An Indiana-based pooled special needs trust has been accused of passing along some $2.4 million in legal fees to the trust beneficiaries without explaining what the fees were actually used for.
A pooled special needs trust is a trust established by a nonprofit organization that manages funds on behalf of multiple beneficiaries at the same time. Each beneficiary has an individual account with the trust, but the accumulation of trust assets typically cuts down on fees and makes investments more affordable. When a trust beneficiary dies, a portion of his account is used to support the nonprofit organization while the remaining funds are used to pay back the state for Medicaid services provided to the beneficiary.
In the present case, an Indiana man with disabilities has filed suit against his pooled trust, Special Needs Integrity, claiming that the trust violated its fiduciary duty by spending too much money on legal fees and other expenses. According to the lawsuit, which the man is is seeking to turn into a class action, Special Needs Integrity paid $2.4 million for legal fees over a four-year period and also paid out excessive trustee fees. The suit claims that the trust failed to provide the beneficiaries with adequate information detailing the expenses and why they were incurred.
While we don’t know yet whether the trust is truly at fault, this case provides a warning for any potential pooled trust beneficiary. Before setting up an account with a pooled trust, it is important to review the trust\’s financial statements, including its previous accountings, to make sure that funds are not being wasted on administrative fees. While it is certainly ethical to charge a trustee\’s fee and to pay for legal advice, a pooled trust should not be spending an excessive amount of money on these expenses. If a pooled special needs trust refuses to give a prospective client these figures, or is unable to adequately explain high charges, then the potential beneficiary should probably look elsewhere for services. Your special needs planner can assist you in evaluating and selecting a pooled trust if that option is the right one for you.
To read the full article about the lawsuit, click here.
To find a list of pooled trusts in your state, click here.