What is a Pooled Special Needs Trust?
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. Pooled trusts are special needs trusts established by non-profit organizations.
Those who wish to join a pooled trust sign a joinder agreement. The joinder agreement dictates the trust’s terms. Each beneficiary’s assets are held in 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. The goal of doing so is 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).
Pooled trusts don’t offer the same flexibility as a separate traditional trust. Additionally, they result in a loss of direct control over investments and disbursements of the assets transferred to the trust. However, 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. In addition to their fiduciary duties, trustees must also keep abreast of changing laws that affect distributions to the beneficiary. Pooled trusts provide professional administration that may not otherwise be available for trusts of modest size. They also provide 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.