Pooled “Special Needs” Trusts
By Mark S. Reckman
A trust is a special fund created for the benefit of someone who cannot or should not have unlimited access to large sums of money. Trusts are created by a written agreement – a trust agreement – which appoints a trustee to manage the funds. The agreement spells out who the money is held for, how it should be invested and what the money should be used for.
Generally, a trust agreement sets up a single trust fund for a limited purpose. However, setting up and managing a Trust can be expensive. So, many years ago someone came up with the idea to combine several small trusts into a single “pool” for several beneficiaries. This reduces the cost of the paperwork and the administration of the trust. Equally important, combining the funds improves the return on the investment and usually reduces the cost of the investment advisor.
Back in 1996, the federal government passed a law authorizing the use of “pooled trusts” for the benefit of disabled persons receiving “needs based” benefits like SSI and Medicaid. These are called Special Needs Pooled Trusts. Money placed in these special “pooled” trusts are not “counted” as an available asset by SSI or Medicaid. To qualify, these pooled trusts must be set up by a non-profit organization governed by a Board of Trustees.
This creates a significant opportunity for:
(1) Any person who wants to leave a modest amount of money (for example, $35,000) to a disabled person who is receiving or may receive SSI or Medicaid benefits.
(2) A disabled Medicaid recipient who receives a modest amount of money as a result of inheritance, or personal injury reward. This money would destroy his or her Medicaid eligibility. This money can be placed in a pooled trust for his or her care and his or her Medicaid benefits will continue, uninterrupted.
Ohio now has three pooled “special needs” trusts to choose from:
The Community Develop Fund is based in Cleveland. It is the oldest and largest of Ohio’s pooled trusts. They offer two variations of the pooled trust concept. With questions, contact them at: 1275 Lakeside Avenue, Cleveland, OH 44114-1132, (216) 736-4540 or www.cfmf.org.
The Dayton Foundation set up its own Trust to target southwestern Ohio. They can be reached at: 2300 Kettering Tower, Dayton, OH 45243, (937) 222-0410, or www.daytonfoundation.org.
The newest addition to available pooled trusts is the Ohio McGivney Special Needs Trust. This was set up by the Knights of Columbus with a special twist. In this trust, when a beneficiary dies, any balance remaining in that person’s account is given to the charity of his or her choice. They can be reached at: 3111 W. MLK Blvd, Suite 100, Tampa, FL 33607, (813) 350-7883 or www.mcgivneytrust.com.
All three of these trusts are operated by approved charities. All of them engage professional money management firms. Distributions from all three trusts are governed by the same rules. Distributions are limited to non-essential services. In other words, this money cannot be used for food, shelter, and medical care. See the inset box with this article for a partial list of approved expenditures.
Examples of Non-Essential Services:
Hobbies, sports, recreational or other activities/events
Nonessential food and clothing
Upgrade to a private room
Exercise and special medical equipment
Prepaid burial expenses up to 4500
Visiting friends or expense for a companion
Private use of home electronics and equipment
Travel and vacations
Subscriptions and membership dues
Vocational rehabilitation
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admin @ January 1, 2008