FAQs

I already have a trust for my child who has a developmental disability and want to keep it. May I also set up a trust fund through DDETF?

Yes. You may want to set up a trust fund in addition to other trusts in order to gain access to the Trust Fund Partners’ expertise.

May I move funds from an existing private trust into DDETF?

Potentially. You may be able to transfer funds from an existing trust into DDETF. You will need to consult an attorney to review your specific situation.

I already have a trust for a family member who has a developmental disability, and another family member is serving as trustee. How is DDETF better?

DDETF is managed by reliable trust fund partners that provide stability and fund oversight throughout the lifetime of the Beneficiary. DDETF trusts do not depend on an individual to manage, adjust investments or stay current on federal and state regulations. DDETF takes care of the day-to-day management, so you don’t have to. Family members may still help the Beneficiary use funds for supplemental services.

What would it cost to set up a special needs trust on my own?

For an exact answer, you will need to ask an attorney how much they will charge. It may costs between $1,000 and $5,000 to establish a private special needs trust, based on comparable trusts and associated expenses. It may require ongoing management fees to operate. DDETF makes having a trust more affordable.

What happens if the Beneficiary of a Trust I becomes ineligible by moving out of Washington? What happens if they no longer meet the state definition of developmental disability in RCW 71A.10.020(5)?

If the Beneficiary is no longer eligible to have a trust with DDETF, the Primary Representative may elect one of the following options (subject to final approval by the Governing Board):

• 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.
• The individual trust account will remain open and 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.
• If ineligible by moving, the Beneficiary’s individual trust account will be terminated and distributed as if the Beneficiary died.
• 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

What happens if a Beneficiary of a Trust II becomes ineligible to participate in the program by moving out of Washington State?

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:

• 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.
• 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.
• If ineligible by moving, the Beneficiary’s individual trust account will be terminated and distributed as if the beneficiary died.

What happens if a Beneficiary of a Trust II becomes ineligible because they no longer meet the state definition of developmental disability?

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:

• 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.
• 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.
• The Trust Manager shall make or direct distributions to or for the benefit of the Beneficiary as requested by the Primary Representative.

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).

Is the Beneficiary’s individual trust account subject to federal income tax?

Each individual trust account is subject to federal income tax on its investment earnings (such as interest and dividends). If all 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.

Who prepares the tax forms and pays federal income tax owed?

DDETF 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.

What are the tax implications for the Primary Donor or person establishing an individual trust account?

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.

What are the tax implications for the Beneficiary of an individual trust account?

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, they will be required to prepare and file an income tax return. They will be asked to pay any income tax due.

DDETF will provide the Primary Representative with a completed IRS Schedule K-1 (IRS 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

Will the Beneficiary owe income taxes on state matching contributions?

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

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).

What are the tax implications for a person who establishes an individual trust account?

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.

Who prepares the tax forms and pays federal income tax owed?

If required, the Beneficiary will be responsible for preparing and ling a federal income tax return. DDETF will prepare an IRS Form 1041 for the individual trust account and send it to the Primary Representative. The 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.

What is the Beneficiary’s responsibility for paying tax related to the individual trust account?

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.

What is the Beneficiary’s responsibility for paying tax related to the individual trust account?

If the beneficiary owes income tax, they will be required to prepare and file an income tax return, as well as pay any income tax due. DDETF will provide the Primary Representative with a completed IRS Schedule K-1 (IRS 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.

In 2022, Chapter 11.130 RCW changed. The new Uniform Guardianship, Conservatorship, and Other Protective Arrangements Act took effect.

Informing Families provides an overview on guardianship here at Guardianship | Informing Families.

Washington Law Help and Northwest Justice Project explains more about guardianship on their websites.

The CLEAR Hotline (Coordinated Legal Education, Advice and Referral) is available for low-income communities.