Pooled Special Needs Trusts

A personal injury settlement, inheritance, or other large sums of money received directly can derail the finances of someone with disabilities. Having more than $2,000 in resources prevents them from receiving government benefits such as Medicaid or SSI . One way to safeguard their funds and public benefits is to establish a first-party special needs trust (SNT) since such trusts are considered exempt. However, sometimes a standalone SNT isn’t practical, and a pooled SNT should be considered instead.

In lieu of naming a trustee to manage the special needs trust you form; you might be able to have your family member’s inheritance overseen as part of a group trust. Our nonprofit organization manages these pooled trusts, also known as community trusts or master trusts. If you cannot think of a logical trustee or don’t have enough money to justify creating an individual trust, a pooled trust is a reasonable alternative to your own special needs trust.

What Is a Pooled Trust?

Special needs pooled trusts run by our nonprofit organization are designed to administer a special needs trust efficiently and expertly on behalf of individuals with disabilities. All assets are combined and invested together; funds are allocated to beneficiaries based on their share of the total amount.

Each pooled trust is unique. All have their own fees, services, and contracts under which they operate. Some have complicated contracts and fee schedules. Some offer a single agreement and an easy-to-understand fee schedule. In some organizations, the beneficiaries are fully provided for, whereas the money is managed appropriately in others.

All pooled trusts share some basic advantages and are worth considering despite their differences.

To maximize administrative efficiency and investment efficiency, pooled SNTs combine the resources of many beneficiaries. Individuals have their own subaccounts and typically receive a share of the fund’s earnings.

Pooled SNTs can be first-party or third-party trusts. First-party sub-accounts must be funded from resources belonging to the beneficiary and can be established by the beneficiary, the court, or a parent or grandparent. The third-party sub-account can be created and funded by anyone except the beneficiary. Moreover, the resources used to fund a third-party subaccount must have been owned by someone else, a “third party,” and not the beneficiary.

A first-party pooled trust may retain all or part of the funds remaining after the beneficiary’s death, depending on the state. According to federal law, if the nonprofit does not keep all or a portion of the leftover funds, Medicaid must be reimbursed for any services covered during the individual’s life from those funds not retained. Medicaid can be compensated, and any leftover funds can be distributed to beneficiaries. Medicaid is not required to reimburse funds remaining in a pooled third-party trust, although some portion may still revert to the nonprofit administering the trust.