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John Bair
John Bair
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A Primer on Pooled Special Needs Trust – What Moms and Dads of Disabled Children Need to Know

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The landscape of Pooled Special Needs Trusts is diverse and complicated for most of our clients who are coming into the concept for the first time due to the settlement of their child’s case.  In our settlement planning practice, we advise attorneys and their clients on the best solutions for certain cases.  If your case has settled for between $10,000 and $200,000 and your child is a minor or can’t handle their finances, one of the first questions you will want to ask your attorney is, “What can we do with this money?” The answer can be complex if your child is on Social Security Income (SSI) and/or Medicaid.

For most settlements concerning minors in excess of $10,000, which is the threshold for the Uniform Transfer to Minors Act (UTMA), and depending upon whether or not your particular state requires court approval and the amount of the settlement, attorneys will typically recommend a trust, a structured settlement, or a guardianship account (or conservatorship).

If your child is on SSI and/or Medicaid, they typically cannot have more than $2,000 to their name, without disqualifying them for their benefits.  This basic benefits issue raises the challenging question of what parents are to do with settlement proceeds for their children.  Social services law in all states provide for Special Needs Trusts under the Omnibus Budget Reconciliation Act of 1993 (OBRA-93).  These trusts are known as D4A or D4C trusts.  For small recoveries, a Pooled Trust can be an attractive option, as Individual Special Needs Trusts can be expensive to set up ($3-$15,000) and costly to maintain.  A Pooled Special Needs Trust is a trust that is sponsored by a state or nationally based charitable organization, and is administered by the charity and most likely an administrative trustee.  The assets are pooled, and for smaller amounts of money they can be an efficient way to get from settlement to having your child protected for many years.

The only reason to rely upon a Pooled Special Needs Trust is to protect the SSI/Medicaid benefits that your child is eligible for now, or may be eligible for in the future.  If this is not a concern, another simple Pooled Trust, or an Individual Trust may a better planning choice.


Researching Your Options

So, where do parents get reliable information?  As a settlement planner, I’ve made it my professional career to know these answers, but if you asked any of our clients, they would admit they were hard to find.  Only by referral from your trial attorney will you find a reputable settlement planner.  Your planning options range from doing the research yourself to hiring a trust and estates lawyer to help you navigate the space, or hiring a settlement planner.  If you intend to do the research yourself, here are a few tips.

There are currently two National Pooled Trusts that are reliable.  Secure Futures, based out of Pennsylvania, and Settlement Solutions, based out of Florida. Their contact information is here.

State based options are also readily available by googling “Pooled Special Needs Trust New York.” Within the first 20 or so replies you will find the ARC of NY trust, xyz.  Most state based trusts will have an initial set up fee of $500-$2000, and an annual fee of about 1.5%.


Trust Agreements

Most trusts have an ajoinder agreement. The ajoinder agreement is the agreement between you, as your child’s guardian, and the Master Trust.  There is no way for a new parent to evaluate the professionalism, responsiveness, benefits and experience of the staff that work for the pooled trust until you try it.  Most ajoinder agreements are irrevocable (meaning you are stuck with the initial trustee), so the additional burden for most parents is to do months’ worth of research and due diligence, and ultimately hope for the best.  Relying on the advice of an attorney or settlement planner can make this transition easier.


Getting Your Answers

Here are some good questions that parents should be asking prior to signing any ajoinder agreement:

  • What are the upfront fees, transactional fees, recurring annual fees, and fees on termination?
  • How many staff people work for the trust?
  • What is a typical response time for a requested distribution?
  • What happens to the money in the Pooled Trust if my child dies?
  • What experience do the trust officers have in determining if a requested distribution is allowable?
  • What distributions are typically allowable?


Although initially difficult to understand and research, we have found that using reliable trustees in the Pooled Special Needs Trust space gives parents a good long-term choice when assets from settlement are limited or need to be spread out efficiently for a long time.  The benefits of a Pooled Trust are the same as an Individual Pooled Trust – that the money from settlement can supplement what government benefits may be available. Given the restrictions that go with these types of trusts, this is usually better than having just the settlement proceeds and losing the government benefits.

If you are settling the case of your minor child or if your child’s case is going to trial, it is wise to invest a significant amount of time prior to it settling so that you will know what your options are, who you will want to get advice from, and what realistic expectations you should have about how long it takes to get everything finalized.

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