What are Special Needs Trusts, Supplemental Needs Trusts, and Pooled Trusts?

These trusts are specialized trusts designed to benefit a person with a disability.  It allows the disabled person to benefit from assets without losing their important governmental benefits.  Such benefits may include Supplemental Security Income (SSI), Medical Assistance (Medicaid), and other benefits based on need.  Examples of these trusts are:

1. Third-party Special or Supplemental Needs Trust.  This is a trust established by a third party for the benefit of a person with disabilities to improve their quality of life.  It can be established by someone, usually a parent, for the benefit of a disabled person.  You need not be concerned with Medicare claims, Medicaid liens or age limits relating to the beneficiary.  There is no requirement for the state Medicaid agency be paid back funds on the death of the beneficiary.  The purpose is to give the disabled person benefit of the proceeds by placing them in a protected trust rather than leaving them in the disabled person’s possession which would hinder his/her ability to receive important governmental benefits.

2. Self-settled Special Needs Trust. This is a trust established with the assets of the person with disabilities to improve their quality of life.  These assets may come from a person who is injured, suffers a disability and receives a substantial settlement.  The funds come from the person who is disabled, and no longer is the trust limited to being established by the parent, grandparent, Guardian, or Court.   The Trust can now be established by the disabled person.  The trust must be established for the benefit of the disabled person.  You must be concerned with the existence of any Medicare claim and Medicaid lien.  The trust must be irrevocable and cannot be established if the beneficiary is over the age of 64.  On the death of the beneficiary, assets remaining in the trust must be used to pay back any state Medicaid agency providing benefits.  The purpose is to protect governmental benefits for disabled person through a trust rather than in the disabled person’s possession.

3. Pooled Trust.  This is a trust wherein the assets of an individual, usually not a large sum, are placed in a Pooled Trust to be used for the benefit of the individual with a disability to improve their quality of life. The assets of all the beneficiaries in a Pooled Trust are pooled for investment purposes so the trustee can have more flexibility in investments.  The trustee still must separately account for each person’s interest in the Pooled Trust.  If there are any funds left after the beneficiary dies, the remaining funds are placed in a fund that benefits other people with disabilities.  The account in the Pooled Trust may be created either by the individual with a disability, their parent or grandparent, their Guardian or a Court.  Pooled Trusts are operated by non-profit companies.