By Nathan Schnackenberg
Nathan Schnackenberg is Chief Operating Officer of Secured Alliance, Secured Futures, and Good Shepherd Fund.
There are many types of trusts out there, as well as a virtually unlimited ability to tailor the provisions of any trust to the grantor’s (person setting up the trust) unique specifications. With all the names, titles, and legalese, it’s no wonder most of us can get confused.
A trust is the legal document that governs how a third party (a trustee) is to own and administer certain assets on behalf of another individual. The trust document spells out the rules the trustee must follow in the administration of the assets held “in trust.” Failure to follow those rules can land a trustee in hot legal water, so it’s important that trustees be selected for their professionalism, knowledge, and sharp attention to detail.
Every standalone trust is unique and has its own unique tax identification number issued by the Internal Revenue Service, but a “pooled trust” is governed by a single document with a single tax identification number. The way someone would join a pooled trust is by filling out and signing what’s called a joinder agreement. By signing the joinder agreement, an individual is essentially saying, “I am comfortable with the provisions of the master pool document and agree to have my assets administered by the provisions set forth in that master pool document.”
Pooled trusts provide all the same legal protections as a standalone trust, but they have the added benefit of being cheaper to set up. This is because there is no need to ask an attorney to draft a unique trust document. The trust document is already set up, and you just need to decide whether the provisions set forth in that document are agreeable to you.
The top reasons to attach to a pooled trust instead of asking an attorney to draft a unique standalone trust include:
- Pooled trusts are administered by nonprofit organizations and tend to be administered less expensively, relative to banks or large trust divisions
- There’s no need to draft a unique trust document, so one might expect to save as much as $3,000 to $5,000 in initial legal fees
- A more streamlined administration experience—pooled trust administrators are likely used to administering pooled accounts based on shared provisions, so the need to constantly consult the governing document or advisory council, as may be required in standalone trust administration, is nonexistent
- Some pooled trusts allow:
- Real estate to be held in trust
- Property or other unique holdings
- Assets to be distributed to assigned remainder beneficiaries at the death of the primary beneficiary (some pooled trust companies retain these moneys as a charitable contribution)
- Many pooled trusts don’t have a minimum funding level
Pooled trusts can save a lot of time and money for everyone involved. Secured Futures is a Pennsylvania-based nonprofit organization that has been administering a menu of pooled trust solutions since 2008, including:
- Pooled special needs trust
- Pooled minors trust
- Pooled preservation trust
- Pooled education trust
Please find us at www.SecuredFutures.org for more information, or give our offices a call at 602-635-6674.