The Settlement Alliance

Protecting Government Benefits with a Pooled Trust

Protecting Government Benefits with a Pooled Trust

Dec 28, 2017


Disabled individuals who are awarded injury settlements under $500,000 may experience financial consequences with lifelong implications. Those who receive needs-based government benefits (e.g., Medicaid, SSI) will likely lose benefit eligibility if the settlement proceeds are accepted as a lump sum. When it comes to protecting benefit eligibility, a first-party special needs trust (SNT) may be too expensive an option to consider. Furthermore, if the claimant is over age 65, a first-party SNT isn’t even an option. What is the best alternative in these situations?

A different approach to special needs trust planning

First-party special needs trusts have proven useful for many injured claimants who want to preserve government benefit eligibility while retaining access to settlement proceeds through a trust. Claimants can continue receiving their needs-based government benefits while taking distributions from the trust to pay for needs that aren’t covered by government benefits (note: allowable distributions may vary by state and/or county).

However, the cost of administration and management, when combined with regular distributions, can quickly eat away at the settlement proceeds. First party SNTs also have age restrictions, so claimants over the age of 65 are ineligible.

Unlike a first-party SNT, a pooled trust is a collection of sub-accounts that are pooled for investment purposes. It is established and managed by a nonprofit organization, with sub-accounts added via joinder agreements. The assets within the sub-accounts are collectively invested and managed by a professional trustee. The overhead costs for a pooled trust are lower than those associated with a first-party special needs trust, allowing the claimant to retain more of their settlement proceeds while maintaining government benefit eligibility. There are no age restrictions on pooled trusts, so claimants over the age of 65 are eligible.

How are pooled trust proceeds handled after the beneficiary’s death?

The terms of the pooled trust determine how the remaining funds in the beneficiary’s sub-account are handled after the beneficiary’s death. In some instances, excess funds may remain in the pooled trust, while in other cases, Medicaid must be reimbursed before the funds being distributed to remaining beneficiaries, if applicable.

Contact our comprehensive settlement planning team today

Our settlement planning team has guided thousands of disabled claimants through the process of government benefit preservation and trust planning. To learn more, contact us today.

We are proud to partner with the highest rated structured settlement providers in the industry:

  • American general Life Companies
  • Berkshire Hathaway Structured Settlements
  • MetLife
  • Mutual of Omaha
  • New York Life
  • Pacific Life
  • Prudential