A recent popular estate planning technique is the use of a Pooled Trust. Pooled Trusts are basically entities that are established and administered by a non-profit organization. Each person who contributes to the Pooled Trust, called a Donor, has a separate account established for them, and they each become a beneficiary of the Pooled Trust.
The Trust assets are pooled together and invested in funds controlled by the trustee, who will utilize the funds to or for the benefit of each particular beneficiary. Upon the death of a beneficiary, normally a portion of the funds remains in the Trust for other charitable purposes and for beneficiaries who have disabilities, while the other portion is repaid to the State for the amount that the State Medicaid Office may have paid for that particular beneficiary’s expenses while alive.
Many Pooled Trusts are established by individuals who have disabilities and are on Medicaid or SSI and are not permitted to maintain significant assets. If their assets had not been contributed to a Pooled Trust, they would have been denied benefits, required to spend all of their funds down to approximately $1,500 and then re-apply for benefits.
By depositing and contributing their funds to a Pooled Trust, they immediately become qualified for or maintain their qualification for Medicaid and SSI, and they do not lose other benefits, such as housing, subsidies, food stamps, oil assistance, etc.
While they are alive, the trustee may expend and use income and/or principal from the Pooled Trust for the beneficiary, but only for purposes that would not otherwise disqualify the beneficiary from benefits. If the Trust is administered properly, the beneficiary is remains eligible for Medicaid benefits, and it is anticipated that a significant portion of the funds will be spent on the beneficiary during their lifetime, so there will not be a substantial amount to be repaid to the State upon their death.
Because a Pooled Trust is managed by a non-profit organization, it is not necessary to select an independent trustee. The non-profit becomes the trustee itself. Normally, because Pooled Trusts are commingled with other assets and managed similarly, administrative expenses of the Trust are also lower than those of any individually managed account.
In most states, there are choices to be made as to which Trust would be most appropriate, and it is important to select the one that matches the needs of the beneficiary before selecting a Pooled Trust.
By: Hyman G. Darling, Esquire