What Are Pooled Trusts?

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…

Benefits of Pooled Trusts

• The people managing the trust and its assets will be knowledgeable about agency rules regarding income and resources and will be able to deal with any questions from the SSI or Medicaid programs.
• The trust directors usually are relatives of people with disabilities and are attuned to that community.
• Even if you don’t have a lot of money to leave to your loved one, a Pooled Trust can give your loved one the benefits of a Special Needs Trust.

Limitations 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 trusts are only as good as the nonprofit that is managing it. Some may do a good job for a while, but in the face of financial problems or management changes, may end up mismanaging or even going out of business altogether.
• Some Pooled Trusts distribute assets only at certain times of the month. This may be a problem for a beneficiary needing distributions more frequently.
• Pooled Trusts can be very expensive. Find out exactly how much a Pooled Trust charges before you join. Generally, there is a one-time setup fee that can run from a few hundred dollars to several thousand dollars. Plus, there is an annual fee—based on a percentage of the assets that are put into the trust—this can be several thousand dollars a year.
• If you’re only putting a modest amount of assets into the trust, the fees of the Pooled Trust can seriously deplete these assets. In contrast, a friend or family member may not charge anything to serve as the trustee of an individual trust.
• Pooled Trusts are inflexible. Once the assets are in the Pooled Trust, it is difficult if not impossible to move the assets to another trust. Your beneficiary is then restricted to this Pooled Trust even if the trustee does not do a good job.
• Many Pooled Trusts will not agree to own real estate or authorize other nontraditional investments. If your inheritance will include these types of investments, an individual Special Needs Trust may better serve you.