Pooled Trusts: Should You Consider Taking a Dip?
Most special needs trusts (SNTs) are set up to benefit one individual. But it’s possible to contribute to a trust where the funds of many people with special needs are “pooled.” This kind of trust, called a pooled or (d)(4)(C) trust, may be a better option for some people than the conventional SNT, depending on the circumstances.
In a pooled trust, individual beneficiaries create accounts within a larger trust, which is managed by a non-profit association. But as with an individual SNT, transfers into a pooled trust do not prevent a person with special needs from accessing government benefits like Medicaid and Supplemental Security Income (SSI). Funds in a pooled trust are used to supplement a beneficiary's government benefits, and the funds can be used to pay for reoccurring bills, clothes, and other expenses.
Pooled trusts have some advantages over individual SNTs. One is that pooling trust resources can reduce administrative fees, which may be attractive if the funds available for a trust are of a modest size. Also, because a pooled trust accepts contributions from many beneficiaries, the trust may be able to make more stable investments and provide additional management services that an individual special needs trust might not be able to afford. Finally, many people have a hard time identifying a suitable trustee for a standalone trust. A pooled trust offers a good alternative in this situation.
A word of caution. Some pooled trusts accept deposits after a beneficiary turns 65. While this is allowed under federal law, many states (including Oregon) will impose a penalty against the beneficiary for transfers after the 65th birthday.
When should a person with special needs consider a pooled trust? While each beneficiary's situation is different, a person who has only a small amount of money in his name may like the low cost of a pooled trust. If the funds to be deposited to the trust are less than $70k, pooled trusts should be considered.
Oregon's ARC has a pooled trust in the state. However, there are several national pooled trusts that have options for beneficiaries who reside in Oregon. Pooled trusts are helpful, if underutilized, tools for people with special needs. Talk to your qualified special needs planner about whether a pooled trust is the right choice for you. A list of state and national pooled trusts is here.