In a traditional special needs trust, a trustee is named to handle the trust you create. In a pooled special needs trust, it’s possible to have your loved one’s inheritance managed as part of a group trust.
Pooled trusts are also referred to as community or master trusts, and are managed by nonprofit organizations. If you don’t have a viable choice for a trustee or you don’t have enough funds to justify making an individual trust, then a pooled special needs trust may be right for you.
Read on to learn more.
Pooled Special Needs Trusts
Nonprofit organizations, such as our very own Legacy Enhancement Trust, handle the details regarding pooled trusts, including setting them up to expertly and efficiently administer a pooled special needs trust on behalf of individual beneficiaries with disabilities.
Pooled special needs trusts combine assets in order to invest them together. The funds are spent on beneficiaries according to their share of the total sum of the trust.
All pooled special needs trusts are unique in their own right. Each one has its own fees, list of available services, and contracts determining the operation of the trust. Some may offer several options, complex contracts, and intricate fee schedules. Others provide a single agreement and a simplistic fee structure. Many are put together to provide total care of beneficiaries, while others simply manage the money appropriately.
Regardless of what sets them apart, there are some general benefits and drawbacks of pooled special needs trusts that you should be aware of.
Pooled Special Needs Trust Benefits
Here are some of the benefits of pooled special needs trusts:
- Those who manage the trust and its assets are aware of agency rules concerning income and resources and will be capable of handling any questions from the Supplemental Security Income (SSI) or Medicaid programs.
- The costs to establish a pooled trust are significantly lower.
- Even if you don’t have a ton of money to leave for your loved one, a pooled trust can provide your loved one with the benefits of a special needs trust.
Pooled Special Needs Trust Drawbacks
Even though pooled special needs trusts can be a great solution for many, there are some crucial restraints to be aware of, including:
- You must have a good nonprofit organization handle your pooled special needs trust.
- Some pooled special needs trusts only allot assets during certain periods of the month. This can cause problems for beneficiaries who require more frequent distributions.
- There’s usually a one-time setup fee as well as an annual fee.
- Pooled special needs trusts don’t offer much flexibility in choosing how the funds are invested.
- It is common for pooled trusts to disallow owning real estate or other nontraditional investments.
How To Join a Pooled Special Needs Trust
In order to join a pooled special needs trust, you must sign a joinder agreement and pay a one-time non-refundable enrollment fee. The joinder agreement does the following:
- Serves to link your loved one to the master trust provisions,
- Describes your duties as the one supplying the funding (the grantor),
- Describes what should happen if you want to withdraw the money later, and
- Provides specifications regarding what should be done with any money left in your loved one’s account when it concludes.
Some joinder agreements may also allow you to describe your disbursement wishes when the trust is funded and takes effect.
The joinder agreement is irrevocable, which means that any money that has been added to the account will remain there. The trustee will manage and disburse the funding for your loved one’s benefit according to the terms of the trust.
If you need assistance setting up your loved one’s pooled special needs trust, we are here to help. Don’t delay—reach out with any questions you have right away.