At the 2025 National Academy of Special Needs Planners (ASNP) Conference held in San Diego, California, earlier this spring, special needs planning attorney and ASNP National Director Kevin Urbatsch delivered an insightful presentation on the often-intricate world of pooled special needs trusts (SNTs).
His session, “Trust and Verify: Ensuring Safety in Pooled Special Needs Trusts,” delved into the structure, benefits, limitations, and critical evaluation of these programs. Speaking to attorneys and financial planners from across the country, Urbatsch provided a roadmap for navigating the complexities of pooled SNTs, especially in light of recent events that have raised serious questions about their oversight and reliability.
Pooled Special Needs Trusts: The Good, the Bad, and the Ugly
Urbatsch began by defining pooled trusts and their unique structure. “It is one program with hundreds of beneficiaries with different factual scenarios using a master trust,” he explained. These trusts combine assets for investment purposes while maintaining separate set-aside accounts for each beneficiary.
While the Social Security Administration may evaluate disbursements and whether master trust agreements comply with certain requirements, it does not oversee the day-to-day operations or internal management of these programs. This lack of oversight makes thorough due diligence by professionals absolutely essential.
“You have to understand nonprofit compliance on top of just normal trust administration,” he cautioned. “The one thing to remember about pooled trust programs: There’s no federal oversight over a well-run program or a poorly run program – none.”
However, one of the key benefits of pooled special needs trusts, as Urbatsch outlined, is access to professional trust management.
“A lot of pool trust programs have very experienced trust administrators, and they can manage these accounts very well, very easily,” he said.
Additionally, he noted their lower costs compared with individual trusts, potentially better investment returns due to pooled assets, and the fact that they have often already been evaluated by the Social Security Administration.
In some states, they also offer the option for over-age-65 funding, which is not always possible with individual (d)(4)(A) trusts. “Be careful what your state will and will not allow,” he added.
In his own experience, Urbatsch has found that pooled trust programs often have a dedicated, independent board that is motivated to ensure that their program works. Yet he did go on to address the limitations and potential pitfalls.
“Oftentimes, our only source of information is the website of the pooled trust provider,” he told attendees. “You really have to dig in and figure out: Is what they’re telling you the truth?”
For example, he discussed the importance of understanding a pooled SNT’s retention policy, which determines what happens to residual funds upon a beneficiary’s death.
“You need to explain that to your client when they’re trying to make a decision,” he said, highlighting that funds may be retained by the nonprofit or subject to payback. This detail can significantly impact a client’s planning decisions.
The conversation took a somber turn when Urbatsch addressed the Centers for Special Needs Trust Administration bankruptcy, a Florida nonprofit that left roughly 2,000 special needs beneficiaries with depleted or empty accounts. This incident underscored the vital importance of rigorous evaluation and ongoing monitoring.
“This raises a question, then: How safe are pooled special needs trusts?” Urbatsch asked, emphasizing that the lack of oversight necessitates that professionals cannot “just rely solely on the appearances.”
Urbatsch then provided a practical toolkit for evaluating pooled SNTs. He stressed the need to verify information from the pooled trust provider’s website and ask probing questions about factors not readily visible. He recommended avoiding providers that are not transparent or that withhold information.
“These are nonprofits,” he said. “They shouldn’t be hiding things from you. You have the right to know what the nonprofit is doing.”
Key Evaluation Criteria
Urbatsch detailed several criteria for evaluation, including:
- Ease of Onboarding and Leaving. A straightforward process is crucial. High fees for exiting the program should be a red flag: “I always want to have an out in anything that we can set up,” he told attendees.
- Fees. Transparent fee schedules are essential. Again, professionals should watch for hidden fees and determine whether the fees are a flat rate, percentage-based, or hybrid. A finder’s fee or fee sharing with others can be a point of concern, Urbatsch said.
- Investment Model. Understand the pooled trust’s investment strategy, the number of investment options available, and whether investment fees are included in trustee fees or separate. “I like to see a trusted money manager like the Merrill Lynch special needs team or TrueLink or somebody like that who’s involved,” he said.
- Beneficiary Support. Determine the level of one-on-one time with trust officers, response times to inquiries, and the process for disbursement requests.
- History, Reputation, and Legal Standing. Investigate the pooled trust’s background in the community and be prepared to change providers if standards slip.
- Retention Policy. Clearly understand how residual funds are handled upon the beneficiary’s death.
“As the years go on, we have to keep evaluating, keep testing the system,” Urbatsch said. “What does a pooled trust program need in order for you to feel safe enough to refer them to your clients? It’s important to keep that oversight going.”
Delving into IRS Form 990
A significant portion of Urbatsch’s presentation focused on analyzing IRS Form 990, the information return for nonprofit organizations.
“It’s really the ‘X-ray’ in the nonprofit that runs pooled programs,” he said. He explained that the 990 is publicly available on sites such as GuideStar.org and ProPublica and serves as a crucial tool for evaluating the financial health and management practices of the nonprofit running the pooled trust.
Urbatsch detailed what to look for in a 990, including:
- Independent Audits. Verify that an independent audit has been conducted. If not, ask for it, and consider a refusal as a major red flag.
- Excessive Compensation and Insider Transactions. Review Schedules J and L to identify potential conflicts of interest and exorbitant payments to insiders.
- Vague or Inflated Expenses. Scrutinize “other expenses” and ensure they are adequately explained in Schedule O.
- Governance Disclosures. Check for a conflict-of-interest policy and information on things like how much their profit is and how CEO compensation is assessed.
The Power of AI
In an innovative approach, Urbatsch shared his experience of using AI, specifically ChatGPT, to analyze 990 forms. He found that inputting multiple years of 990 data into ChatGPT provided a surprisingly effective way to quickly identify potential red flags.
“I uploaded the Centers [for Special Needs Trust Administration]’s 2020 990 form, and I said, are there any indications of fraud or mismanagement in this 990? Here’s what it kicked out.” The AI highlighted issues such as self-dealing risks, high salaries, large grants to a single organization, high costs for third-party vendors, and unclear fund management. While cautioning that AI is not infallible, Urbatsch emphasized its utility as a tool for initial analysis.
“Take this with a giant grain of salt, but again, it really digested a massive amount of data in a very short period of time,” he said of ChatGPT. “Unless you’re an expert in evaluating 990s, pull three years [of 990 forms], see what it says, and then ask the agency: ‘Here are some red flats that I’ve identified for your agency. How do you respond?’ They usually have a really good response.”
Ongoing Due Diligence and Monitoring
Urbatsch concluded by underscoring the theme of ongoing due diligence. He provided a comprehensive set of questions for professionals to ask pooled trust providers and urged them to stay informed about changes in the pooled SNT landscape.
“Make sure that you keep monitoring this over time,” he said. He reminded attendees that while pooled trusts can be valuable tools, careful evaluation and vigilant monitoring are essential to safeguard their clients’ interests.
By sharing his deep knowledge and practical insights, Urbatsch equipped attendees with tools they can use to navigate the complexities of pooled special needs trusts and ensure the safety and security of their clients.
“I think, as attorneys, as professionals, we have ethical obligations to our clients, especially with how vulnerable many of them are,” he said.
Check out other articles on sessions from this year’s ASNP National Conference:
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