The Settlement Alliance

When is it Appropriate to Use a Pooled Special Needs Trust?

When is it Appropriate to Use a Pooled Special Needs Trust?

Nov 27, 2014

Many individuals with special needs receive some form of government benefits. For those who receive an inheritance or a settlement from a lawsuit, the acceptance of those funds could risk the individual’s eligibility to continue receiving needs-based benefits, such as Medicaid and Supplemental Security Income (SSI). In many cases, a Special Needs Trust (sometimes referred to as a Supplemental Needs Trust) should be considered as a vehicle for protecting the disabled individual’s assets and government benefits eligibility. While many people have heard of an Individual Special Needs Trust, though, a Pooled Special Needs Trust is far less well-known.

What is a Pooled Special Needs Trust?

Unlike an Individual Special Needs Trust, which is managed by a trustee, a pooled trust is administered by a non-profit entity. A sub-account for the disabled individual is established within the trust, then multiple sub-accounts accounts are “pooled” together for the purpose of investment and management. The Pooled Trust can provide a good alternative for smaller accounts, for which the administrative expenses associated with an Individual Special Needs Trust could be prohibitive.

How is a Pooled Special Needs Trust established?

The Pooled Trust sub-account can be established by the disabled individual or a parent, grandparent, guardian, or the court. Much like an Individual Special Needs Trust, the Pooled Trust is funded with the assets of the disabled individual. Upon the death of the beneficiary, the trust must reimburse the state for any Medicaid assistance that was provided to the beneficiary. The selected trust should be one with a proven record of compliance with the state Medicaid offices.

What can the funds be used for?

Distributions from a Pooled Special Needs Trust can be used to supplement the disabled individual’s needs that aren’t covered by government benefits. These items and services could include (but are not limited to):

  • Clothing
  • Counseling
  • Education
  • Household modifications and items
  • Insurance premiums
  • Medication/Medical Equipment

Any items or services purchased with funds from the Pooled Trust must be purchased for the benefit of the disabled individual.

What are the main differences between an Individual and a Pooled Special Needs Trust?

Because a Pooled Trust is made up of multiple sub-accounts and managed by a non-profit entity, the administrative expenses are generally lower than those incurred by an Individual Special Needs Trust. On the other hand, an Individual Special Needs Trust, which is managed by a trustee, allows more control over the investment and management

If your client is considering a trust, contact our settlement planning experts. We can help you determine if a trust is the right option for your client, and if so, which type of trust best meets their needs.

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