The Executive Director of a pooled trust in Virginia responded to our
recent article on pooled trusts. She observed that our article
recommended the use of pooled trusts for smaller amounts of money -- we
specifically suggested $50,000 or less -- and went on to say that she
believes that ". . .Pooled Trusts offer advantages for both smaller and
larger trusts. The advantages are: funds are pooled for investment
purposes providing a greater opportunity for growth; staff are
experienced Trustees and are knowledgeable about the rules regarding
public benefits such as SSI and Medicaid; reports are made to public
agencies regarding the Trust and disbursements; a Board of Directors,
comprised of professionals with expertise in various relevant areas,
oversees the operation of the organization; a nonprofit organization
will continue in perpetuity; disbursements are prompt; and staff are
sensitive to the needs of people with disabilities."
We agree that all of those benefits strongly support consideration of a
pooled trust in most cases. Pooled trusts typically offer a staff with
sensitivity to special needs and familiarity with the benefits issues of
persons with disabilities. That can be very difficult to replicate with
either a family member or a professional trustee (such as a bank or
trust company). A pooled trust typically can provide trust management at
a lower cost than other professional trustees due to the pooling of
accounts and the magic of "non-profit" involvement.
So what is the right size to consider the use of a pooled trust? Perhaps
focusing on the amount of money in the trust is the wrong question.
Many members of the Special Needs Alliance were instrumental in starting
pooled trusts in their communities, and most of those trusts now
operating across the country have active involvement of Alliance
members. In most cases, one of the principal concepts the organizers of
those trusts had from the inception was to provide an option for people
who needed such a trust but did not have access to a trustee. That
limited access is usually because there is not a family member available
(or no family member with the necessary investment and trust accounting
experience) and the amount of assets is too small to interest a
professional trustee.
Now that pooled trusts are part of the everyday special needs landscape,
we often find that individuals and families are using the pooled trust
for all kinds of reasons unrelated to size. Perhaps it is attractive to
have a trustee who operates right in the area where the beneficiary
lives, or it is helpful to have a trustee who is not personally and
emotionally involved with the beneficiary. It is never any fun for a
family member to have to say "no" in a money situation. Many of our
clients choose a pooled trust simply because they do not believe that
any normal human is capable of learning and keeping up with all of the
rules of special needs trusts and government benefits.
So why would you ever *not* choose a pooled trust? Many of our clients
with special needs do a have a family member or friend who can fill the
role of trustee very well and at little or no cost -- though we often
caution that family members, no matter how well-intentioned and
inexpensive -- are often not the best choice. Some pooled trusts may
have restrictions on types of investments that can be used, or require
that the participants choose a particular asset allocation model or
investment mix. Few pooled trusts are able to accept assets such as real
estate into their trusts. If the trust is large or has complex assets
such as real estate or limited partnerships, one can often better
customize the asset management with an individual trust.
One other problem with pooled trusts is a little more difficult to
explain, and does not apply in every case. Because most pooled trusts
were established so that any unused trust balance reverts to charitable
purposes on the death of the beneficiary, the use of a pooled trust may
(depending on the precise terms of the trust and circumstances) prevent
the distribution of trust residue to heirs of the beneficiary. Of
course, most stand-alone trusts funded with personal injury proceeds or
other assets originally belonging to the beneficiary provide for
repayment of state Medicaid expenses, which may consume the trust
without leaving anything for family members. This limitation of pooled
trusts therefore mostly applies to large trusts or beneficiaries who
happen to live only a short time after establishment of the trust.
Pooled trusts also vary greatly in what they can offer in the way of
service, prompt disbursements, and "perpetuity" of the sponsoring
nonprofit organization. Some excel in all of these and some do not.
There is tremendous geographic variability, as well, with some states
having no local pooled trust options at all. As with so many things (and
especially things as complicated and individualized as special needs
trusts), one needs to investigate, and to determine which option best
addresses the individual needs of each beneficiary.
About the Author: Kelly A. Thompson
is an attorney in Arlington, Virginia, and a member of the Special Needs
Alliance. She knows what she is talking about on the subject of pooled
trusts: she serves as counsel for the Personal Support Trusts,
a pooled trust managed by The Arc of Northern Virginia
.
About this Newsletter: We hope you find this newsletter useful and
informative, but it is not the same as legal counsel. A free newsletter
is ultimately worth everything it costs you; you rely on it at your own
risk. Good legal advice includes a review of all of the facts of your
situation, including many that may at first blush seem to you not to
matter. The plan it generates is sensitive to your goals and wishes
while taking into account a whole panoply of laws, rules and practices,
many not published. That is what The Special Needs Alliance is all
about. Contact information for a member in your state may be obtained by
calling toll-free (877) 572-8472, or by visiting
www.specialneedsalliance.com