietary Needs * Computers/Software * Pets/Pet Supplies * Games * Washer/Dryer * Guitar, Musical Instrument, etc. * Household Products and Supplies * Kitchen Appliances/Tools * School Tuition * Household Appliances * Outdoor Grill * Prepaid Funeral Expenses

Services

Cell Phone Services * Internet * Cable TV * Hair Care * Transportation * Auto and Renter’s Insurance * Eye and Dental Care * Entertainment Expenses * Tuition to Camps, Classes, etc. * Athletic or Recreational Fees * Auto Repair/Maintenance * Attendant Care * Rehabilitation * Pet Grooming/Veterinarian Bills * Tickets to Concerts, Movies, Sporting Events, etc. * Music Lessons * Maid Services * Home Modifications/Improvements * Field Trips/Day Trips, etc. * Therapeutic Massage * Vehicle modifications to make accessible * HVAC Services * Attorney/Accountant/Financial Planning * Seminar/Training/Conference Expenses

Purchases must be made for the sole benefit of the beneficiary at the sole discretion of the trustee.

On occasion, when appropriate and affordable, Trust I 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.

Yes. We encourage active participation and advice from Key Persons, who often are family members. Family members do not 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.

Requests can be made through the online form available on our website, thearctrust.org, or by email, phone, or fax and can only be made by the Key People, or, when appropriate, by the beneficiary. Each trust beneficiary is assigned an account manager who is the primary contact for disbursement requests.

A funded Trust I account is irrevocable, meaning it cannot be changed or cancelled. If your other child is dissatisfied, he or she can request a review of the grievance. The grievance is reviewed by the Trust Advisory Committee, The Arc Board of Directors or our Trustee, The National Bank of Indianapolis. When appropriate the trust can be transferred to another pooled trust.

Yes. If this is the case, all disbursements will first be made from Trust II until it is depleted.

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, a living trust, a retirement plan or a life insurance policy specifically designated for this purpose.

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 the trust beneficiary.

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.

There may be one or multiple donors to a beneficiary’s account. Typically, if both parents are alive, both parents 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.

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.

No. Your enrollment lets you use Trust I if you want, but it does not obligate you to do so. Some parents may enroll as a hedge against other plans not working out as planned.

There is no minimum to fund Trust I; however, if the balance is under $30,000 it will not be held in our investment account.

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 Master Trust to obtain information about your child that is needed to safely and effectively administer the trust for his or her benefit.

Our intent is to spend the entire amount for your child’s benefit during his or her lifetime. If he or she lives to actuarial life expectancy, the trust should be completely depleted. Should any money remain in the trust after your child passes away, you, as the donor, designate how this money is distributed.

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.

• Continuity. Parents want continuity. They want the trust they create to last their child’s lifetime. That continuity could be at risk if the trust is being administered by a beneficiary’s brother or sister because siblings might move away, lose interest in administering the trust or die before the beneficiary. Trust I is professionally administered, providing the lifetime continuity parents want.
• 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 proven history of reliability. It is a part of The Arc of Indiana’s mission to meet the expectations we create.
• Expertise. If one of your other 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 Social Security Administration (SSA), the Division of Disability and Rehabilitative Services (DDRS) and Medicaid. Our staff has the knowledge and expertise to make these reports.
  

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. The Arc Master Trust knows the government regulations, so the key people do not need to be concerned that benefits will be reduced or eliminated.

Yes, we make the reports. We know the regulations well. Our expertise minimizes potential challenges from government agencies. Because we administer thousands 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 Master Trust.

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.

Yes. Several families want our experience and expertise, but they also want family members to control the bulk of trust resources. Both objectives can be achieved by using tandem trusts. If this situation applies to you, please request our handout describing tandem trusts.

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.

Yes. A spending target is based on the balance in the account and the age of the child so, 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.

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.

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.

If a similar trust is operating in the state to which your child moves and if 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.

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. If there are any questions, we will be happy to work with him or her directly.

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.

A trust beneficiary can use his or her Trust I account to pre-pay for any or all funeral expenses during his or her lifetime. However, a beneficiary’s Trust I account cannot be used to pay for funeral expenses after the death of the beneficiary due to state and federal laws governing trusts. For this reason, it is strongly recommended that trust beneficiaries pre-pay all costs associated with their funeral, burial plot, headstone and other related expenses before their death. In general, the use of an irrevocable funeral trust for the purposes of pre-paying funeral costs will not affect Medicaid or SSI benefits.

Trust II can pay for disability related and non-disability related expenses. It is impossible to draft an all-inclusive list of what goods and services can and cannot be purchased with a special needs trust. Following are items that are routinely covered.

