“Special Needs
Trusts” (“SNT’s”) come in three types: (1) Self-Settled (“first party”); (2)
third party; and (3) Pooled.  SNT’s help
people with special needs to remain eligible for needs based government
benefits (e.g., SSI/Medi-Cal) who might otherwise lose such benefits due to an
inheritance, personal injury award, or a lucky wind-fall. Many people who know
about the first two types of SNT generally do not know about “Pooled” SNT’s.

            A “Pooled” SNT is so-named because
multiple beneficiaries participate in a single trust, but with separate
accounts. The “Pooled” SNT is not drafted by a private attorney.  Nor is it established either “by or for” any
one individual beneficiary. Instead, it is established by a non-profit
organization, which is also the trustee, for the benefit of many participants.
That organization manages and invests the assets for the benefit of all
beneficiaries. Thus small accounts receive better investment opportunities.
“Pooled” SNT’s are often attractive when small amounts are involved that would
otherwise not justify a separate trust.

 Currently there are around six (6) “Pooled” SNT’s serving California. Each
provides a different benefits package. Each charges a one-time “Enrollment/Joinder
Fee” and recurring “Annual Fees”. These fees vary. For example, the Proxy
Parent Foundation Plan of California charges a one-time enrollment fee of 1.5%
of the trust balance (not to exceed $1,800 or less than $500) and a 1.25 %
annual fee. The Center for Special Needs Trust Administration charges $2,500
for enrollment and a 2% annual fee. These fees can change.

“Pooled” SNT’s are
not for everyone. They will not accept to own and/or manage real property (such
as the house where the beneficiary lives); any real property must first be sold
and the cash proceeds deposited with the trust. Pooled SNT’s can be located far
away from where the beneficiary lives. Pooled SNT’s will usually keep what
remains when the beneficiary dies for their own non-profit mission. And, some
find the annual costs too expensive.


         Nevertheless the “Pooled” SNT can be
very useful in situations where the other types of SNT’s are not solutions.
Consider the “Self-Settled” SNT which requires that a parent, grandparent or a
guardian establish the trust solely for a person with special needs who is
under age 65.   This SNT cannot be
established by the beneficiary himself/herself; nor can it be established for a
beneficiary over age 65.  In addition, it
cannot be established for multiple beneficiaries of the same trust.

          Next, consider the “Third Party” SNT.
It only applies when someone other than the special needs person (often a
family member) is gifting his/her own assets. The “Third Party” SNT cannot
receive assets directly from the beneficiary. Like the “Self-Settled” type, the
“Third Party” SNT requires someone to act as trustee who must either understand
public benefits law or work closely with someone who does. Otherwise, the
trustee will likely make improper distributions that could cost the beneficiary
his or her benefits.

By contrast, the
“Pooled” SNT can be joined by anyone, and can receive assets from anyone.
Furthermore, the “Pooled” SNT provides a competent trustee. Thus, someone who
is over 65 and receiving SSI or Medi-Cal can still join a “Pooled” SNT and can
contribute his or her excess resources directly to the “Pooled” SNT.  And someone who cannot find a qualified person
to act as trustee for a Third Party SNT can solve that problem by joining a “Pooled”

In sum, “Pooled” SNT’s
can be a savior when someone cannot otherwise qualify for another type of SNT;
when the amount to be invested is too small for a separate SNT; and when a
trustee cannot otherwise be found.  The
value of this type of SNT should not be overlooked.


“Serving Lake and Mendocino Counties for nineteen years, the Law Office of Dennis Fordham focuses on legacy and estate planning, trust and probate administration, and special needs planning. We are here for you. 870 South Main Street Lakeport, California 95453-4801. Phone: 707-263-3235.”