For a long time, I’ve been using WisPACT trusts to hold money for special needs beneficiaries. For people who are unfamiliar with special needs trusts or WisPACT, what WisPACT does is manage a pooled special needs trust (SNT). Like any other SNT, the funds are managed to supplement—not replace—government programs like SSI and MA. The pooled part means that disabled individuals have their own accounts with WisPACT. WisPACT hires a corporate money manager (currently, Chemical Bank) to manage the funds as a single pool, and gets a favorable fee structure, since it has millions to invest. WisPACT makes decisions about distributions in consultation with a trust advisor (a family member or guardian of the beneficiary).
This solves a big SNT design problem—the trustee problem. Public benefits programs are complicated, and it’s a big ask for a family member to understand those programs well enough to serve as trustee. Mistakes can be costly for the beneficiary. And even if you have the right individual, the trust will last a very long time, in many cases longer than any one individual’s ability to manage it. So professional management for a SNT is very much a best practice. But banks and trust companies have minimum balances (typically, at least $300K) that are out of reach for a lot of families.
The WisPACT model solves this problem with its pooled structure. By pooling the beneficiary funds and investing them together, WisPACT creates efficiencies of scale that allow it to accept even small funds. This makes professional trust management (and competitive professional investment management) accessible for all special needs beneficiaries.
So this has always been a go-to option for me when helping families who need a SNT. In the past, what I’ve generally done is create the WisPACT trust account, not put anything in it now, and then name the trust as partial (or, in some cases, full) beneficiary in the parents’ estate planning documents or on a life insurance policy.
But now WisPACT has made this better by adding incentives for creating and funding these accounts. The way this works is:
If the trust account is funded (more on this below) WisPACT will reimburse up to $2,000 in attorney’s fees for creation of the fund, along with the $250 setup fee. Except in unusual cases, this will cover my entire fee for the family’s estate plan. So the family gets the estate plan at no cost to them—we invoice WisPACT directly.
The only requirement is that the trust be funded with $750 or more when it is set up. Once deposited, this is money that can be used for the beneficiary’s needs.
Once the trust is created, the beneficiary is eligible for up to $6,000 per year from the WisPACT retained fund. (What this retained fund is and why it has the resources to do this for so many beneficiaries is a long story, but it does.) I’ve been told WisPACT is currently awarding grants to almost all recipients who apply.
The bottom line is that for $750 out of pocket (that can be used for the beneficiary’s needs), the family gets an estate plan, a professionally managed trust fund to use as part of that plan, and potentially $6,000 per year to spend on the beneficiary for a very long time. So this is something that is going to be a great solution for just about every family out there with a special needs child.
Want to discuss setting up a WisPACT trust as part of your estate plan? Call our office to set up your free consultation.