SNTs 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 SNTs.
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 nonprofit 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 SNTs are often attractive when small amounts are involved that would otherwise not justify a separate trust.
Currently there are around six pooled SNTs 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 percent of the trust balance (not to exceed $1,800 or less than $500) and a 1.25 percent annual fee. The Center for Special Needs Trust Administration charges $2,500 for enrollment and a 2% annual fee. These fees can change.
Pooled SNTs 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 SNTs can be located far away from where the beneficiary lives. Pooled SNTs 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 SNTs 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 SNT.
In sum, pooled SNTs 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.
Follow Lake County News on Twitter at http://twitter.com/LakeCoNews, on Tumblr at www.lakeconews.tumblr.com, on Facebook at http://www.facebook.com/pages/Lake-County-News/143156775604?ref=mf and on YouTube at http://www.youtube.com/user/LakeCoNews.