What is a Pooled Trust?
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. For self-settled, or (d)(4)(C) pooled trusts, each subaccount is established by the person with a disability, a parent, grandparent, guardian, or a court, and the trust is funded with the assets of the person with a disability. The trust provides that, upon the death of the disabled beneficiary, if there are funds remaining in the beneficiary's subaccount, the trust must pay to the state an amount up to the total amount of Medicaid assistance provided to the beneficiary, to the extent that the funds are not retained by the trust. The pooled trust should be irrevocable to avoid being treated as a resource.
Third-party pooled trust subaccounts can also be established by family members who want to leave inheritances for persons with disabilities. Because these accounts are not funded with the assets of the person with a disability, they do not include a Medicaid payback provision. The remainder of this article will discuss the self-settled (d)(4)(C) pooled trust.
When is a (d)(4)(C) 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. The receipt of these funds may make this person ineligible for public benefits. The client could purchase exempt resources, and then reapply for benefits; however, in many cases, there are no appropriate exempt resources for the person with disabilities to purchase. The person with a disability would then be ineligible for public benefits until these funds are spent down. The 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 client 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 (d)(4)(C) Pooled Trust subaccount compared to a d(4)(A) SNT?
The person with a disability under 65 years of age 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 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 (d)(4)(C) Pooled Trust compared to a d(4)(A) SNT?
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 person with disabilities may serve as the trustee, or a corporate or professional trustee may 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.
Can you give me an example of the use of a (d)(4)(C) Pooled Trust?
Oast & Hook represented a client under the age of 65 years with a disability who was receiving SSI and Medicaid. This client received an inheritance from her mother of approximately $50,000. Oast & Hook assisted the client in establishing a pooled trust subaccount to hold the inherited funds. Because the client's resources were less than $2,000 and there was no resulting period of ineligibility, the client continued to qualify for SSI and Medicaid assistance. The funds in her pooled trust subaccount may be used for goods and services, such as dental care, that SSI and Medicaid do not pay.
Where do you find a Pooled Trust in Virginia?
Self-settled and third-party trusts:
Commonwealth Community Trust
P.O. Box 29408
Richmond, Virginia 23242
ARC of Northern Virginia
98 North Washington Street, Falls Church, Virginia 22040
Third-party trusts only:
Virginia Beach Community Trust
289 Independence Blvd., Suite 120
Virginia Beach, Virginia 23462
Norfolk Community Trust
248 West Olney Road
Norfolk, Virginia 23510
Tel: 757-823-1600 Website: www.norfolkcsb.org
How can I find out more about planning for the financial management and care of persons with disabilities?
You can visit Oast & Hook's website at www.oasthook.com or the Special Needs Alliance (SNA) website at www.specialneedsalliance.com. Oast & Hook is a Virginia member of the Special Needs Alliance, and certified elder law attorney Andrew Hook is a past president of the SNA. Oast & Hook also makes presentations about pooled trusts, special needs trusts, and other elder law issues to organizations and groups.
Oast & Hook certified elder law attorney Sandra Smith has just finished her second term as President of the Commonwealth Community Trust, one of several pooled trusts in Virginia. Sandra L. Smith joined Oast & Hook in 2003. Oast and Hook has served Southeastern Virginia and North Carolina for more than 80 years. Visit their website at www.oasthook.com for more information. Ms. Smith practices primarily in the areas of elder law, estate planning, estate and trust administration, special needs planning, asset protection planning, long-term care planning and Veterans' benefits. She is certified as an Elder Law Attorney (CELA) by The National Elder Law Foundation (NELF). In 2008, Ms. Smith was named as a Rising Star by Virginia Super Lawyers magazine. Rising Stars names the state's top up-and-coming attorneys.
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