Pooled special needs trusts differ greatly from individual special needs trusts and can be a great way to gain the benefits of an SNT while reducing some of the practical downsides. Both pooled and individual SNTs have the same goal – prevent assets from affecting people with special needs’ eligibility for SSI and Medicaid while holding the assets for use in supplementing government benefits in the future.
Just like individual SNTs, Pooled SNTs come in two forms, first party self-settled SNTs and Third Party SNTs. However while individual first party self-settled SNTs must be established by an individual with special needs, a parent, a grandparent, a guardian, or the court. In contrast, pooled first party SNTs are established by non-profit associations, such as charitable organizations under section 501(c)(3) of the Internal Revenue Code. In pooled SNTs, a group of individuals each agree to have their assets managed by the non-profit. Each individual has a separate trust bank account, but the non-profit consolidates investment and management of all the assets into a “pool”.
To join a pooled first party SNT, the person with special needs, his parent, grandparent, guardian, or the court must establish the bank account that will hold the assets. In a crucial difference from individual first party SNTs, on the death of the beneficiary (person with special needs) the non-profit may, in some states keep any balance remaining the bank account and use it to benefit other beneficiaries in the pool. Illinois, however, requires that the balance instead be used to repay Medicaid.
Because of the Medicaid repayment requirement for pooled SNTs, some non-profits have special rules for third-party contributions to the pool. For example, the pool may have separate accounts for third parties, such as parents and grandparents, to contribute funds to a person with special needs separate from the person’s own contributions. In this way, the third-party funds need not be repaid to Medicaid on death of the beneficiary. These are often referred to as third party pooled SNTs
Pooled trusts usually have been in existence for a while when families consider joining them, so families can verify their stability and evaluate the economic feasibility of paying for trust administration. Professional trust administration for individual SNTs can be extremely expensive, but pooled SNTs give families longevity and experience without high account balance minimums. Many pools accept any account balance, small or large.
Rubin Law is the only law firm in Illinois exclusively limited to providing compassionate special needs legal and future planning to guide our fellow Illinois families of children and adults with intellectual disabilities, developmental disabilities, or mental illness down the road to peace of mind. For more information, email us at firstname.lastname@example.org or call 866-TO-RUBIN.