What is a Special Needs Trust?
For a disabled person who is receiving or is eligible for “means tested” government benefits, such as Social Security Insurance (SSI) or Medi-Cal, a Special Needs Trust is an indispensable estate planning instrument. Funds placed in a special needs trust are not counted as assets, nor are proper distributions made from them counted as income, in determining eligibility for benefits.
Types of Special Needs Trusts
There are several types of special needs trusts, most commonly in the form of Third Party Special Needs Trusts, so-called because they are set up and funded by third parties, such as parents, grandparents, or guardians. Third Party Special Needs Trusts generally become active (i.e., funded) upon the death of the grantor(s) but can also be active at creation or at any point while the grantor(s) are living (inter-vivos).
Unlike the Third Party Special Needs Trust, a First Party Special Needs Trust is funded with the disabled beneficiary’s own assets (thus, “First Party”). First Party Special Needs Trusts are particularly useful for a disabled client who has received a “windfall” from an inheritance or an insurance, litigation, or divorce settlement or award. First Party Special Needs Trusts are active immediately upon funding.
What is a Pooled Special Needs Trust?
A Pooled Special Needs Trust must be managed by a nonprofit Trustee and has the advantages of not requiring the expense of drafting an individual special needs trust because the assets are ”joined” as a separate sub-trust to a Master Trust.
Another advantage of a Pooled Special Needs Trust is that since the assets are “pooled”, investment and financial management fees are exponentially lower. In fact, most financial institutions will not accept a special needs trust with an estate of less than several hundred thousand dollars.
Pooled Trusts are also very useful if there is not a qualified or willing person to act as Trustee of the trust. Many grantor(s) in this situation prefer a nonprofit Trustee, such as Proxy Parent Foundation, that has served the disabled community for several years, over a professional or financial trustee, who may have financial expertise, but little understanding of the beneficiary’s special needs.
Proxy Parent Foundation is Trustee of the PLAN of California MASTER POOLED TRUST
PLAN of California Master Pooled Trust. Proxy Parent Foundation is the nonprofit Trustee of the PLAN of California Master Pooled Trust. It is open to all disabilities, has no asset limits, and accepts both Third Party and First Party Special Needs Trusts. In many cases, grantors may establish a sub-account within the trust by executing a Joinder Agreement with Proxy Parent Foundation and the PLAN of California Master Pooled Trust. A sub-account may be funded in the present (for instance, by a grantor-beneficiary’s inheritance, or litigation or insurance settlement) or in the future (for instance, from a family’s estate) at the time of the grantor(s) death.
Fidelity Investments acts as Trust Custodian of the PLAN of California Master Pooled Trust Funds. Under Proxy Parent Foundation oversight, Lindbrook Capital, LLC, is the Investment Manager for the PLAN of California Master Pooled Trust. In conjunction, Binder & Co., acts as Trust Agent and is tasked with providing disbursements and accounting for each individual subaccount. It also prepares and delivers tax information and requisite regulatory filings.