Can a family member or friend other than the Grantor make a contribution to a Third-Party Pooled Special Needs Trust?

Thursday, October 10th, 2013

Yes, the trust can receive gifts, bequests, and inheritances from relatives or friends who choose to direct funds to the Beneficiary’s Third-Party Pooled Special Needs Trust.  This allows for an efficient and cost-effective way for family members to avoid having to prepare separate special needs trusts, since anyone can name the Beneficiary’s trust with CCT in their estate plan or will.  It is important that family members be notified that the Third-Party Pooled Special Needs Trust has been established and that funds should be directed to the trust with CCT and not directed to the individual.

Once the Third-Party Pooled Special Needs Trustis set up, checks can be made payable to the Trust Company of Virginia (TCVA) and sent to CCT for deposit into the Beneficiary’s account.  The Beneficiary’s name, and account number if available, should be included on the check to ensure funds are deposited to the correct account.

What happens to the remainder when the Beneficiary passes away?

Thursday, October 10th, 2013

The Grantor can designate Primary and Contingent Successor Beneficiaries in the Joinder Agreement.  For participants of the Third-Party Pooled Special Needs Trust, the Successor Beneficiaries will receive the remainder of funds in the trust sub account upon the death of the Beneficiary.  The Grantor can designate one person, several people or a nonprofit organization like CCT to receive a percentage or all of the remainder funds. This information can be updated by the Grantor at any time by completing the Amendment to the Third-Party Pooled Special Needs Trust Joinder Agreement form.

Upon the actual death of the Beneficiary, distributions for CCT and TCVA administrative and termination fees are allowed.  After the administrative fees are disbursed, the remaining funds are distributed to the individual(s) designated in the Joinder Agreement.

IMPORTANT! Pre-need funeral and burial arrangements for the Beneficiary should be made and paid for in advance, as disbursements will not be approved once the Beneficiary has passed away.

What are the fees to establish the Third-Party Pooled Special Needs Trust?

Thursday, October 10th, 2013

There is a one-time Enrollment Fee that is due at the time the Joinder Agreement is completed, signed in front of a Notary and received by CCT.

If a Grantor does not submit a completed Joinder Agreement and Enrollment Fee prior to passing away, the Enrollment Fee is assessed at three times the current Enrollment Fee.  Trusts that are established in this manner are much more complex to administer due to the lack of information about the Beneficiary and the Grantor’s intentions for the trust.

For SNTs that will not be funded immediately, there is an Annual Renewal Fee.  This fee is assessed annually until the trust is funded.

Once the trust is funded, there are ongoing administrative fees and the Annual Renewal Fee is no longer billed.

(See Third-Party Pooled Special Needs Trust Fee Schedule for current fees and additional details.)

How can the trust be funded?

Thursday, October 10th, 2013

The most common way to fund the Third-Party Pooled Special Needs Trust is through the Grantor’s will, estate plan, life insurance policy or employee benefit.  The trust may also be funded by a gift, bequest, or inheritance directed to the trust by a family member or friend.

Checks can be made payable to TCVA for deposits to the trust at any time.  Real estate or other non-cash assets are not accepted, since the funds must be pooled for investment purposes.

The following resources may also be helpful in determining how much to allocate to a special needs trust.

  1. Budget and Expense Worksheet: This annual budget worksheet can be helpful in making decisions about how to use funds from the trust. The estimated costs per year should be based on how many years you anticipate the trust lasting.
  2. Special Needs Planning Calculator: This calculator, provided by MetLife, is intended to help you project the future expenses for the individual with special needs.
  3. How to Assess Future Life Needs for a Loved One with a Disability: This article was written by CCT Executive Director, Joanne Marcus, MSW, for the Special Needs Alliance.

It is helpful to consult with an Estate Planning Attorney who is familiar with special needs trusts when writing your estate plan or will.  CCT can provide the Master Trust Agreement and suggested language and is available to assist with questions that you or your attorney may have.

Why should I consider a Third-Party Pooled Special Needs Trust?

Thursday, October 10th, 2013

Family members or others can set up a Third-Party Pooled Special Needs Trust that will provide financial support for a loved one with special needs.

In the case of an individual who receives public benefits such as Supplemental Security Income (SSI) and/or Medicaid, an inheritance left directly to the Beneficiary will jeopardize eligibility because of the $2,000 asset limit.  (See What is the connection between public benefits and personal resources (assets and income)?)  The same funds, if directed to a Third-Party Pooled Special Needs Trust for the benefit of the Beneficiary, will not be counted as an asset or income for the purpose of maintaining SSI and Medicaid eligibility.

In addition, the Grantor may have concerns about the Beneficiary’s ability to manage his or her own funds.  The Third-Party Pooled Special Needs Trust eases this anxiety by providing fiscal oversight to ensure that funds left for the Beneficiary meet their intended goals.

What is the Third-Party Pooled Special Needs Trust?

Thursday, October 10th, 2013

A third-party trust is a general term for a special needs trust that a parent, family member or others (the “third-party”) establish “for the benefit of” an individual with special needs. Third-party trusts are based on applicable state law (both statutory and common law).  All assets intended for the Beneficiary must be third-party assets, typically belonging to the Grantor, family member, or friend at the time of transfer.  None of the assets may belong to the Beneficiary.

CCT’s Third-Party Pooled Special Needs Trust is a pooled special needs trust administered by CCT, a nonprofit organization. Each Beneficiary’s funds are placed in an individual sub account.  CCT accepts cash assets for deposit into the trust; no real estate or non-cash assets are accepted.  The cash assets from all sub accounts are then “pooled” together, and are invested and managed by the Trust Company of Virginia (TCVA) (www.tcva.com).  TCVA is a federal chartered financial institution with trust powers, located in Virginia.  Pooling the funds reduces administrative fees and increases the principal for investment purposes.  Earnings based on the Beneficiary’s share of the principal are reinvested into each sub account.