** This article has been revised from its original version which was published on February…
For many seniors and individuals with disabilities, a pooled trust can be an excellent option to help them qualify for means-based government benefits, such as Medicaid and/or Supplemental Security Income (SSI). So, what exactly are the benefits of a pooled trust?
What is a Pooled Trust?
A pooled trust is a special needs trust (SNT) that, under Federal and New York statute, can help recipients of government benefits, such as Medicaid and/or Supplemental Security Income (SSI), become eligible for or continue to qualify for their benefits.
First- and Third-Party Trusts
A pooled SNT may be either a first- or third-party trust. A first-party sub-account of the pooled SNT can be established by the beneficiary themselves, a parent, a grandparent, or the court party sub-account but must be initially funded with resources belonging to the beneficiary.
A third-party sub-account of the pooled SNT can be created and funded by anyone except the beneficiary. The funds in a third-party sub-account must have always been owned by someone else (third party), and not the beneficiary.
Benefits of a Pooled Trust
Although there are some drawbacks to pooled SNTs, such as fees and limitations on distributions, there are many significant benefits. Some benefits of a pooled SNT are as follows:
Maintain eligibility for benefits
For an individual to qualify for means-based government benefits, such as Medicaid and/or SSI, he or she is subject to certain income and/or resource limits. Since the funds contained in a properly established SNT are not includible in the individual’s countable resources, the pooled SNT will allow the individual to retain unlimited assets to cover their needs without disqualifying him or her from government benefits.
Another major benefit of a pooled SNT is that it is administered by professional administrators.
When you establish an SNT on your own, you must find a trustee who knows the laws and regulations related to government benefits and will efficiently and effectively manage the trust on behalf of the beneficiary.
Responsibly managing an SNT is complicated and might be too much for family members to take on. Typically, pooled SNTs are staffed by individuals who are well-versed in special needs planning, keep abreast of changing benefit rules, and are knowledgeable about local services. Also, they may partner with financial institutions in the handling of investments. This could allow access to a wider array of investment opportunities, including greater diversification, which can reduce risk.
Stability is another reason why many individuals with disabilities and their families choose a pooled SNT instead of establishing their own SNT. Instead of worrying about who will become a trustee in the event of illness or death, the individual and their family can take comfort in the continuous professional management of the pooled SNT.
Oftentimes the concept of a pooled trust can feel overwhelming, let alone the process of deciding what pooled trust to use. It is always a good idea to seek the guidance and advice of a qualified elder law and special needs attorney who can help you sort through your options.