Pooled Special Needs Trusts: A Guide for Parents

Many of our clients are parents who have never received a settlement before and have suddenly found themselves in the middle of a lawsuit involving their injured child. Every experience is a new one: each step as the case progresses, each decision to be made — not to mention the changes at home as they care for their child. When their case is finally coming to a close, there is often a wave of relief.

But the process is not quite over yet. Parents still have to think about their incoming settlement as actual, tangible money — and they need to figure out what to do with it. Finding the right answer is even more complex if the child is receiving Social Security Income (SSI) and/or Medicaid.

Protecting Government Benefits After Settlement

When a child’s injury lawsuit is approaching settlement, some parents work with our settlement planners to establish a pooled special needs trust. This type of trust is sponsored by a state or nationally-based charitable organization. The money is administered by the organization, most likely in conjunction with an administrative trustee. A pooled trust can be a great option for children who are to receive smaller settlement recoveries, as they’re typically less expensive to establish and maintain than an individual special needs trust.

SSI and/or Medicaid beneficiaries typically cannot have more than $2,000 to their name without being disqualified for their benefits. Pooled trusts are an efficient way to use a settlement to benefit a child while still protecting his or her SSI and Medicaid eligibility for many years.

Trustees and Trust Agreements

Most trusts have an ajoinder agreement, which refers to the agreement between you (as your child’s guardian) and the “Master Trust.”  Most ajoinder agreements are irrevocable, which means parents are most often stuck with the trustee they initially select.

Below are a few good questions to ask prior to signing an ajoinder agreement:

1. What are the upfront fees, transaction fees, recurring annual fees, and termination fees?
2. How many staff members work for the trust? What is their experience?
3. What is a typical response time for a requested distribution?
4. What happens to the money in the pooled trust if my child dies?
5. What distributions are typically allowable?

This is where the assistance of an experienced professional can be extremely handy. To avoid a likely overwhelming amount of research and time spent vetting and selecting an appropriate and reliable trustee, obtaining the advice of your trial attorney or a comprehensive settlement planner can make this transition easier.

If your child’s case is approaching settlement or headed 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.

About John Bair

John Bair is an experienced settlement planner and financial consultant. He helps families develop strategies to provide lifelong financial support for children with disabilities, catastrophic injuries, special education needs, and congenital abnormalities. Read more about John’s work and his firm, Milestone Consulting, at http://milestoneseventh.com/.