How to Prepare Your Client for a Trust Administrator

By Joanne Marcus, MSW, President and CEO of Commonwealth Community Trust (CCT)

You have won the case for your client; however, the procedure for disbursing the settlement funds may not always be as simple as writing a check. When working with clients who have special needs or who are receiving means-tested public benefits such as Medicaid and Supplemental Security Income (SSI), the next step in the settlement process may be to recommend a pooled special needs trust organization to administer your client’s well-deserved funds. If your client with special needs receives the settlement directly, they would be over the allowable resource limit, jeopardizing their public benefits. In the case that a pooled trust is your recommendation, it is important to prepare your client for what to expect.

The pooled special needs trust administrator has the responsibility to review each client’s disbursement requests to ensure the following criteria are met: (1) The request protects the client’s public benefits, (2) the request is for the sole benefit of the beneficiary, (3) the disbursement is prudent, and (4) the request adheres to the objectives and budget laid out for the use of the funds.

Understanding that the role and responsibility of a pooled trust administrator is discretionary, and that the administrator must make decisions to serve in the client’s best interest is important to convey to your client ahead of time.

Given the responsibilities of a pooled special needs trust administrator, there is an internal process that each disbursement request goes through to make sure the criteria above are met, and appropriate documentation is received. Clients will need to take this processing time as well as shipping time into account to ensure their payments are made on time.

The trust administrator may offer tools to the client that increase efficiency for the disbursement process. A preloaded debit card option may be available that links the beneficiary’s trust account to a credit card set up in his or her name. The card is loaded for the beneficiary to use in place of a check and for the ease of making purchases such as movie tickets, gas and other day to day living items. Some trust administrators offer online access for clients to view their balance, make disbursement requests, download past statements, and more.

Examples of allowable disbursements include, but are not limited to: assistive technology, medical devices, services not covered by insurance, clothing, household items, care providers, cable, internet, or phone bills, and much more. If a client is receiving SSI, disbursements for food or shelter related expenses for which SSI is already earmarked to pay would not be allowable, unless under extenuating circumstances but could result in a reduction of benefits. In addition, since disbursements must be for the client’s sole benefit, purchasing gifts for someone other than the beneficiary would not be permitted. If the client shares a bill with other people, their trust will be used to pay only the beneficiary’s portion.

Often, clients may have credit card bills they wish to pay off or wish to use their trust funds to repay borrowed money to another individual. Please advise your client to save receipts as receipts will be required in order to avoid appearing as if the trust is making a distribution to someone other than the beneficiary, violating the sole-benefit rule. Additionally, if your client is on SSI, and the debt includes payment food or shelter related expenses, we will subtract those amounts to avoid jeopardizing benefits.

Additionally, in cases where your client may be interested in purchasing a house or vehicle with their trust funds, you may advise that these are allowable purchases. However, please reiterate to your client the necessity of getting in touch with the trust administrator at the beginning of the process as there is specific documentation required during the distribution procedure to assure that the purchase will be approved.

Funds in a pooled special needs trust are pooled for investment purposes and records are maintained for each individual subaccount. Since the funds from all subaccounts are pooled together, administrative fees are reduced. Clients will see the market fluctuation reflected on their financial statements, as well as administrative fees. It is important to explain the while the investments have the potential for growth that over time it is possible that your client will see dips and rises on their statements as the market fluctuates. It can be a surprise to clients when they see their statement if they do not know ahead of time that their funds are invested.

Family members or friends of the client may wish to deposit funds into the subaccount. However, there are two types of pooled trusts based on whose money funds the trust. Only the client’s own money can go into the first-party (or self-settled) pooled trust. If a family member wishes to set up a trust with their money, they will need to explore the third-party pooled trust option. Additionally, the client cannot place their SSI checks into their trust, as this would jeopardize benefits.

A pooled special needs trust is a wonderful option for your client’s settlement funds in the case when they have special needs and are receiving means-tested benefits. While the trust administrator must follow certain guidelines when disbursing the client’s funds, they are doing so with the client’s best interest in mind while protecting benefits. Explaining the role of the trust administrator to your client is an important step in transitioning them to working with a pooled trust.

Published by the National Medicare Secondary Payer Network as their May Featured Article