A pooled trust is a legal arrangement that combines the financial resources of multiple individuals with disabilities into separate accounts. These trusts are similar to a bank in that they manage individual account holders’ assets. This pooling of resources allows individuals with disabilities and older adults to protect their eligibility for government benefits, such as Medicaid and Supplemental Security Income (SSI), while still being able to access funds for supplementary care and quality of life improvements.
However, many individuals fail to utilize pooled trusts because they lack an understanding of them. In the following guide, we will discuss these pooled trusts in more detail, including the benefits they provide and whether they can be terminated.
What Exactly Is a Pooled Trust?
A pooled trust, also known as a payback special needs trust, is a type of trust that holds the assets of an individual with disabilities. This trust must meet specific conditions to be considered a pooled trust.
- The trust is created and managed by a non-profit association
- A separate account will be maintained for each trust beneficiary. However, for investment and management purposes, the trust will pool these accounts together
- These trust accounts will be established for the benefit of the beneficiary
- Upon the beneficiary’s death, if funds remain in the beneficiary’s account that are not retained by the trust, the trust is required to pay the state an amount equal to the total sum of medical assistance provided on behalf of the beneficiary under the state plan. This obligation ensures that any medical expenses covered by the state are reimbursed before any remaining funds are distributed.
Different Pooled Trusts
The management of a pooled special needs trust shares many similarities with that of individual special needs trusts. However, it is important to recognize that not all pooled trusts are identical.
Pooled trusts can vary significantly in terms of their operating culture, fee structures, asset management practices, and administrative approaches. Some pooled special needs trusts cater exclusively to individuals with developmental disabilities, while others specialize in handling funds from legal settlements and awards. Additionally, pooled trusts may differ in their geographic scope, with some operating at a regional level and others on a national scale. Given this diversity, it is imperative for individuals to discuss their options with an experienced estate planning attorney to guide them through a thorough review of the distinctive characteristics and options offered by different pooled trusts.
Can You Terminate a Pooled Trust?
Pooled Special Needs Trusts (SNTs) are a type of irrevocable trust that are established to manage funds for individuals with disabilities. Typically, these trusts cannot be terminated without a court order. However, there are specific circumstances in which termination may be considered.
For instance, if the trust’s primary purpose has been achieved, such as providing for the beneficiary’s specific needs, termination may be an option. Additionally, if the assets within the trust are no longer available due to market conditions or have become insufficient to support the beneficiary, termination could be sought. Other potential reasons for termination may include changes in laws or regulations affecting the trust or circumstances where the continuation of the trust is no longer in the beneficiary’s best interests. If termination is being considered, it is critical to seek legal advice to understand the specific requirements and processes involved.
Consequences of Terminating a Pooled Trust
Terminating a trust is a consequential decision with considerable financial and legal implications. The process involves several necessary steps, including notifying all parties with an interest or stake in the trust and ensuring that all debts and liabilities are fully settled. It is essential to approach each stage of the process with precision and attention to detail to ensure that the termination is executed correctly and complies with all relevant laws and regulations.
Contact Losavio & DeJean Today To Learn More
If you want to learn more about pooled trusts and what they entail, contact Losavio & DeJean today and speak with our legal team.