Pooled Trusts

By William S. Fralin, Esq.

A pooled trust is a trust established and administered by a non-profit organization. A separate account is established for each beneficiary of the trust, but for the purposes of investment and management of funds, the trust pools these accounts. Each subaccount is established by the person with a disability, a parent, grandparent, guardian, or a court. The trust provides that, upon the death of the disabled beneficiary, to the
extent any funds remain in the beneficiarys subaccount, the trust must
pay to the state the amount remain-ing up to the amount equal to the
total amount of Medicaid assist-
ance provided to the beneficiary.
The pooled trust should be irrevocable to avoid being treated as a resource.
When is a Pooled Trust used?
Elder law attorneys often assist persons with disabilities who receive public benefits, including Supplemental Security Income (SSI) and Medicaid, and then receive a modest inheritance, divorce settlement, or personal injury settlement or award. These funds may make this disabled person ineligible for public benefits. The disabled person could purchase exempt resources, and then reapply for benefits; however, in many cases, there are no appropriate exempt resources for the disabled person to purchase. This person would then be ineligible for public benefits until these funds are spent down. The disabled person could give the funds away, however, the gifts would result in a period of ineligibility for SSI and Medicaid long-term care benefits. If under 65 years of age, the disabled person could transfer the funds to a d(4)(A) Special Needs Trust (SNT); however, it is frequently difficult to find an appropriate trustee for this type of trust, and the administrative expenses may be high for a trust funded with $100,000 or less. A fourth alternative is to transfer the funds to a d(4)(C) (“Pooled Trust”) subaccount.
What are the advantages of a Pooled Trust subaccount compared to a d(4)(A) SNT?
The person with a disability
may create his or her own pooled trust subaccount. Because the pooled trust is managed by a non-profit organization, it is not necessary to find a trustee who is willing to manage the trust. Additionally, because the pooled trust funds are pooled for investment and management purposes, the administrative expenses of these trusts are frequently lower than those of a d(4)(A) SNT.
What are the disadvantages
of a Pooled Trust?
The d(4)(A) SNT is a trust managed by a trustee for the sole benefit of the disabled beneficiary. A family member or friend of the disabled
person may serve as the trustee, or
a corporate or professional trustee might serve. The d(4)(A) SNT permits the trustee to customize the management and investment of the trust to meet the unique needs of the beneficiary.