Legal Definitions - pooled trust

A pooled trust is a specialized type of trust, typically established and managed by a non-profit organization, where the assets of multiple beneficiaries are combined, or "pooled," for investment and administrative purposes. This pooling allows for greater efficiency and lower management costs compared to managing individual trusts separately.

One primary use of a pooled trust is to help individuals with disabilities or special needs manage their assets without losing eligibility for crucial government benefits, such as Medicaid or Supplemental Security Income (SSI), which have strict income and asset limits. By placing assets into a pooled trust, these funds are generally not counted against the individual's eligibility for these programs, provided specific rules are followed. The non-profit trustee then uses these funds to pay for the beneficiary's needs that are not covered by government benefits, enhancing their quality of life. Upon the beneficiary's death, any remaining funds in their sub-account within the pooled trust may be used to reimburse the state for certain government benefits received during their lifetime.

Pooled trusts can also be used in other contexts, such as facilitating charitable giving. In these cases, individuals might contribute assets to a non-profit's pooled trust, potentially receiving income for life, with the remaining assets passing to the non-profit upon their death. This structure can offer tax advantages and reduced administrative burdens.

• Example 1: Preserving Government Benefits for an Inheritance

  Maria, a young adult with a severe intellectual disability, receives a substantial inheritance from her grandmother. Maria relies on Medicaid for her medical care and Supplemental Security Income (SSI) for her living expenses. If she were to receive the inheritance directly, the funds would exceed the asset limits for these programs, causing her to lose her essential benefits. To prevent this, Maria's family works with a non-profit organization to establish a sub-account for her within a state-approved pooled special needs trust. The inheritance is then placed into this sub-account.

  How it illustrates the term: By placing the inheritance into the pooled trust, the funds are not considered Maria's countable assets for Medicaid and SSI eligibility. The non-profit trustee can then use these funds to pay for things that enhance Maria's quality of life but are not covered by government benefits, such as specialized therapies, accessible transportation, or recreational activities, without jeopardizing her vital government assistance.

• Example 2: Managing a Personal Injury Settlement

  David sustained a traumatic brain injury in a car accident and receives a significant settlement. He requires ongoing medical care and support, much of which is covered by Medicaid. If he takes the settlement funds directly, he would lose his Medicaid eligibility, leaving him unable to afford the necessary long-term care. David's attorney advises him to place the settlement funds into a pooled special needs trust managed by a non-profit.

  How it illustrates the term: This allows David to use his settlement money for supplementary needs not fully covered by Medicaid, such as home modifications for accessibility, specialized equipment, or additional personal care attendants, while still maintaining his eligibility for critical Medicaid services. The pooled nature of the trust also means that his funds are managed efficiently with lower administrative fees, as they are combined with assets from other beneficiaries.

• Example 3: Charitable Giving with Income for Life

  An elderly couple, the Johnsons, wish to leave a lasting legacy to their favorite local library while also ensuring they have a steady income stream during their retirement years. They decide to contribute a significant sum of money to the library's pooled income fund, which is structured as a charitable pooled trust.

  How it illustrates the term: The Johnsons receive regular income payments from the pooled fund for the remainder of their lives. Upon their passing, the remaining principal in their designated portion of the pooled fund will be permanently transferred to the library, fulfilling their charitable intent. This arrangement also provides them with potential tax benefits during their lifetime and the peace of mind that their assets are professionally managed by the non-profit library foundation.