I am posting this article for a friend and guest blogger, JoAnn Marcus. JoAnn is the Executive Director of Commonwealth Community Trust, a nonprofit organization that administers pooled special needs trusts. Her post follows:
Special needs trusts are a common tool used by attorneys and financial professionals to protect assets for people who are disabled. Individuals benefit from having a trustee to make financial decisions on their behalf and/or to maintain eligibility for Medicaid and Supplemental Security Income (SSI). Setting up a special needs trust, however, is not always easy or straightforward. One of the most difficult aspects is identifying a trustee to administer the trust.
An increasingly popular option is to recommend a pooled special needs trust. The following are six things to know:
- Funds are pooled together for greater investment opportunities
Instead of having an individual special needs trust, the beneficiary joins his or her funds with others in a pooled trust. Funds are then invested together which provides for greater investment opportunities. Earnings based on the beneficiary’s share of the principal are reinvested into each beneficiary’s sub account.
- Lower administration fees
Because the funds are pooled for investment purposes, administrative fees are typically lower. For example, Commonwealth Community Trust, a national pooled trust organization, currently administers a pooled trust with $36 million in funded trusts for less than 1 percent in administration fees (excluding the enrollment fee).
- Minimum funding requirements
Funding requirements will vary per trustee. It is not unusual for a financial institution to require a minimum of $350,000 to $750,000 to fund a special needs trust. Nonprofits specializing in pooled special needs trusts have lower funding requirements.
- Managed by a nonprofit organization
Pooled special needs trusts are administered by nonprofit organizations that specialize in working with individuals who have a disability along with their families and other stakeholders. A nonprofit organization has a Board of Directors and often has staff that includes professional social workers who have the knowledge and skills to understand the needs of individuals with disabilities.
- Expertise in protecting Medicaid and Supplemental Security Income (SSI)
In addition to assistance with money management, beneficiaries may need funds placed into a special needs trust in order to apply for or remain eligible for Medicaid and SSI. Nonprofit organizations have expertise in disbursing funds that will not jeopardize eligibility for Medicaid and SSI.
- Available nationwide
The grantor, the person(s) establishing the trust, is not limited to a pooled trust in the state where the beneficiary currently resides or may move to in the future. There are a few national nonprofit pooled special needs trust organizations such as Commonwealth Community Trust that provides services nationwide.
Sharing this information with your clients will help them make an informed decision.
By Joanne Marcus, MSW
Executive Director, Commonwealth Community Trust
A National Nonprofit Organization that administers Pooled Special Needs Trusts (SNT)