There are numerous forms of pooled investment vehicles, such as real estate investment trusts and commodity pools. One distinct form with unique uses in the estate planning landscape is pooled trusts operated by non-profit organizations. As non-profit entities they are charged with trust administration services for first party and third-party special needs trusts, settlement preservation, and third-party minor’s trusts for beneficiaries. Each such pooled trust option operates under a single master trust agreement. They present options and considerations that differ materially from both conventional “standalone” trusts and for-profit corporate trustees. Pooled trusts provide special needs trust services to clients with a disability and for individuals such as minors and adults who are vulnerable but not under a disability, by offering settlement preservation and third-party minor’s trust opportunities.

The framework in this article is designed specifically for estate planning attorneys to evaluate pooled trusts and document their recommendations as part of their professional duty of care.

The evaluation of a pooled trust requires a bifurcated analysis: first, as a non-profit organization subject to IRS disclosure obligations under 26 U.S.C. §§ 6033 and 6104; and second, as a trust instrument governed by state trust law, the master trust agreement, and the individual joinder agreement executed on behalf of each beneficiary.

I. Fiduciary Context and Professional Duty

When an estate planning attorney recommends a pooled special needs trust, that recommendation becomes part of the client’s permanent planning record. Under the Model Rules of Professional Conduct, counsel must possess sufficient understanding of the pooled trust’s governance, financial transparency, and operational safeguards to provide informed advice. The attorney’s recommendation should be defensible in the event of a subsequent dispute regarding the selection of the trustee or the administration of the trust assets. It is recommended that attorneys who work with pooled trusts “vet” a few trusted options, so they are not performing an exhaustive evaluation for their clients.

II. Non-Profit Governance and Transparency Assessment

Every pooled trust of the kind discussed here operates as a tax-exempt non-profit organization. This status creates both obligations and opportunities for due diligence. Under 26 U.S.C. § 6033, each non-profit must file an annual Form 990 with the Internal Revenue Service. Section 6104 requires that these filings be made available for public inspection. The Form 990 provides a structured disclosure of executive compensation, fundraising expenditures, program-related expenses, board composition, and conflict-of-interest policies.

A. Board Independence and Oversight Structure

A genuinely independent board of directors is the primary structural safeguard against organizational misconduct. Counsel should verify that board members submit regular conflict-of-interest disclosures, that no board member derives direct financial benefit from the pooled trust’s operations, and that the board includes professionals with relevant expertise. Specifically, a board of directors should include attorneys and certified public accountants and investment professionals capable of reviewing the organization’s Form 990 filings, monthly financial reconciliations, and investment policy statements.

Transparency regarding board operations should extend to meeting frequency, member tenure, committee structure, and organizational bylaws. A pooled trust that resists disclosure of this information should be viewed with heightened scrutiny.

B. Financial Transparency Beyond Mandatory Disclosure

The mandatory Form 990 disclosure is the baseline. Sizeable organizations should have a financial audit every year by an independent accounting firm, and a summary of findings can be requested. Small nonprofit organizations should have an annual financial review. Counsel can review the pooled trust’s fee schedule, the frequency and format of beneficiary account statements, and the availability of real-time online account access. Independent evaluations, such as those provided by Charity Navigator, can supplement, not replace, direct document review.

C. Internal Controls and Anti-Exploitation Safeguards

Effective internal controls at a pooled trust require multiple independent review points for every material transaction. Best practices for pooled trusts include: (1) Separation of duties between the individuals who open mail, enter data, and approve distributions and deposits; (2) A minimum of two independent reviewers for every distribution; (3) A final approver who is unable to modify the amount, payee, or other key transaction details; and (4) A whistleblower policy that encourages staff to report irregularities without fear of retaliation.

Does the pooled trust have a written disbursement policy manual, which is publicly accessible? Does the organization conduct regular internal audits by a reputable independent firm? These audits are not limited to financial operations, but also internal procedures, electronic security, and investment management. The frequency of the audits and the identity of the auditing firm should be available on request.