Goods

Furniture * Personal Care Items * Clothing * Mattress/Box Springs * Vehicles * Television/Stereo, etc. * Eyeglasses/Contacts * Toys * Vacations * Hobby Supplies * Gasoline * Essential Dietary Needs * Computers/Software * Pets/Pet Supplies * Games * Washer/Dryer * Guitar, Musical Instrument, etc. * Household Products and Supplies * Kitchen Appliances/Tools * School Tuition * Household Appliances * Outdoor Grill * Prepaid Funeral Expenses

Services

Cell Phone Services * Internet * Cable TV * Hair Care * Transportation * Auto and Renter’s Insurance * Eye and Dental Care * Entertainment Expenses * Tuition to Camps, Classes, etc. * Athletic or Recreational Fees * Auto Repair/Maintenance * Attendant Care * Rehabilitation * Pet Grooming/Veterinarian Bills * Tickets to Concerts, Movies, Sporting Events, etc. * Music Lessons * Maid Services * Home Modifications/Improvements * Field Trips/Day Trips, etc. * Therapeutic Massage * Vehicle modifications to make accessible * HVAC Services * Attorney/Accountant/Financial Planning * Seminar/Training/Conference Expenses

Purchases must be made for the sole benefit of the beneficiary at the sole discretion of the trustee.

Requests can be made through the online form available on our website, thearctrust.org, or by email, phone, or fax and can only be made by the Key People, or, when appropriate, by the beneficiary. Each trust beneficiary is assigned an account manager who is the primary contact for disbursement requests.

There is no minimum or maximum to open or maintain a Trust II account. Many Trust II accounts are very small. The average balance generally is under $10,000.

Trust II beneficiaries often use their trust as a savings account and add to it whenever they need or want to with excess money left after paying their monthly bills and other necessities. However, if there is a larger amount received from an inheritance, social security back payment or lawsuit settlement, and the amount placed into the trust is over $30,000, these accounts are held in our Trust II investment account.

Interest-bearing investments are limited to Treasury bills for trust accounts under $30,000. If the amount is over $30,000 it is invested in a diverse, well performing, prudent portfolio consisting of mutual funds, mutual bond funds, and a small percentage of money market funds.

Yes. You can put your child’s money into Trust II. Once the money is in our trust it no longer counts as an asset in determining your child’s financial eligibility for the waiver. However, per federal law, after your child’s death, the state has a claim on a portion of any funds remaining in the trust, and while living the money can only be used for the sole benefit of the child.

Parents of minor children have a legal duty to provide basic support for their children, including food, clothing, shelter and basic educational expenses. This duty ceases at age 18. Using the child’s trust fund to pay for what parents are legally obligated to provide would not be in the child’s best interest.

Disbursements from your child’s trust should be reserved for extraordinary expenses, such as expenses unique to parents whose minor children are disabled, or very large medical expenses not covered by insurance or Medicaid and not easily afforded by the parents.

Every situation is somewhat different. However, as a general rule, if the requested disbursement is for something that our laws and cultural norms generally expect parents of a minor to provide for their children, then The Arc Trust will be reluctant to use funds from the child’s Trust II account for such requests.

The law allows the parent, grandparent, guardian, court or the person with the disability to open the trust. There may be times when a court order is required to open the Trust II account.

For those trusts under $30,000 that have purchased Treasury bills, taxes may be due on interest received. If the account is funded over $30,000 funds are held in our Trust II investment account and a Grant or Tax Letter will be mailed to the Key Person authorized to receive tax information on the account.

When Treasury bills are cashed in, a 1099 MISC form is generated from the bank. The 1099 is mailed to the Trust II Beneficiary or the key person on the account designated to receive tax information. Beneficiaries then report this information, along with other income, on the tax forms they already use. If a beneficiary has an account that is invested, the bank will prepare a Grantor Tax Letter, and it will be mailed to the person indicated to receive tax information.

Yes. An important part of our service for both trusts is reporting disbursements and explaining why they do not interfere with eligibility for benefits like Medicaid, SSI and Medicaid Waivers.

A trust beneficiary can use his or her Trust II account to pre-pay for any or all funeral expenses during his or her lifetime. However, a beneficiary’s Trust II account cannot be used to pay for funeral expenses after the death of the beneficiary due to state and federal laws governing trusts. For this reason, it is strongly recommended that trust beneficiaries pre-pay all costs associated with their funeral, burial plot, headstone and other related expenses before their death. In general, the use of an irrevocable funeral trust for the purposes of pre-paying funeral costs will not affect Medicaid or SSI benefits.