Instead of naming a trustee to handle the special needs trust you create, you may be able to have your loved one’s inheritance managed as part of a group trust. These pooled trusts, also known as community or master trusts, are managed by nonprofit organizations. Pooled trusts are reasonable alternative to doing your own special needs trust if you can’t come up with a logical choice for trustee or if you don’t have enough money to justify creating an individual trust. However, they’re not ideal for every family.
This article provides an overview of pooled special needs trusts. For details about the pros and cons, read Special Needs Trusts, by Steven Elias and Kevin Urbatsch (Nolo).
Special needs pooled trusts are run by nonprofit organizations set up to expertly and efficiently administer a master special needs trust on behalf of individual beneficiaries with disabilities. Assets are combined and invested together; funds are spent on beneficiaries in proportion to their share of the total amount.
No two pooled trusts are exactly alike. Each has its own fees, menu of available services, and contracts under which it operates. Some offer many options, complicated contracts, and complex fee schedules. Others offer a single agreement and an easy-to-understand fee schedule. Some are organized to provide complete care of beneficiaries while others just manage the money in an appropriate manner.
But whatever their differences, all pooled trusts share some basic pros and cons worth considering.
Here are some advantages of pooled trusts:
While pooled special needs trusts work for many people, they do have some important limitations that you should consider . For example:
Pooled trust must adhere to strict state rules, so to keep things manageable, most pooled trusts only take residents that reside in the same state. To find a special needs pooled trust in your state, try contacting one of these organizations:
Before you sign on with a pooled trust, investigate your options. Pooled trusts vary in the services they offer and the fees they charge, so you should compare programs carefully. Read the materials carefully, meet with a program representative, and trust your gut. If something doesn’t feel right, you should keep looking.
Learn more about Finding and Choosing a Pooled Special Needs Trust.
When you’re ready to join a pooled trust, you will sign a joinder agreement and pay a ne-time nonrefundable enrollment fee described above. The joinder agreement links your loved one to the master trust provisions, describes your duties as the person supplying the money (the grantor), explains what happens if you wish to withdraw the funds later, and specifies what will be done with any funds left in your loved one’s account when it terminates. Some joinder agreements also let you describe your preferences for disbursements once the trust is funded and goes into effect.
After you die, the joinder agreement becomes irrevocable, which means any funds that have been put in the account will stay there. The trustee will manage and disburse them for your loved one’s benefit under the terms of the trust.
To fund the trust, you can use your will or living trust to leave property to the pooled trust. Learn more about How to Leave Property to a Special Needs Trust.
Also, instead of signing up for a pooled trust during your lifetime, you can use your estate plan to request that your executor join one after you die.
To learn more about special needs trust, go to the Special Needs Trusts section of Nolo.com.
This article was excerpted from Special Needs Trusts, by Steven Elias and Kevin Urbatsch (Nolo) which provides detailed information about pooled trusts and how to join them, as well as everything you need to make your own special needs trust.