During the past twenty plus years representing children with disabilities in personal injury cases, I encountered a common problem. After a good settlement or verdict was obtained and a special needs trust was established for the child’s money, I would inevitably receive calls from parents who were frustrated by their efforts to interact with the trustee to obtain money for necessities for their child. After all, the SNT was set up to provide for the child’s necessities while preserving the child’s Medicaid or SSI benefits. Why should the parent feel belittled when he or she tried to work with the trustee on behalf of the child? In each of these cases, the trustee was a bank or other financial institution that was not well suited to dealing with families.
This problem was alleviated when I discovered the Commonwealth Community Trust (CCT) and other non-profit organizations like it that administer pooled special needs trusts. The big difference, in my experience, was the trustees were now trained social workers who empathized with the family. That’s not to say that the money is managed by social workers. In the case of CCT, the Trust Company of Virginia, a well-established financial institution, manages the funds. The families, however, deal directly with the social workers.
What is a Pooled Special Needs Trust?
A pooled Special Needs Trust (SNT) is administered by a nonprofit organization that is governed by a volunteer board of directors. Pooled trusts are beneficial when the person with a disability comes into a sum of money or when a family member wants to provide financially for their loved one with a disability. The trust also preserves benefits for clients who receive Medicaid and Supplemental Security Income (SSI). In order to qualify for public means tested benefits, the disabled individual can have no more than $2,000 in cash assets. A monetary gift, settlement, or inheritance will disqualify the beneficiary from receiving the much-needed assistance.
“A special needs trust means that the beneficiary can still receive the public benefits that are crucial to meeting their basic needs, but also have the trust funds to maintain a healthy and enjoyable quality of life”, said Joanne Marcus, executive director, Commonwealth Community Trust.
A trust fund can be used to purchase a wheelchair, eyeglasses, hearing aids, furniture, electronic equipment or clothing, and to pay for dental care, education, recreation, travel and transportation.
Two Types of Trusts
The third-party SNT is funded by a third party, usually a close family member, and can be coordinated with the family’s estate plan. The SNT holds funds that the grantor leaves for the sole benefit of the beneficiary.
The self-funded Pooled Disability Trust (PDT) is funded by the person with a disability, generally through a personal injury award. This trust is sometimes referred to as a Medicaid payback trust as people who receive Medicaid will have to pay back the state(s) for medical expenses incurred on their behalf with funds remaining in the trust upon the death of the beneficiary. This trust is codified in the Omnibus Reconciliation Act of 1993 (OBRA ’93) at 42 U.S.C. :1396 (d) (4) (c).
Advantages of a pooled special needs trust include:
• lower administrative costs and greater opportunity for investment potential.
• funds are pooled for investment purposes; individual sub-accounts are maintained.
• staff is experienced and knowledgeable about the needs of people with disabilities and the rules
that will protect SSI and Medicaid benefits.
• there is usually no minimum amount required to establish the trust.
Role of the Trustee
The master trust agreements allow the trustee to administer the trusts under the umbrella of the “master.” Both the self-funded PDT and the third-party special needs master trust agreements are generally written by an estate planning attorney with expertise in this area of the law and signed by the board of directors.
The beneficiary of the trust is the person for whose benefit the trust was created; however, the beneficiary does not own the funds in the trust. The trustee has the legal ownership of the trust funds. Although the beneficiary, or someone acting on behalf of the beneficiary (e.g., designated advocate), has the right to request payment to vendors by the trustee, the trustee is not required to approve the request. At the same time, however, the trustee has a responsibility to ensure that the trust funds are available for supplemental needs that will improve, to the extent possible, the quality of life of the beneficiary.
The trustee has the duty to be prudent. It is the fiduciary’s responsibility to safeguard the trust property for the beneficiary. The beneficiary of the trust and their legal representative (such as an agent under a durable power of attorney, guardian or conservator) and the advocate are entitled to an accounting from the trustee.
The trust has been drafted in such a way that provided the trustee follows certain guidelines, the beneficiary will continue to be eligible for Medicaid and SSI. Although the recipient of the trust does not have legal title to the trust funds, the recipient is what the law calls the “beneficiary” of the trust. This means that the Department of Social Services for Medicaid recipients and the Social Security Administration for SSI recipients are notified of any deposits made to the trust and of distributions made from the trust. Generally, the following distributions would impact SSI benefits: food, mortgage (principal and interest), rent, real estate taxes, gas, electricity, water, sewer, and homeowner’s insurance and cash payments to the beneficiary. There are additional rules for both Medicaid and SSI that are complicated and rigorous.
The trustee manages and invests the funds for the trust and approves disbursements that are for the sole benefit of the beneficiary. The trustee is knowledgeable about government agencies providing benefits and staying abreast of changing regulations.
Any distributions from the trust must be for the sole benefit of the beneficiary, the person for whom the trust is intended to benefit. Distributions from the trust must be limited to those that benefit only the beneficiary and not any other person. If a trust provides benefits to other persons, then it will not be considered a special needs trust, it will become a countable resource, and the beneficiary may lose government benefits.
Role of the Advocate
An advocate is designated by the grantor (individual funding the trust) and is generally someone close to the beneficiary such as a family member, guardian, conservator, caseworker, power of attorney or the beneficiary. The advocate works closely with the trustee in submitting requests for disbursements that will maintain the quality of life for the beneficiary. The grantor can provide a vision for the trust, and there are forms available to assist in this.
Who to Call?
Once you are ready to establish the trust, you can contact nonprofit organizations like Commonwealth Community Trust who can serve as the trustee. Because the regulations are complex and constantly changing, it’s important to select an attorney or nonprofit that specializes in these types of trusts.
Commonwealth Community Trust (CCT) is a national nonprofit organization established in 1990 by concerned citizens and parents of children with disabilities to provide an effective and affordable administration of third party Special Needs Trusts and self-funded Pooled Disability Trusts. For trust documents including Joinder Agreements, Objectives of the Trust, Attorney Checklist and FAQ, go to:www.commonwealthcommunitytrust.org or call toll free: 888-241-6039.
Posted to the Injury Board Blog Network by Michael Phelan, personal injury attorney and member of the Board of Directors of Commonwealth Community Trust.
BACK TO TOP