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What is a Pooled Special Needs Trust?

A pooled trust is a trust established and administered by a non-profit organization. A separate account is established for each beneficiary of the trust, but for the purposes of investment and management of funds, the trust pools these accounts. For Pooled Trusts (also known as (d)(4)(C) Trusts), each sub-account is established by the person with a disability, a parent, grandparent, guardian, or a court, and the Trust is funded with the assets of the person with a disability. The Pooled Trust provides that, upon the death of the disabled beneficiary, if there are funds remaining in the beneficiary’s sub-account, the trust must pay to the state an amount up to the total amount of Medicaid assistance provided to the beneficiary, to the extent that the funds are not retained by the trust. The pooled trust must be irrevocable to avoid being treated as a resource.

The Need

Individuals with disabilities who receive public benefits would benefit from having funds in a trust used to maintain their quality of life. When an individual who receives public benefits also receives money, the public benefits may be jeopardized. This situation may arise when the individual receives a personal injury or divorce settlement, an inheritance, or other funds. Regardless of the source of the funds, once the individual has money in his or her own name, the public benefits may be at risk. To protect the public benefits, in many circumstances the excess funds can be placed in a Pooled Special Needs Trust. This type of trust is used to supplement, not replace, public benefits such as Supplemental Security Income (SSI) or Medicaid. The trust assets should be used to purchase things that public benefits do not provide, and the trustee should seek to determine the impact of distributions on public benefits.

Requirements for a Pooled Trust

  1. The pooled trust must be established and maintained by a non-profit organization.
  2. Assets are pooled for investment but accounted for separately.
  3. The account is for the benefit of an individual with a disability as defined in 42 USC1382 c(a)(3).
  4. The account is established by a parent, grandparent, guardian, court or the individual.
  5. At the time of the beneficiary’s death, to the extent that funds are not retained by the trust, remaining funds are first used to pay back governmental benefits received by the beneficiary. At the time of the beneficiary’s death, ACT retains the remaining funds to enhance the lives of individual pooled members with special needs.

Other Notes about a Pooled Trust:

  • This trust can be self-created and self-funded.
  • Because there is no “look-back” period on a Pooled Trust, any funds received by the individual, or to which the individual is already entitled, can be deposited into a Pooled Trust and will no longer render the individual ineligible.
  • A Pooled Trust is established using a Social Security Administration pre-approved form and does not require separate court approval.  These trusts are a more affordable option to establish and maintain, prolonging the assets.

Language of the Trust

To qualify for the favorable treatment accorded to supplemental needs trusts under federal and state law, the trust document must do all of the following:

  • show the creator’s intent to supplement — not supplant, impair or diminish — government benefits or assistance for which the beneficiary may otherwise be eligible
  • prohibit the trustee from distributing trust assets in any manner that may impair or diminish the disabled individual’s entitlement to government benefits, and
  • preclude the disabled individual from authorizing distributions from the trust.

Assets That May Be Put in the Trust

In some cases, the family may turn to a professional trustee such as a bank or trust company for assistance. Unfortunately, many for-profit trustees will not accept a trust that has less than a certain minimum value, often as high as $500,000 or $1,000,000, or will charge high minimum fees. The requirement of a high minimum trust balance rules out for-profit trustees for a significant number of families. A pooled SNT can fill this gap.

Although Pooled Special Needs Trust tend to be smaller in value, the following are examples of funding sources:

  • bank accounts
  • inheritance, and
  • court settlements.

Where do you begin?

  • First, we’d encourage you to contact us to learn more about how a Pooled Trust may assist you, your loved one or your client.
  • Then you should carefully review the terms of the Master Trust Agreement. This is the legal document that contains the terms of our Pooled Trust.
  • If you decide to move forward with a Pooled Trust you will need to complete the Joinder Agreement and Disclosure.
  • Mail the completed, signed Joinder Agreement and Disclosure document to us, along with a check in order to open your Pooled Trust.