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Wayne Schlaht
Wayne Schlaht
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Pooled Special Needs Trusts – A great solution for disabled special needs clients with settlements

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A pooled special needs trust (“pooled trust") is a trust created pursuant to federal law, in which the not-for-profit trustee agrees to hold assets for the benefit of a person with disabilities. This type of trust provides an injury victim with resources to use to pay for special or supplemental needs while preserving eligibility for government benefits, particularly Supplemental Security Income (SSI) and Medicaid. The trust funds can be used for items or services such as medications, non-essential medical care, comfort services, companion services, entertainment, electronic equipment and personal care services without risking the loss of public benefits.

Normally assets held in trust are countable for purposes of qualifying for needs based public benefits. However, federal law and state regulations allow individuals with disabilities to set aside assets for supplemental/ special needs into a pooled trust for the purpose of maintaining eligibility for public assistance programs. Pooled trust assets are not counted as available resources, nor are interest on the assets counted as income. A pooled trust is irrevocable and is established by a non-profit association. A separate account (sub-account) is maintained for each beneficiary in the trust but for purposes of investment and management of funds, the trust pools these accounts.

In summary, pooled trust beneficiaries can receive public benefits that meet their essential needs while maintaining a supplemental fund that is available to meet their special or supplemental needs which are not provided for by public benefits. There are three primary reasons that a pooled trust is frequently used for personal injury settlements. First, the injury victim can establish it himself or herself as long as he or she are competent. Second, there is no age limitation and someone over 65 can establish it for themselves. Third and probably most importantly, it can be used even if only a small amount of money is available to fund the trust. Even though a small amount of money is available, the trust beneficiary gets a professional trustee well versed in the complicated rules governing Medicaid and SSI eligibility.

A Pooled trust operates the same as a “regular” “(d)(4)(A)” special needs trust does in terms of administration and how the funds can be used. The primary difference is what happens when the trust beneficiary passes away. With a (d)(4)(A) special needs trust, the trust contains a payback provision and Medicaid is repaid for the services provided to the trust beneficiary with the remainder going to the trust beneficiary’s family or specified death beneficiaries. With most pooled trusts, if the funds are sufficient to payback Medicaid, Medicaid is repaid and the trust beneficiary’s family or specified death beneficiaries receives the remainder. Some Pooled trusts will retain all assets at death or retain funds if the balance in the trust isn’t sufficient to pay back Medicaid for the care provided by the state agency.

The Omnibus Budget Reconciliation Act of 1993 (OBRA 1993) is the Federal Law that allows for the creation of pooled trusts. The federal statute permitting Pooled trusts is 42 U.S.C. 1396p (d)(4)(C). It reads:

(C) A trust containing the assets of an individual who is disabled (as defined in section 1382c (a)(3) of this title) that meets the following conditions:

(i) The trust is established and managed by a non-profit association.

(ii) A separate account is maintained for each beneficiary of the trust, but, for purposes of investment and management of funds, the trust pools these accounts.

(iii) Accounts in the trust are established solely for the benefit of individuals who are disabled (as defined in section 1382c (a)(3) of this title) by the parent, grandparent, or legal guardian of such individuals, by such individuals, or by a court.

(iv) To the extent that amounts remaining in the beneficiary’s account upon the death of the beneficiary are not retained by the trust, the trust pays to the State from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under the State plan under this subchapter.