All parents worry for their child's future, but as the parents of a child with special needs, you have worries that most parents don't have to deal with. While most children will eventually stand on their own two feet as adults, a child with special needs may always need a little extra help, especially financial help. That means that parents of children with special needs have to have a plan in place for their child for when they are no longer around to care for their children. The most common method of providing for adult children with special needs is to set up a trust. There are a few different types of trusts aimed at providing support to people with special needs, including general support trusts, supplementary care trusts, and pooled trusts. Take a look at the pooled trust and why it may be the best choice for you.
No Trustee Needed
Most trusts are managed by a trustee. However, choosing a trustee to manage your child's funds after you're gone can be a very daunting task. You need someone that you trust not to mismanage or misuse your child's funds, someone who understands finances and investments, and someone who's willing to take on the responsibility of managing your adult child's money for the foreseeable future. That's a tall order, and a lot to ask of one or two people.
A family member seems like the obvious choice to be a trustee. But what if you don't have any extended family, or you're estranged from the family that you do have? What if no one that you know has the financial skills required to manage a trust fund? One way that parents sometimes deal with this is by appointing a professional, like a lawyer, accountant, or banker as a trustee. But if you don't already have a relationship with a similar professional, how do you know who you can trust?
With a pooled trust, a non-profit organization is responsible for managing the money in the trust. That's a benefit because it's much less likely that your child's future financial well-being is going to come down to the judgment or actions of one person. Instead, you'll be relying on an organization of people who already have experience managing special needs trusts. You'll also be able to research the non-profit ahead of time, so you'll know going in what the organizations track record is when it comes to managing trusts. This is as close as you can get to a guarantee that whoever is handling your child's trust will do a good job.
Fewer Assets Needed
Even if you would prefer a bank or other professional to handle your child's trust, if your assets are limited that may not be an option. Most corporate trustees won't take on a trust that consists of less than $500,000 in assets. Remember that special needs adults with more than a few thousand in the bank risk losing their Social Security and Medicaid eligibility, so even a small inheritance is better off in a safe trust. If no family member or friend is available or qualified to be a trustee, a pooled trust may be your only option for assets under $500,000.
A pooled trust, on the other hand, can take on trust arrangements with a smaller amount of money. Having a pool of beneficiaries combining their assets still allows the organization to make significant investments even if some members of the pool are coming in with small amounts of cash.
Between the economic advantages of pooling the money from several beneficiaries into one investment and the lower overhead of a non-profit organization, the fees and expenses associated with pooled trusts tend to be lower than most other types of trusts. That means that more of the money that you have earmarked for your child's future will actually end up being used for your child. It's never a good idea to pay more than you have to in fees.
That doesn't mean that you should jump at the least expensive pooled trust option that you can find, however. You still want an organization with employees that are skilled at their jobs and interested in serving your child. Remember that you get what you pay for – never commit to a trust only because they have the lowest fees.
When you've done your research on pooled trusts in your area, you should be able to find at least a few with a great track record, talented staff, and affordable fees. Then you can click here for more information and begin to narrow the list down to one, based on which pooled trust option is most attractive for your child's financial situation.