Frequently Asked Questions

RIC-E Trust® FAQs

  • What is the RIC-E Trust®?

    The Retirement InCome — for Everyone Trust® (called the RIC-E Trust® for short, pronounced RICKY) is a way for parents, grandparents and others to help a child they love enjoy a more financially secure retirement. The idea is to let you set aside money that grows without taxes until the child reaches retirement age. The account also grows outside of the donor’s estate.

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  • Who can establish a RIC-E Trust®?

    Anyone can establish a RIC-E Trust® for any child, regardless of the child’s age. You can create a RIC-E Trust® for a newborn, or for adult children, including those in college or newly married, as well as for those much older.

    Parents and grandparents, of course, can establish a RIC-E Trust® for the important children in their lives — and so can aunts, uncles, godparents and family friends. Indeed, you can establish a RIC-E Trust® for anyone; you do not have to be related.

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  • What might the RIC-E Trust® be worth when the child retires?

    Investment results will vary, of course. We cannot predict the future.

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  • What is the tax liability when investing in a RIC-E Trust®?

    If the trust and its assets are managed as designed, there is no annual income tax, no tax filing and no trustee fee during the life of the trust. (It is possible the Trust could incur fees for Trustee services if you choose a trustee who charges a fee. Any distributions made to pay Trustee fees would necessitate the filing of a trust tax return and create the obligation for income taxes and a 10% IRS penalty if the child is under age 59½.)

    When the child receives distributions from the RIC-E Trust® in retirement, he or she will owe income taxes based on his or her income tax rate at that time. The child will choose when to receive this income.

    Please note that changes in tax rates, the tax treatment of investment earnings, or the tax treatment of annuities may impact results.

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  • What happens if there are changes in tax law?

    Tax-deferred investments are long-established retirement planning tools, but it is always possible that Congress might do away with them. If that were to happen, the Financial Advisor you select for the Trust could offer recommendations to respond to any tax law changes.

    Please note that changes in tax rates, the tax treatment of investment earnings, or the tax treatment of annuities may impact results.

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  • How do I obtain a RIC-E Trust®?

    It’s easy to establish a RIC-E Trust®. Just complete a RIC-E Trust® Enrollment Form and send it to Edelman Business Services, LLC along with a check for the one-time set up fee of $200. This fee is waived for clients of Edelman Financial Services who are invested in the Edelman Managed Asset Program.

    EBS will then prepare a template trust and send it to you for review.

    Please note that the RIC-E Trust® is a legal document and only a qualified attorney can provide legal advice to consumers. We encourage you to review the Trust with your estate planning attorney. If you receive legal services, an attorney will likely charge a legal fee.

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  • Who serves as the Trustee?

    You can name anyone you wish, except yourself. You can also name a successor Trustee if the initial Trustee becomes unable or unwilling to serve. Furthermore, the child (or the child’s guardian if the child is a minor) can replace the Trustee at any time.

    If you want to name yourself, your spouse or the child’s spouse as Trustee, we recommend you talk to an estate attorney.

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  • How much work is required for the Trustee?

    Very little. Essentially, the Trustee’s function is to make sure the money in the Trust is invested as you instruct when you established the RIC-E Trust®, and that the money remains invested until the child reaches retirement age. When the child reaches that age, the Trustee will make sure the Trust’s assets are given to the child.

    Because you will probably name a family member or close family friend to serve as Trustee, he or she will probably agree to serve as Trustee at no cost. However, the Trust does permit the Trustee to receive compensation, so discuss this with the person you plan to appoint as Trustee. If you select a corporate Trustee, such as a bank or trust company, the Trust will incur fees for such services. Distributions made to pay trustee fees will be taxable to the Trust and will necessitate the filing of a trust tax return. (You and the child or the child’s guardian can replace the Trustee at any time, for any reason.)

    To make it even easier for the Trustee to carry out his or her duties, you’ll name a Financial Advisor to assist him or her.

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  • Tell me more about the Financial Advisor

    The Financial Advisor for your RIC-E Trust® will be one of Ric Edelman’s colleagues at Edelman Financial unless you select a different Financial Advisor. You will receive investment recommendations that are appropriate for the child, and the money will be invested accordingly.

    The Trustee is also permitted to delegate certain tasks to Edelman Financial Services, such as issuing notices as required by law. Thus, the Trustee will have very little work to do. The Trustee will oversee the Financial Advisor’s activities for the benefit of the child. (Because it is not intended that withdrawals will be made prior to retirement, the Financial Advisor will not be responsible for filing trust tax returns should any pre-retirement withdrawals necessitate them.)

    The advisors of Edelman Financial Services are also Registered Representatives of EF Legacy Securities, LLC an affiliated broker-dealer, member FINRA/SIPC, and are acting in their capacity as Registered Representatives of EF Legacy Securities, LLC when offering the RIC-E Trust® and any related securities.

    You and the child (if the child is a minor, then his or her guardian) can fire the Financial Advisor at any time and hire a different Financial Advisor.

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  • What are the fees of the Financial Advisor?

    If you allow Edelman Financial Services to serve as the Financial Advisor for the RIC-E Trust®, there will be no administrative or investment advisory fees, other than the one-time $200 set up fee (which is waived for clients of Edelman Financial Services who are invested in the Edelman Managed Asset Program). Be aware that the investment vehicle used for the RIC-E Trust® will incur fees and expenses annually. These fees are described in the “Expenses of the Variable Annuity” section. In addition, the investment vehicle used for the RIC-E Trust® pays compensation to the Financial Advisor. This compensation is paid from the invested assets.

