What is a Pooled Special Needs Trust?

Originally published by Rania Combs.

Special needs trusts are trusts that hold assets for a disabled beneficiary and distribute funds in a way that preserves the beneficiary’s eligibility to receive public benefits. A pooled trust is a special needs trust established by a non-profit organization.

Those who wish to join the pooled trust sign a joinder agreement, which dictates the trust’s terms, and then transfer assets into their own sub-account with the pooled trust. No one but the beneficiary has access to funds in their own sub-account; however, the pooled trust pools all the funds for purposes of investment and management, with the goal of maximizing return on investment and reducing costs of administration and management.

A pooled trust account can be created with funds that belong to the beneficiary (first party trust) or funds that don’t belong to the beneficiary, such as gifts from parents, grandparents and friends (third party trust).

Although trusts don’t offer the same flexibility as a separate traditional trust and results in a loss of direct control over investments and disbursements of the assets transferred to the trust, the low cost of establishing and maintaining a sub-account can be attractive to some families and beneficiaries.

Additionally, creating an account with a pooled trust alleviates the need to find a qualified trustee who can administer the trust. Administering a special needs trust can be complex because in addition to their fiduciary duties, a trustee must also keep abreast of changing laws that affect distributions to a beneficiary. Pooled trusts provide professional administration that may not otherwise be available for trusts of modest size. It also provides continuity because there is not a concern of an individual trustee dying, becoming incapacitated or losing interest in administering the funds.

Talk to your lawyer about whether a pooled trust is an option. You can find out more about pooled special needs trust in Texas by visiting the Arc of Texas.

Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.

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