What Is a Pooled Trust, and How Can It Protect My Benefits?

Asian woman who uses wheelchair looks up from the book she is reading in the park.In certain situations, beneficiaries of programs like Supplemental Security Income (SSI) and Medicaid may be at risk of losing their benefits. For example, if they come into an inheritance or receive money in their own names from an accident settlement, their income may exceed the thresholds set by these government programs.

SSI and/or Medicaid recipients in such a situation may utilize a pooled income trust to avoid becoming ineligible for these public benefits.

What Is SSI? What Is Medicaid?

Supplemental Security Income (SSI) a federal program that provides funds to people living with disabilities and limited means. These funds are intended to help individuals pay for basic needs.

In most cases, individuals who qualify for SSI are automatically eligible for Medicaid. Medicaid, another federal benefits program, provides health coverage to low-income individuals as well as access to Medicaid-based services, such as the Home and Community Based Services Waiver.

SSI and Medicaid Asset Limits

SSI and Medicaid are both “means-tested” benefits programs. This means an applicant or beneficiary must not exceed certain income and asset or resource limits to qualify for these benefits. Typically these individuals include those over 65, those eligible for SSI, institutionalized persons, disabled persons, and the blind. A pooled trust can help a person stay within these limits and continue receiving benefits.

Note that while eligibility for SSI and Medicaid often go hand in hand, Medicaid is a state-by-state administered benefit. As a result, some states have different income resource limits for Medicaid benefits than SSI.

In New York, for example, as of 2023, individual Medicaid recipients may have up to $28,133 in resources and $1,563 per month in income. A couple in New York may have up to $37,902 in resources and $2,106 in monthly income. As contrast, Connecticut's Medicaid resource limit is $1,600.

However, these expanded limits do not apply to SSI. To receive SSI in New York, an individual may not have more in countable resources than $2,000 or gross income from work that exceeds $1,913 per month. A couple may have at most $3,000 in countable resources and $2,827 per month in gross wages.

What happens if you come into money that pushes you over one of these limits and you still wish to qualify for the affected benefit? The answer may be to consider a pooled trust.

Pooled Trusts May Be a Solution

Whether a beneficiary is coming into an inheritance that was not left to a Third Party Special Needs Trust, receiving money from an accident settlement, or has merely accumulated too much money in their bank account, a pooled trust may allow them to transfer these funds into a trust where funds are managed for their benefit.

This is more desirable than having to turn over the funds or spend down these funds before qualifying for benefits.

What Is a Pooled Trust?

A pooled trust, also referred to as a (d)(4)(C) trust, is a type of special needs trust established and managed by a nonprofit. Individual beneficiaries create accounts within the larger trust. An individual’s funds in a pooled trust are invested with all the other funds. In other words, the assets of many people with special needs are “pooled.”

Because a pooled trust accepts contributions from many beneficiaries, the trust can make more stable investments and provide additional management services that a plain vanilla special needs trust might not be able to afford. However, each beneficiary’s account remains their own.

Depending on the pooled trust, a beneficiary might work with a social worker or trust advisor to tailor a funds distribution plan that fits their lifestyle. As with an individual special needs trust, funds in a pooled trust are used to supplement a beneficiary’s government benefits. The funds can be used to pay for expenses within certain permitted criteria. Often, these are expenses that supplement or improve the beneficiary’s quality of life.

Beneficiaries of SSI and/or Medicaid looking to spend down their assets to qualify for or remain on government benefits can transfer funds directly into a pooled trust account, often on their own and without having to rely on a family member’s help.

First-Party Special Needs Trust

Another potential option is a first-party special needs or supplemental needs trust (SNT). This type of trust  also called a (d)(4)(A) trust, may be available to SSI or Medicaid recipients who:

  • have come into money or assets,
  • who meet the Social Security Administration (SSA)’s definition of “disabled,” and
  • are under 65.

Due to the passage of the Special Needs Trust Fairness Act in 2016, beneficiaries can establish their own first-party SNT as long as they are mentally and legally competent.

In the case of an inheritance, significant gift, or settlement, a qualifying beneficiary may be able to create their own SNT. This way, they may protect these funds from the reach of Medicaid or the SSA and still receive benefits. SNTs must be drafted carefully and contain certain language to avoid violating various state and federal rules and regulations.

Pooled Trusts vs. SNTs

Both pooled trusts and SNTs are technically “first-party” trusts. However, a pooled trust does differ from an SNT in certain ways:

  • One reason a pooled trust is often considered is because a wider group of people may be able to utilize it. For example, participation in a pooled trust may also be available to a person over 65, unlike first-party SNTs.
  • Another difference is access to investments. Because a pooled trust is dealing with a larger group of beneficiaries, they may be able to invest in products that may not be available to a single beneficiary.
  • Pooled trusts often also employ professional trustees as part of their team. The nonprofit in charge will often be staffed by people very familiar with special needs planning, the changing rules and regulations, and local services. In contrast, an individual SNT is often overseen by a family member, trusted person, or entity who serves as trustee and may be managed differently. An SNT trustee may not have the same experience or access to resources.

Pooled trusts also share similarities with SNTs. Transfers into a pooled trust, like transfers into a first-party SNT, do not prevent a person with special needs from qualifying for government benefits.

Both are irrevocable trusts, and both will have a Medicaid payback provision. “Irrevocable” means contributions cannot be reversed. The payback provision means that upon the beneficiary’s death, any funds remaining in the trust (up to the total lifetime medical assistance paid on behalf of the beneficiary) must be turned over to the Medicaid state that provided benefits.

States often allow the nonprofit that established the pooled trust to retain a percentage of a deceased beneficiary’s account to support its mission. Any funds assets remaining after this reimbursement may go to the remainder beneficiaries.

When to Consider a Pooled Income Trust

While each beneficiary’s situation is different, a person with only a small amount of money may prefer the low cost of a pooled trust. They may also appreciate working with a nonprofit that is finely attuned to the needs of those living with special needs.

If a person prefers to have a family member or trusted loved one manage their funds, then an SNT may be a better fit.

View a list of pooled trusts, organized by state. Speak with your special needs planner to learn more.

Contact us

Questions? Contact us at Belvedere Wealth Partners

Belvedere Wealth Partners
Michael Beloff, CFP®, ChSNC®
Phone: (203) 918-4069