    If you choose a different person as Financial Advisor for the RIC-E Trust, you or the Trust might incur expenses in addition to the fees and expenses described in the “Expenses of the Variable Annuity” section.

    Also, other Financial Advisors might not be willing to perform all the duties EFS is willing to perform. Therefore, before you select a different Financial Advisor, talk with them about the services you want them to perform and ask them about the fees they will charge.

    The Financial Advisor you select will be compensated through his or her broker-proposed investment to the Trust. This compensation is paid by from the invested assets.

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  • Where will the money be invested?

    The money will be invested in a proposed tax-deferred investment

    Be aware that because the Trust assets are invested in this manner, withdrawals made for any purpose, including paying fees, are currently subject to income taxes and a 10% penalty if such withdrawals are made before the child reaches age 59½.

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  • Does the investment charge any fees?

    There are fees and charges incurred by the proposed tax-deferred investment. Please refer to the “Expenses of the Variable Annuity” section. A detailed description of fees can also be found in the prospectus. You should read the prospectus carefully before you invest or send money on behalf of the Trust.

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  • What is the minimum needed to establish the RIC-E Trust®?

    When you establish a RIC-E Trust®, you must fund it with at least $5,000. You can contribute more if you wish. Once the Trust is established, you may make additional contributions at any time, in amounts of $500 or more. You are never required to do so.

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  • Can I set up a RIC-E Trust® for a child of any age?

    Yes. The child simply needs a Social Security Number and a U.S. address.

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  • Is there a limit to the amount that can be placed in a RIC-E Trust®?

    From an economic perspective, no, because the more you contribute, the more the child will have when in retirement.

    However, there is an IRS limitation on gifts. For 2016, if you alone contribute to the RIC-E Trust®, a gift tax might be incurred if you contribute more than $14,000 to the child (either directly or through the Trust). If you and another person (such as your spouse) together act as co-contributors, then the limit is $28,000 per child per year.

    For more information about the tax implications of gifts and current limits, you should consult a financial or tax advisor. For administrative questions regarding the RIC-E Trust®, contact us at 888-PLAN-RIC (888-752-6742) ext. 2154.

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  • Can I add money to the RIC-E Trust® over time?

    Yes. RIC-E Trusts® can accept additional contributions at any time, from any person, in amounts of $500 or more.

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  • What if I have more than one child? Must I open a separate RIC-E Trust® for each child?

    Yes. Each RIC-E Trust® is designed to benefit one child.

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  • I want to establish a RIC-E® Trust for a child, but I am not the child’s parent. Should I coordinate with the parents before I proceed?

    Yes, if the child is a minor. When creating a RIC-E Trust® for a child under age 18, the child’s parent or legal guardian needs to sign some of the paperwork so the IRS will regard the gift as “received” (for tax purposes) by the child. So it’s best to explain this to the child’s parent or guardian in advance, and we can join you in that conversation if you wish. The parents or guardian will be reassured to know that, under current tax law, the RIC-E Trust® does not create any tax liability for the child or the child’s parents during the life of the trust, nor does it interfere with the child’s ability to qualify for college financial aid. Of course, tax law could change, so we encourage you to consult with a tax and legal advisor.

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  • I have several children in mind. How much should I give to each child’s RIC-E Trust®?

    Although the minimum to establish a RIC-E Trust® is $5,000, you can contribute different amounts to different RIC-E Trusts®. When establishing multiple trusts, some people give more to older children than to younger ones, because the older ones are closer to retirement and have less time for the money to grow. Others prefer to fund each Trust with identical amounts.

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  • If I establish a RIC-E Trust®, can I later change my mind?

    No. The RIC-E Trust® is irrevocable. Once you establish the Trust and make a contribution to it on behalf of the child, you cannot take the money back or undo any aspect of the Trust.

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  • When is the child able to receive money from the Trust?

    When establishing a RIC-E Trust®, you decide the age for the child to receive the money (the earliest you can select is age 59½).

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  • What happens if the child becomes disabled?

    If the child becomes disabled, as defined in the RIC-E Trust®, the Trustee will be able to distribute the money from the Trust, even if the child has not yet reached retirement age. Distributions may be subject to income taxes and a 10% IRS penalty. Consult a tax advisor for further details.

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  • When the child reaches the age I've designated, is the money given to him or her all at once?

    When the child reaches the retirement age you designated, the assets in the RIC-E Trust® will be transferred from the Trust to the child. The child will have the option of leaving the money in the account as-is (to continue deferring taxes), or, if the child prefers, he or she can receive some or all of the money immediately.

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  • What happens if the child needs the money before retirement?

    The RIC-E Trust® is designed to help solve the child’s future retirement needs, not to be used for other financial concerns that may occur before then. Therefore, aside from disability, the money is not available prior to the retirement age that you select when establishing the RIC-E Trust®.

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  • What happens if the child dies before retirement?

    The Trustee will distribute the Trust’s assets to the child’s probate estate. From there, the money will be distributed in accordance with the child’s estate plan and the law. This process can be more fully explained by a financial advisor or estate attorney.

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  • Who will be kept informed of the RIC-E Trust's® status?

    Quarterly statements will be sent to the Trustee.

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  • What do I do next?

    Just complete the RIC-E Trust® Enrollment Form for each child and send it to Edelman Business Services, LLC. We’ll commence your enrollment right away.

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