Pooled Income Trust (Special Needs Trust)
The term pooled income trust refers to an arrangement that allows individuals to become eligible for public assistance, while maintaining their assets. Pooled income trusts provide supplemental income to beneficiaries to address their unmet needs.
Also referred to as a special needs trust and a pooled trust, a pooled income trust is a planning tool that allows individuals to become eligible for government programs, such as Medicaid, while preserving their wealth to help pay for supplemental needs.
Under federal law, the assets placed into, and income derived from, an ordinary trust is counted against an individual when determining their eligibility for programs such as Medicaid. A pooled trust will contain the assets of more than one person. These assets are professionally managed as one fund; however, subaccounts are maintained for the benefit of the individual donors.
Under federal law, a pooled trust must be maintained and established under certain conditions, including:
- The assets placed in the account must be managed together; however, subaccounts must be maintained for each participant.
- The trust must be established and maintained by a not-for-profit organization.
- The subaccount can only be used by a beneficiary that is also disabled and it must be created by the disabled person, their parent, grandparent, guardian or a court of law.
- Upon the death of the beneficiary, the assets remaining in the trust will be paid to the state up to the amount of medical costs paid by the state's Medicaid plan on behalf of the beneficiary.
Examples of expenses eligible for payment under a pooled income trust include:
- Clothing, food, and shelter as well as entertainment and travel expenses.
- Utilities, rent, and property taxes associated with maintaining a home.
- Private and supplemental nursing care.
- Procedures not provided by government-sponsored medical assistance programs.