Pooled Special Needs Trusts: Preserving the Assets of People with Special Needs

April 2, 2012 at 5:27 pm Leave a comment

By Joanne Marcus, MSW, Executive Director, Commonwealth Community Trust

A pooled Special Needs Trust (SNT) is administered by a nonprofit organization that is governed by a volunteer board of directors. Pooled trusts are beneficial when the person with a disability comes into a sum of money and needs assistance managing the funds or when a family member wants to provide financially for their loved one with a disability. The trust also preserves benefits for clients who receive Medicaid and Supplemental Security Income (SSI).

Why establish a pooled SNT?

An SNT allows the grantor, the person setting up the trust, the opportunity to provide funds that will enrich the quality of life of the beneficiary (the person for whose benefit the trust is established) who is living with a disability. The beneficiary may be receiving or may someday need to apply for Medicaid and SSI.  In order to qualify for public means tested benefits, the disabled individual can have no more than $2,000 in cash assets. A monetary gift, settlement or inheritance will likely disqualify the beneficiary from receiving much-needed assistance. Having funds in a pooled SNT will not jeopardize these crucial government benefits.

A trust fund can be used to pay for a variety of expenses including dental care, medical services, wheelchairs, eye glasses, hearing aids, furniture, electronic equipment, clothing, education, recreation and transportation.

Two Types of Trusts

The third-party SNT is funded by a third party, usually a close family member, and can be coordinated with the family’s estate plan. The SNT holds funds that the grantor leaves for the sole benefit of the beneficiary.

The self-funded Pooled Disability Trust (PDT) is funded by the person with a disability, for example, through a personal injury award. This trust is sometimes referred to as a Medicaid payback trust because the trust will have to pay back the state(s) for medical expenses incurred on the beneficiary’s behalf with funds remaining in the trust upon their death. This trust is codified in the Omnibus Reconciliation Act of 1993 (OBRA ’93) at 42 U.S.C. :1396 (d) (4) (c).

Role of the Trustee

The trustee manages and invests the funds for the trust and approves disbursements that are for the sole benefit of the beneficiary. A master trust agreement establishes that the trustee is allowed to administer the pooled trusts under the umbrella of the “master.” Both the self-funded PDT and the third-party special needs master trust agreements are written by estate planning attorneys with expertise in this area of the law and signed by the board of directors.

The beneficiary of the trust is the person for whose benefit the trust was created; however, the beneficiary does not own the funds in the trust. The trustee has legal ownership of the trust funds. Although the beneficiary, or someone acting on behalf of the beneficiary (e.g., designated advocate), has the right to request payment to vendors by the trustee, the trustee is not required to approve the request. At the same time, however, the trustee has a responsibility to ensure that the trust funds are available for supplemental needs that will improve, to the extent possible, the quality of life of the beneficiary.

The trustee has the duty to be prudent and to safeguard the trust property for the beneficiary. The beneficiary of the trust and their legal representative (such as an agent under a durable power of attorney, guardian or conservator) and the advocate are entitled to an accounting from the trustee.  Distributions from the trust must be limited to those that benefit only the beneficiary and not any other person. If a trust provides benefits to other persons, then it will not be considered a special needs trust, it will become a countable resource, and the beneficiary may lose government benefits.

The trust is drafted in such a way that if the trustee follows certain guidelines, the beneficiary will continue to be eligible for Medicaid and SSI. The Department of Social Services for Medicaid recipients and the Social Security Administration for SSI recipients are notified by the trustee of any deposits made to the trust and of distributions made from the trust. Generally, the following distributions would impact SSI benefits: food, mortgage (principal and interest), rent, real estate taxes, gas, electricity, water, sewer, and homeowner’s insurance and cash payments to the beneficiary. The trustee must be knowledgeable about the complicated and changing rules governing SSI and Medicaid to insure that the disbursements from the trust do not jeopardize these benefits.

Role of the Advocate

An advocate is designated by the grantor (individual funding the trust) and is generally someone close to the beneficiary such as a family member, guardian, conservator, case worker, power of attorney or the beneficiary. The advocate works closely with the trustee in submitting requests for disbursements that will maintain the quality of life for the beneficiary. The grantor can provide a vision for the trust to assist the advocate and trustee in understanding their wishes, and forms are available to assist in this.

Advantages of a pooled nonprofit SNT

  • The funds are pooled allowing for greater investment opportunities; individual sub-accounts are maintained.
  • Staff is experienced and knowledgeable about the needs of people with disabilities and the rules that will protect SSI and Medicaid benefits.
  • There is no minimum amount equired to establish the trust.

Joanne Marcus, MSW, is executive director of the Commonwealth Community Trust (CCT), a national nonprofit organization providing an effective and affordable administration of third party Special Needs Trusts and self-funded Pooled Disability Trusts. For more information, visit www.commonwealthcommunitytrust.org, call 888-241-6039 or 804-740-6930, or email  info@commonwealthcommunitytrust.org.


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