from Alabama Family Trust’s Executive Director, Melanie B. Holliman
Recently, I attended a large CLE (continuing legal education) course with a variety of speakers. I was surprised to hear a vendor from a for-profit trust company denigrate trusts managed by “pooled non-profit trust companies” as being inferior to their for-profit trust services.
You could say the speaker “stepped on our toes” a bit, so I want to clarify the advantages of a pooled non-profit such as Alabama Family Trust.
Beneficiaries of pooled special needs trusts have the advantage of their funds being managed well regardless of whether the funds are only a few thousand or millions. The administrative overhead is less, leaving more assets available for the beneficiaries’ needs.
The investment vehicles are of as high quality as individual trusts at for-profit trust companies. Each of our potential clients completes a detailed risk assessment questionnaire before an investment strategy is selected from the array of options from Warren Averett who manages the pooled trust funds for Alabama Family Trust beneficiaries as well as another $2.5 billion in investments.
Individual Co-trustees receive highly detailed statements even though the administration of Alabama Family Trust funds are in a pooled trust of $30+ million. Take a look at this sample monthly statement with details about the performance of the invested funds as well as the distribution activities for the month. Co-trustees are kept informed at Alabama Family Trust.
Alabama Family Trust is proud to be the one and only non-profit pooled trust entity set up by the Alabama Legislature to serve Alabamians. Our non-profit status drives our team to be efficient as possible with our trust services. The quality of our trust administration is particularly evident by the lack of issues identified by Medicaid. Social Security Administration Approval Letter – April 2018
What Happens When Trusts Terminate?
Read the fine print of trust termination terms for a for-profit trust company, and you’ll find some important differences from Alabama Family Trust’s terms. Often you’ll find that the for-profit trust entity keeps ALL remainder trust funds when the Life Beneficiary passes away.
When the Life Beneficiary of an Alabama Family Trust First-Party Irrevocable Trust dies after receiving income or principal, the remaining funds are used for:
- Payment of any taxes due from the trust to the State of Alabama or any other state or the federal government because of the death of the life beneficiary;
- Payment of reasonable fees for administration of the trust such as an accounting of the trust to a court, completion and filing of documents, or other required actions associated with termination and wrapping up of the trust;
- Retention of 10 percent to Alabama Family Trust for our Charitable Trust Fund;
- Reimbursement to the State of Alabama or to any other state, the District of Columbia or any other commonwealth, territory, or jurisdiction of the United States for medical assistance paid on behalf of the life beneficiary under the plan of the respective jurisdiction;
- Payment of the balance, if any, to remainder beneficiaries.
- Payment of administrative fees and expenses as established by Alabama Family Trust.
- Distribution to the Remainder Beneficiaries of an amount equal to 95 percent of the fair market value of the principal balance of the Life Beneficiary’s account (as determined on the date of distribution).
- Any remaining balance of the Life Beneficiary’s account is distributed to our Charitable Trust Fund.
Who Benefits From Alabama Family Trust’s Charitable Trust Fund?
The Charitable Trust Fund is used for other Life Beneficiaries who have exhausted their trust accounts at Alabama Family Trust but still have viable needs. The Alabama Family Trust Board of Trustees reviews all applications to make decisions on any financial awards from the Charitable Trust Fund.
Our Board of Trustees has deep experience in various facets of special needs trusts and are appointed by the Alabama governor, presiding officer of the Alabama Senate, and the Speaker of the Alabama House of Representatives. Let’s just say they are vetted thoroughly.
Pooled trusts use size to reduce administrative costs, but at Alabama Family Trust, size also matters because our non-profit status allows us to help individuals with very small trust needs. Alabama Family Trust efficiently administers Special Needs Trusts (SNTs) as small as $1,500. We manage trusts that are funded from the sources shown here for seniors, disabled adults, and disabled children.
Compare $1,500 to the minimums required by many for-profit trust companies who avoid small trust needs because their profit margin and overhead are too much for a small trust to bear.
I hope this information helps you understand what you may hear from for-profit trust companies offering non-pooled trust services.
And know that the Alabama Family Trust team is ready to answer any specific questions you may have before you direct a client’s funds to a particular trust administration entity.