Pooled special needs trusts offer many benefits of individual trusts without the high setup costs. Here's how they work and whether one might be right for you.
In this article, we'll cover:
- What pooled trusts are
- How they work
- Benefits and considerations
- How to find one
1. What Pooled Trusts Are
Definition: A pooled trust is a special needs trust managed by a nonprofit organization, where multiple beneficiaries' funds are pooled for investment but tracked separately.
Key features:
- Managed by nonprofit
- Individual accounts within pool
- Professional management
- Lower costs than individual trust
Who they serve:
- People with disabilities
- Any age (unlike some individual trusts)
- Those needing to protect SSI eligibility
- Those with smaller amounts to protect
Legal structure:
- Must be managed by nonprofit
- Established under federal law
- Individual subaccounts
- Same SSI protection as individual trusts
2. How They Work
Joining a pooled trust:
- Contact a pooled trust organization
- Complete joinder agreement
- Transfer funds to trust
- Your money goes to your subaccount
Your subaccount:
- Separate from other beneficiaries
- Tracked individually
- Used only for your benefit
- Maintained by trustee
Investment:
- Funds pooled for investment
- Professional management
- Diversified investments
- Your share of returns
Distributions:
- Request funds for qualified expenses
- Trustee approves and pays
- Same rules as individual trusts
- Supplemental needs only
Important: Your funds are kept separate in accounting even though they're pooled for investment purposes.
3. Benefits and Considerations
Benefits:
- Lower setup costs
- No attorney fees for trust creation
- Professional management
- No need to find individual trustee
Cost structure:
- Joinder fee (usually modest)
- Monthly or annual administrative fee
- Often percentage of balance
- Compare to individual trust costs
SSI treatment:
- Funds don't count toward $2,000 limit
- Same as individual SNT
- Must follow supplemental rules
- Protects eligibility
Considerations:
- Less control than individual trust
- Fees can add up over time
- Some have minimum balances
- Medicaid payback may apply
Age advantages:
- Can join at any age
- Individual first-party trusts have age limits
- Pooled trusts don't
- Good for older beneficiaries
Remainder treatment:
- When you die, remainder goes to:
- First, Medicaid payback (if first-party)
- Then, often kept by nonprofit
- May not go to heirs
- Understand before joining
4. How to Find One
Where to look:
- Academy of Special Needs Planners
- State protection and advocacy organizations
- Disability organizations in your state
- Internet search for your state
Questions to ask:
- What are the fees?
- What's the minimum balance?
- What happens to remainder?
- What expenses do they pay for?
Evaluate options:
- Compare several
- Understand all fees
- Read the joinder agreement
- Ask questions
State-specific:
- Many states have local pooled trusts
- Some national options
- State may affect choice
- Research your area
Is a Pooled Trust Right for You?
Good for:
- Smaller amounts to protect
- Those who can't afford individual trust
- Older adults (over 65)
- People wanting professional management
May not be best for:
- Very large amounts
- Those wanting family trustee
- Those wanting remainder to go to family
- May prefer individual trust
Alternatives:
- Individual special needs trust
- ABLE accounts (up to $100,000)
- Spending down on allowed items
- Each has pros and cons
How Purple Helps
- Track your regular accounts
- Monitor SSI resource limits
- Simple banking
- Works alongside trusts
- Clear financial picture