Special needs trusts: A financial lifeline for people with disabilities
Martha Goldberg is an 82-year-old widow who has one adult child, Debbie, who is 53. Debbie has mental health challenges and is on the autism spectrum. Although Debbie is able to live independently in Santa Monica, she has never held a steady job and still counts on Martha for financial, emotional and practical support, for everything from paying bills to getting to the dentist. She has very few friends and doesn’t get out much, due to her anxiety issues. Martha has had many a sleepless night worrying about what will happen to Debbie after she is gone.
Within the Los Angeles Jewish community, there are thousands of families in similar situations that are dreading the future. Because most adults with disabilities are unable to get and keep steady jobs, they rely on needs-tested government benefits for financial and medical assistance, such as Supplemental Security Income (SSI) and Medi-Cal. These essential government programs have very strict limits on allowable income and assets, which means that leaving an inheritance for relatives with disabilities can jeopardize them. But people with disabilities need extra money beyond government benefits in order to have a high quality of life and to be able to participate in the community.
High-net-asset families who can set aside $1 million for a special needs trust are able to use commercial banks and law firms that can provide professional trustee and money management services, and can support the adult child after their parents have passed. But what about the rest of us?
It turns out there is a solution: a pooled special needs trust. Created formally by Congress in 1997, pooled special needs trusts must be established and operated by a nonprofit, which creates a master trust document. To become a member of a pooled trust, the beneficiary, his or her parents, grandparents, or the court needs to sign a joinder agreement — a legal contract to enroll in the master trust. Then, as assets are funded to the pooled trust, a separate sub-account is established for each member. Because assets are pooled together, the trust is able to maximize the returns on investment and at the same time reduce the cost of administration and management.
I first heard about pooled special needs trusts around 10 years ago from another parent with a special needs child, Seth Weisbord. He learned about their existence while doing research into ways parents of disabled adults could plan for their long-term financial needs.
“I don’t understand why there are over a hundred pooled special needs trusts located over the country,” Seth told me at the time, “but we don’t have a single one based in L.A. County.”
And now, a decade later, I find myself as the founding executive director of the Jewish Los Angeles Special Needs Trust (JLA Trust). We recently opened for business. And I also now know why no one else has done this: It’s not easy, with many legal, financial and social work challenges and bumps in the road.
Fortunately, I am blessed with a dedicated board chair, Sandy Samuels, former CEO of Bet Tzedek Legal Services, along with other passionate board of directors members: Yolande Erickson, Dr. Yechiel Shalom Goldberg, Janice M. Jager, Stanley Kandel, David Pollock and Adynna Swarz. And we are doubly blessed by having a national expert in special needs trusts, estate attorney Stu Zimring, as the writer of our master trust documents and an ongoing legal consultant.
JLA Trust individual accounts are open to all disabled persons with a $20,000 minimum investment. The account provides professional trustee and investment services, along with links to other nonprofits, such as Jewish Family Services of Los Angeles (JFS) and ETTA, which can provide care coordination and direct services, paid out of the beneficiary’s individual account.
Special needs trusts allow beneficiaries of government safety net programs to keep government benefits such as SSI, Medi-Cal and In-Home Supportive Services (IHSS) and legally supplement those benefits with their own funds, or with money from family members or friends. Money invested in the pooled special needs trust is carefully handled by professional managers to support persons with disabilities throughout their lifespan, such as paying for out-of-pocket medical costs, furniture/clothing and trips out of state to attend weddings or other simchas.
Through our partnership with True Link Financial Inc., a San Francisco-based tech company with expertise in trust finances and related services, we also will be able to offer a customizable debit Visa card, which can be set up to allow only certain categories of purchases, as well as spending caps in each category. So, for example, if the adult beneficiary loves to purchase video games, a maximum monthly amount can be preset in that category. The cards also allow for certain categories to be blocked, such as online purchasing, if that has been an issue in the past.
A three-year, $250,000 Cutting Edge Grant from the Jewish Community Foundation of Los Angeles provided seed funding for the JLA Trust. Planning grants from The Jewish Federation of Greater Los Angeles funded a community-needs assessment and development of a business plan, and Bet Tzedek Legal Services served as fiscal sponsor and incubator of this project for the past four years. Since August, JLA Trust has been open for business with offices located at JFS Senior Services building at 330 N. Fairfax Ave.
JLA Trust is currently enrolling beneficiaries in first-party pooled special needs trusts, created with funds that belong directly to a beneficiary, such a legal settlement or inheritance, and will soon offer third-party pooled special needs trusts, which are funded by parents, grandparents or other family members. By providing this new community service, we hope that all the parents out there will be able to sleep a bit easier.