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Educate yourself
POOLED TRUST
The Federal Law, currently
in force, states that any assets held in a
trust will be counted against applicants or
recipients of public benefits when the
eligibility requirements for those benefits
have asset and income limits. Any trust
funds that can be reached will be counted as
an asset, and any portion of the interest
that could be paid out will be counted as
income. The result is that a recipient of
public benefits will be disqualified and
their benefits cut off. The person applying
for benefits will have their application for
public benefits denied.
However, Federal Law
creates a specific exception to the
rules that normally apply to trusts and
the exception allows the creation of a
"pooled trust". The National Pooled
Trust is modeled pursuant to this
exception. Thus the recipient or
applicant who places assets in The
National Pooled Trust will not be
subject to the rules that normally apply
to trusts. Trust assets will not be
counted as an available resource, nor
will interest on the assets be counted
as income.
The end result is that a
Beneficiary of The National Pooled Trust
can continue receiving public benefits
for meeting essential needs and still
have resources available for their
special, or supplemental, needs.
PAYBACK TRUST
The Social Security Act created the concept
of a “Payback Trust”. See 42 U.S.C.
§1396p(d)(4)(A). The parent, grandparent or
guardian of a person with a disability, or a
Court can create a Payback Trust to protect
the person’s eligibility for Medical
Assistance, Waiver Services and Supplemental
Security Income.
Once the Payback Trust is created, the
person with a disability can add his or her
assets to the Payback Trust. In this way,
the person can save funds rather than spend
down for unnecessary things just to preserve
eligibility for essential supports and
services.
The assets in the Payback
Trust are used for the benefit of the person
with a disability -- to improve
his or her quality of life.
If all the funds in the
Payback Trust have not been spent by the
time the person with a disability dies, the
remaining money is used to “payback” the
Department of Public Welfare for the cost of
providing Medical Assistance to the person.
If any money remains after the “payback”,
the trust agreement will direct the trustee
how to distribute those funds.
COMMON LAW TRUST
American Courts, through
a number of decisions (“Common Law”),
recognized that family and friends of a
person with a disability could create trusts
to benefit the person with a disability.
With a Common Law Trust, family and friends
can provide for their loved one while still
preserving the person’s eligibility for
essential, lifelong supports and services
such as Medical Assistance, Waiver Services
and Supplemental Security Income. The person
with a disability cannot create a Common Law
Trust, but may place his or her assets in a
Pooled Trust or a Payback Trust.
Advantages
Family and friends can
fund the Common Law Trust during their
lifetimes and/or through their estate plans.
The Common Law Trust can
be very flexible and can benefit additional
family members or friends. Families maintain
complete control over their assets while
they are alive and if the special needs
person doesn’t exhaust all the funds the
balance can be transferred to other family
members.
Requirements
In some cases you don’t
need to come up with a lot of cash … ask The
Parents’ Group how?
Trustee must have
absolute discretion over distributions, so
the beneficiary cannot have a legal right to
force a distribution from the trust.
The person creating the
trust must clearly express his or her
intention to supplement, not supplant,
government supports and services.
The person creating and funding the trust
must be someone other than the person with a
disability.
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