Pooled Trusts are available to families with special needs who need the benefits of a special needs trust but don't have the resources to set up a trust of their own. These trusts can be either Self-Settled or Third-Party Pooled Trusts (Learn the difference between Self-Settled and Third-Party Trusts) and are typically set up and administered by nonprofit organizations.
The organizations do this by keeping separate records for each beneficiary's trust, but when it comes to investments "pool" the funds together to obtain the similar efficiencies as larger trusts in terms of rules, options, and costs. You'll typically hear the term "Master Trust" when describing this arrangement. This provides several inherent benefits but there are also a few things to carefully evaluate before joining a Pooled Trust.
- There's a good chance the people managing the trust and it's assets will be knowledgeable on special needs benefit rules and will be able to deal with any questions that may arise from your state's Medicaid agency.
- Many of the trust directors typically have relatives with special needs, may be keenly aware of the issues that affect your family, and are connected to resources within the community.
- You are able to receive the benefits of a Special Needs Trust for your loved one!
- Remember, first and foremost, that a Pooled Trust is only as good as the nonprofit that runs it. That's why it's important to do thorough vetting and, if possible, obtain assistance from a professional knowledgeable in this area.
- In the same vein as #1, Pooled Trusts can be very expensive in terms of fees and/or very inflexible in regards to rules around distributions, investments, and ownership of certain property. It's important to understand the ongoing costs, rules, and restrictions prior to committing.
- Generally, it is very difficult, if not impossible, to move the assets from one Pooled Trust to another after you've made arrangements. This means that your beneficiary could be stuck in a Pooled Trust, even if the trustee doesn't do a good job.
A Pooled Trust can be a great planning tool that can benefit your loved one and open the door to strategies to provide for his or her future that might not otherwise be available. If you'd like to discuss Pooled Trusts and how they can fit into your finances, don't hesitate to reach out!
Mychal Eagleson, CFP®, AAMS® is the President of An Exceptional Life Financial, a firm that specializes in financial planning for teachers and families with special needs. He frequently writes and speaks on personal finance topics relating to these clients. Mychal also serves on the board of the Financial Planning Association of Greater Indiana as the Director of Public Relations & Social Media. To read more of his articles or learn about An Exceptional Life Financial please visit: www.anexceptionallifefinancial.com.