D. Staff Qualifications and Hiring Protocols

What are the qualifications for key staff? Relevant education, professional certifications, and direct experience in special needs trust administration are positive indicators. Does the organization conduct criminal background checks as part of its hiring process? Although non-profit pooled trust administrators are not subject to Section 19 of the Federal Deposit Insurance Act (which prohibits persons convicted of crimes involving dishonesty from participating in bank operations), it is recommended that a background check be conducted.

III. Trust Document Review

The master trust agreement and the individual joinder agreement constitute the legal foundation of the pooled trust relationship. Are the documents readily available for attorney review? Ideally, these should be posted publicly and provided immediately upon request. While all pooled trusts operate under master trust agreements that determine how funds in trust can be used, different pooled trusts will have differences in their joinder agreements. For example, some pooled trusts do not allow a client to name remainder beneficiaries. The pooled trust’s remainder policy should be clear, and there should be a mechanism for clients to inform the pooled trust of their vision for how the funds are to be used.

A. Investment Policy and Oversight

A written investment policy easily accessible to the public is important for transparency. Is the policy reviewed by qualified investment advisors along with the Board of Directors’ approval annually, and does the board’s investment committee include members with investment expertise? The investment policy should address asset allocation and risk tolerance parameters, and historical investment performance data should be available on request.

B. Remainder Policy and Charitable Purpose

Federal law and the laws of many states permit a pooled trust to retain part or all the remainder of a trust account after the beneficiary’s death, to advance the organization’s charitable purpose. What is the organization’s remainder policy and is the policy in writing and available to the public? Are the remainder funds used for operations, special projects, marketing, or other purposes? Is the remainder policy in the master trust agreement? Different pooled trusts have different remainder retention policies, but is the overall organization transparent about what their policy is?

IV. Digital Transparency and Client Experience

In the current practice environment, transparency requires more than paper disclosure. A clear, informative, and navigable website is an essential indicator of organizational culture. Critical documents including fee schedules, disbursement policy manuals, master trust agreements, investment policies, staff, and the board of directors’ information should be easily found on the website. The quality of the digital experience reflects the organization’s commitment to accessibility for both professional advisors and beneficiaries and their families.

V. Conclusion: A Defensible Recommendation Framework

The fundamental question underlying every pooled trust evaluation is whether the organization will honestly, competently, and compassionately safeguard the client’s assets. The Evaluation Framework presented in this article provides estate planning counsel with structured criteria for making that determination. These criteria can be documented, reviewed, and defended as part of the attorney’s professional duty of care. Details matter, but the attorney’s ultimate responsibility is to synthesize those details into a recommendation that serves the client’s best interests and withstands professional scrutiny.

Pooled Trust Quick Vetting Checklist

The following checklist summarizes the most critical evaluation criteria presented in this framework. Busy professionals have limited time to devote to evaluating pooled trusts, and these are the items to examine that will provide the most protection for your clients.

Board of Directors:

☐  How many members? (Look for 10 or more.)

☐  Do they have relevant expertise? Look for trust & estate, elder law, special needs, or personal injury attorneys, CPAs, investment advisors, and individuals with special needs or who have a family member with special needs.

Transparency:

☐  Are their trust documents and fee schedules available on their website?

☐  Do they disclose their leadership, investment advisor, relationship, and investment policy statement preferably on their website?

☐  Do they disclose their remainder policy?

Audit:

☐  Do they have an annual financial audit?

☐  Have they had audits of their internal procedures and IT?

Benjamin Tiefenback, Esq.,
Counsel & Director of Client Services at Commonwealth Community Trust

About Commonwealth Community Trust

Commonwealth Community Trust is a 501(c)(3) nonprofit organization that administers affordable and efficient Pooled Trusts. We serve minors and individuals who are vulnerable, injured, or have a disability throughout the United States. CCT was founded in 1990 by parents of children with disabilities and concerned professionals.