Special needs trusts are important tools for protecting the financial future of individuals with disabilities. Choosing between a pooled special needs trust and an individual trust requires understanding the benefits and drawbacks of each.
These options can help provide financial security while maintaining eligibility for government benefits.
Benefits of pooled special needs trusts
Pooled special needs trusts combine resources from multiple beneficiaries. A nonprofit organization manages these trusts, which helps reduce the administrative burden and costs for each individual. Pooled trusts can be more affordable than individual trusts, making them a good choice for those with limited resources.
Pooled trusts also benefit from professional management, which ensures that funds are handled appropriately to maintain eligibility for government benefits like Medicaid and Supplemental Security Income (SSI).
Drawbacks of pooled special needs trusts
While pooled trusts offer several benefits, they may not be ideal for everyone. One major drawback is the lack of control over investments and distributions. Since a nonprofit manages the trust, individual beneficiaries or their families have limited say in how to invest or use the funds.
Additionally, any remaining funds after the beneficiary passes away often go to the nonprofit rather than to family members. This may be a concern for families who want to leave any unused assets to heirs.
Benefits of individual special needs trusts
Individual special needs trusts offer more control and flexibility compared to pooled trusts. Families can choose a trustee, such as a trusted family member or professional, who understands the beneficiary’s unique needs. This allows for more personalized decisions about using the funds. Individual trusts also provide more options for leaving remaining funds to family members or other heirs after the beneficiary’s death.
Choosing the right trust for your needs
Choosing between a pooled or individual special needs trust depends on the beneficiary’s specific circumstances. Understanding the benefits and drawbacks of each type of trust can help families make the best choice to provide long-term financial security for their loved one.