FAQ

Printable PDF

Establishing a Trust

Yes. You may want to set up a DD Endowment Trust Fund in addition to other trusts in order to gain access to the Trust Fund Partners’ expertise.
Potentially, you may be able to transfer funds from an existing trust into the DD Endowment Trust Fund. You will need to consult an attorney to review your specific situation.
The DD Endowment Trust Fund is managed by reliable Trust Fund Partners that provide stability and fund oversight throughout the lifetime of the Beneficiary. This trust does not depend on an individual to manage and adjust investments or stay current on federal and state regulations. The DD Endowment Trust Fund takes care of the day-to-day management so you don’t have to. Family members may still be actively involved in helping beneficiaries use funds for supplemental services.
For an exact answer, you will need to ask an attorney how much he/she will charge. An estimated cost for a private special needs trust, based on comparable trusts and associated expenses, may run between $1,000 and $5,000 to set up, and require ongoing management fees to operate.

Changes in a Beneficiary’s Eligibility

If the beneficiary becomes ineligible, the Primary Representative may elect one of the following options, subject to final approval by the Governing Board:
1. The balance of the Beneficiary’s individual trust account will be placed in another existing special needs trust established for the Beneficiary. Any costs related to the transfer will be charged to the beneficiary’s individual trust account.
2. The individual trust account will remain open, and the account will be assessed fees at a level that will support all account maintenance costs. The Beneficiary will no longer be eligible for state matching funds as of the ineligible date.
3. A) If Ineligible by moving. The Beneficiary’s individual trust account will be terminated and distributed as if the beneficiary died.
B) If ineligible by DD definition. the Trust Manager will direct distributions to or for the benefit of the beneficiary.The Primary Representative is required to notify the Trust Manager if the Beneficiary moves out of Washington or no longer meets the state definition of developmental disability.

If the Beneficiary becomes ineligible due to moving out of state, the Primary Representative may elect one of the following options, subject to final approval by the Governing Board:
1. The balance of the Beneficiary’s individual trust account will be placed in another existing special needs trust established for the Beneficiary. Any costs related to the transfer will be charged to the Beneficiary’s individual trust account.
2. The individual trust account will remain open, and the account will be assessed fees at a level that will support all account maintenance costs. The Beneficiary will no longer be eligible for state matching funds as of the ineligible date.
3. If ineligible by moving, the Beneficiary’s individual trust account will be terminated and distributed as if the Beneficiary died.

If the Beneficiary becomes ineligible due to no longer meeting the state definition of developmental disability, and there are assets remaining in the individual trust account, the state is entitled to recover dollar for dollar up to the total medical assistance paid on behalf of the Beneficiary under the State’s Medicaid Plan.

If there are remaining assets after the state recovery of funds, the Primary Representative may elect one of the following options, subject to final approval of the Governing Board:
1. The balance of the Beneficiary’s individual trust account will be placed in another existing special needs trust established for the Beneficiary. Any costs related to the transfer will be charged to the Beneficiary’s individual trust account.
2. The individual trust account will remain open, and the account will be assessed fees at a level that will support all account maintenance costs. The Beneficiary will no longer be eligible for state matching funds as of the ineligible date.
3. The Trust Manager shall make or direct distributions to or for the benefit of the Beneficiary as requested by the Primary Representative.


Tax Questions for Trust I (Third Party Trusts)

The following is an abbreviated summary of certain federal tax matters. Individual tax results may vary. Consult a tax advisor for specific implications of your participation in the trust. This summary is not intended to provide individual tax advice and is subject to the terms of the Master Trust Document and Joinder Agreement. If the individual trust account will at any time contain the beneficiary’s own funds, refer to Tax Questions for Trust II (Self-Settled Trusts).

Each individual trust account is subject to federal income tax on its investment earnings (such as interest and dividends). If all of those earnings are used on behalf of the Beneficiary during the calendar year, federal income tax does not apply to the trust; however, the Beneficiary may be subject to tax.

The DD Endowment Trust Fund will prepare and file an IRS Form 1041 for each individual trust account. The fund will issue a check from the individual trust account for any tax owed. A copy of the IRS Form 1041 will be mailed to the Primary Representative.

Once income tax has been paid on earnings, tax does not have to be paid again when funds are spent on behalf of the Beneficiary.

Income Tax
The donor is not required to pay federal income tax on earnings generated by the individual trust account.Gift Tax
Contributions to an individual trust account will be considered a gift for federal tax purposes. The law requires that individuals file a gift tax return (IRS Form 709) for each year that they put money into the individual trust account. Even though the law requires that a gift tax return be filed, there may be no gift taxes owed. For more information, refer to the IRS rules regarding gift taxes.

Tax Deductions: A contribution to an individual trust account is not deductible as a charitable contribution because the funds directly benefit a specific individual.

Income Tax
When the individual trust account’s earnings are disbursed on behalf of the Beneficiary (and not retained in the account), the Beneficiary must claim the amount of those disbursements as taxable income.If the Beneficiary owes income tax, he or she will be required to prepare and file an income tax return, as well as pay any income tax due. The DD Endowment Trust Fund will provide the Primary Representative with a completed IRS Schedule K-1 (Form 1041) showing the investment earnings to be included in the Beneficiary’s income tax calculation.

If income tax is paid on the investment earnings while in the individual trust account, tax does not have to be paid when funds are spent on behalf of the Beneficiary.

Gift Tax
The Beneficiary will not owe gift tax on contributions placed in an individual trust account.

A Beneficiary should not have to pay income tax on the matching contributions made by the state.

Tax Questions for Trust II (Self-Settled Trusts)

The following is an abbreviated summary of certain federal tax matters. Individual tax results may vary. Consult a tax advisor for specific implications of your participation in the trust. This summary is not intended to provide individual tax advice and is subject to the terms of the Master Trust Document and Joinder Agreement. If the individual trust account does not contain any of the Beneficiary’s own funds, refer to Tax Questions for Trust I (Third Party Trusts).

Income Tax
Because the Beneficiary is the sole contributor of a self-settled trust, he or she will be required to pay federal income tax on earnings generated by the individual trust account.

If required, the Beneficiary will be responsible for preparing and ling a federal income tax return. The DD Endowment Trust Fund will prepare an IRS Form 1041 for the individual trust account and send it to the Primary Representative. is form will document all of the investment earnings that the Beneficiary may be required to report on his or her federal income tax return.

Upon request, the Trust Manager will make a disbursement from the individual trust account to pay for taxes attributable to the account. Once income tax has been paid on the earnings, tax does not have to be paid when funds are used on behalf of the Beneficiary.

No, the Beneficiary’s individual trust account is not subject to federal income tax on its investment earnings because the Beneficiary will be required to pay any federal income tax attributable to this account.

Income Tax
If the Beneficiary owes income tax, he or she will be required to prepare and file an income tax return, as well as pay any income tax due. e DD Endowment Trust Fund will provide the Primary Representative with a completed IRS Schedule K-1 (Form 1941) showing the investment earnings to be included in the beneficiary’s income tax calculation.

Upon request, the Trust Manager will make a disbursement from the individual trust account to pay for taxes attributable to the account.

Protect Today,
provide for tomorrow.

Learn More

Designed, developed and hosted by cloudPWR® 2017