Background and History

To appreciate Pooled Special Needs Trusts one needs to understand the Special Needs Trusts in general.  Special Needs Trusts are basically arrangements where funds can be held for a SSI or Medi-Cal recipient without losing eligibility. The Social Security Administration describes a valid Special Needs Trust as "a trust in which the trustee has full discretion as to the time, purpose and amount of all distributions."  If the beneficiary has no discretion over the distributions, the trust is not counted for SSI or Medi-Cal eligibility.  Keep in mind that Special Needs Trusts by nature mean a loss of control by the trust beneficiary. The Special Needs Trust cannot give cash directly to the beneficiary, but can pay for services and certain exempt resources directly without causing a loss of benefits eligibility.

In 1993, Medicaid worked through Congress to establish limits through the Omnibus Reconciliation Act of 1993 to discourage the use of Medicaid Qualifying Trusts and other devices to assist seniors to qualify for nursing home services. Within 42 USC 1396 p,  sections D  4 C Congress granted specific exceptions for SSI or Medicaid recipients to enable them to place their own funds them in a self settled Pooled Special Needs Trust for their own benefit without losing eligibility. Essentially, OBRA 93 caused the utilization of a trust to qualify for Medi-Cal forbidden with certain exceptions.

42 USC 1396 p (d) for our purposes reads as follows;

(4) This subsection shall not apply to any of the following trusts:

(C) A trust containing the assets of an individual who is disabled (as defined in section 1382c (a)(3) of this title) that meets the following conditions:

(i) The trust is established and managed by a non-profit association.

(ii) A separate account is maintained for each Beneficiary of the trust, but, for purposes of investment and management of funds, the trust pools these accounts.

(iii) Accounts in the trust are established solely for the benefit of individuals who are disabled (as defined in section 1382c(a)(3) of this title) by the p

The Foster Care Independence Act of 1999  was enacted which added Section 1613 to the Social Security Act which imposed the OBRA 93 transfer penalties on the SSI program by incorporating the trust exemptions under 42 U.S.C. § 1396p(d)(4)(C).

Examples Where a Self Settled Pooled Special Needs Trusts Might Be Used

Below are some examples of some of my clients that have benefited from utilizing a Pooled Special Needs Trust.  .

Helen, who is 58 years old, has inherited $60,000 from an unexpected inheritance from her aunt.  She is receiving SSI and Medicaid.  Loss of her Medicaid would cause her great hardship.  She has no parent or grandparent alive, and to establish a Self Settled Special Needs Trust would require a court order. Setting up a court ordered Special Needs Trust would cost $5,000 to $7,000, take 3 months or longer, and would require costly court supervision. Helen could instead join a Pooled Special Needs Trust at a fraction of the cost, have professional administration of the account, and avoid court supervision.

John has Multiple Sclerosis, has a residence worth $400,000.  He wants to sell the home and purchase a smaller residence for $100,000. John would like to use the balance to pay for his care. Both SSI and Medicaid allow a Benefits Recipient to own a residence of any value, but if John retains more than $2,000 in his own bank account, he will have a loss of eligibility.  If John does not have a parent or grandparent alive, he would be faced with a costly legal procedure to authorize the establishment of a Self Settled Special Needs Trust.  John could put the balance of the funds in a Pooled Special Needs Trust and then use the account to pay for his care that is not covered by Medi-Cal. If the trust pays for his attendant care directly, there will be no loss of his benefits.

Jane is the recipient of a civil rights settlement totaling $50,000. Her wish is to use the funds to go to law school with the hope that someday she can get off public benefits. She placed her funds in the Pooled Special Needs Trust, and the trust is paying her tuition and buying her books. Her goal is to get a job with good medical benefits and not be reliant on public benefits for the rest of her life.

Sam is 67 years old and has become disabled because of a work related injury.  He is receiving the maximum SSI, and Medi-Cal. Sam is going to receive an award of $64,000.  John is receiving Medically Needy Medi-Cal and feels it is unlikely that he is going to need to be in a nursing home so long as he has dependable attendant care.  A Self Settled (d) (4) (A) Special Needs Trust is not an option because he is over the age of 65. The Pooled Special Needs Trust will pay for his attendant care directly.

Albert has Cerebral Palsy and receives SSI, Medi-Cal and Section 8.  He inherited $120,000 directly from his father.  He wants to use the funds to purchase a residence, and through a program offered by Fannie Mae called HomeChoice he qualifies for a 3% loan, and can use his Section 8 Voucher towards payment of the mortgage.[i]  He estimates that it will take 9 months to qualify for the program. Albert places his funds in a Pooled Special Needs Trust and uses $80,000 towards a down payment. The remaining funds are retained to pay for maintenance.