What Is A Pooled Trust?

What Is A Pooled Trust?

Beneficiaries of government programs such as Supplemental Security Income (SSI) and Medicaid must have limited income to qualify for these benefits. They may lose these crucial benefits if they receive an inheritance, an accident settlement, or simply accumulate too much money in a bank account. Sections 1917(d)(4)(A) and (C) of the Social Security Act [(42 U.S.C. § 1396p(d)(4)(A) and (C)] (the “Act”) provide two options for the establishment of special needs trusts that may avoid this problem.

The first option is a self-settled or first-party special needs trust under § (d)(4)(A) of the Act. The second option is a pooled special needs trust under § (d)(4)(C) of the Act. Sections (d)(4)(A) and (C) of the Act set forth exceptions to the general rule of counting trusts as income and resources for the purposes of SSI and Medicaid eligibility.

Both trust options have the following similarities:

  • The trustee makes disbursements at its discretion.
  • The trustee must spend trust funds for the sole benefit of the beneficiary.
  • When the beneficiary dies, the beneficiary’s estate must repay Medicaid.

The first option allows beneficiaries to transfer their excess assets into an individual or “first-party” special needs trust. However, these first-party SNTs may be costly to create. A second option involves a “pooled trust, which may be more affordable. Whereas an individual creates a special needs trust for oneself or for the benefit of a specific beneficiary who may be a family member, a pooled trust is established by a non-profit organization.

A pooled trust contains the assets of many individuals that are held or “pooled” in separate trust accounts. The pooled trust is analogous to a bank that holds the assets of individual account holders. The pooled trust is usually administered according to an all-encompassing “master trust” with a joinder agreement that contains provisions specific to each individual beneficiary.

The resource-counting provisions of § 1613(e) of the Act do not apply to a trust containing the assets of a disabled individual that meets the following conditions:

  • The pooled trust is established and managed by a nonprofit association;
  • Separate accounts are maintained for each beneficiary, but assets are pooled for investment and management purposes;
  • Accounts are established solely for the benefit of disabled individuals;
  • The account in the trust is established through the actions of the individual, a parent, a grandparent, a legal guardian, or a court; and
  • The trust provides that, to the extent that any amounts remaining in the beneficiary’s account, upon the death of the beneficiary, are not retained by the trust, the trust will pay to the State(s) from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under State Medicaid plan(s).

Because a pooled trust contains the contributions of many individual beneficiaries, the trust can make more balanced and reliable investments while providing a wide variety of management services that may be unaffordable for a first-party special needs trust. More importantly, transfers into a pooled trust, like transfers into a first-party special needs trust, do not restrict a child or adult with special needs from accessing government benefits like SSI and Medicaid.

A special needs trust is a cost-effective tool that may provide and protect the resources necessary to support your child’s future needs. However, establishing a special-needs trust may be challenging and time-consuming. Rubin Law offers specialized guidance to those who want to provide for their child’s future needs with the expertise to help you create a special needs trust that accomplishes all your specific goals.

Rubin Law is a law firm solely dedicated to enhancing the lives of children and adults with intellectual disabilities, developmental disabilities, and mental illnesses. Rubin Law is the only law firm in Illinois that limits its practice to providing legal services and future planning for adults and children with special needs. We offer patience, compassion, and a unique understanding to those with disabilities and those who care for them. For more information, please email us at email@rubinlaw.com or call 866-TO-RUBIN.