How a Pooled Special Needs Trust Can Benefit Your Client

A Special Needs Trust (SNT) is a trust created specifically for individuals with health special needs and designed to manage funds without jeopardizing eligibility for Supplemental Security Income (SSI) and Medicaid. The funds in the trust can be used to enrich the beneficiary’s quality of life and provide for needs such as dental care, eye care and additional supports that public benefit programs cannot provide. A SNT can also benefit beneficiaries who do not receive means tested government benefits but need trust administration services.

Having a SNT is important for an individual with special needs when he or she receives a sum of money or when a family member wants to provide financial support in the future.  If an individual has more than $2,000 in assets, SSI and Medicaid benefits could be jeopardized. An SNT is not counted as income or assets.

A specific type of SNT is a Pooled Special Needs Trust (PSNT) which is administered by a non-profit organization. Beneficiaries’ funds are collectively pooled together for investment purposes while an accounting of each Beneficiary’s sub-account is separately maintained. Earnings based on the Beneficiary’s share of the principal are added to each sub-account.  Professional trust administration services provided by the non-profit include making financial decisions on behalf of the Beneficiary by evaluating disbursement requests, tracking expenses, and ensuring funds are spent prudently without jeopardizing SSI and Medicaid benefits.

Types of Pooled Special Needs Trusts

  • A Third-Party Pooled Special Needs Trust is established and funded by a Grantor, typically a parent or grandparent, and can be coordinated with an estate plan or life insurance policy. The trust holds funds that the grantor and others provide for the Beneficiary.
  • A First-Party Pooled Special Needs Trust is funded by the person with a disability with assets of his or her own, such as a personal injury settlement, an inheritance left directly to the Beneficiary, Social Security back payment, or an award of marital property or spousal support. The Grantor can be the Beneficiary, parent(s), grandparent(s), court-appointed guardian, or the court. Upon the death of the Beneficiary, the First-Party PSNT is subject to a Medicaid Payback provision for a Beneficiary who received Medicaid.

Setting up a Pooled Special Needs Trust

A Grantor, the person or persons establishing the PSNT for the benefit of a Beneficiary, completes, signs, and notarizes a legal document called a Joinder Agreement to join with others under a Master Trust Agreement. The Master Trust Agreement allows the nonprofit PSNT organization to administer the trusts under the umbrella of the “master.”

Role of the Advocate

Advocates named when establishing a PSNT are authorized to submit disbursement requests that are for the benefit of the Beneficiary, receive financial statements, and provide information about the Beneficiary’s needs and wants. An advocate is generally a relative, guardian, conservator, case worker, agent under a power of attorney, or the Beneficiary.

Advantages of a PSNT

  • Funds are pooled together for greater investment opportunities and lower trust administration fees.
  • The PSNT organization has experienced staff members who are knowledgeable about the needs of people with special needs and the rules that protect Medicaid and SSI benefits and govern trusts.
  • There is objectivity and oversight to ensure disbursements from a PSNT are prudent, for the sole benefit of the Beneficiary, do not jeopardize benefits, and prevent misuse or fraud.
  • PSNT organizations serve beneficiaries with accounts that vary in size, from those with modest funds to those with considerable wealth. It is not unusual for a bank or financial services firm to require a minimum of $350,000 to $750,000 to fund an individual special needs trust. However, as a nonprofit, the minimum funding requirement for a PSNT is significantly lower.

There are many advantages to creating a PSNT and knowing that the needs of the Beneficiary are well-managed by a non-profit organization looking out for the best interest of the Beneficiary is perhaps the most important.

About the Author: Joanne Marcus, MSW, is the Executive Director of Commonwealth Community Trust (CCT). CCT is a 501(c)(3) national nonprofit organization that administers affordable and efficient pooled special needs trusts. CCT was founded in 1990 and is managed by a Board of Directors who serve with a caring heart and without compensation. With years of experience, CCT has a proven reputation as a prudent steward and administrator. For more information about CCT, contact Joanne Marcus, MSW, Executive Director at jmarcus@trustcct.org or 804-740-6930. Visit our website at www.trustCCT.org for access to information and additional resources.