Pooled Trust Law and Legal Definition

Under federal law, any assets held in trust will be counted against recipients of public benefits when those benefits have asset and income limits. Any portion of the trust funds that can be reached by the beneficiary will be counted as an asset, and any portion of the interest that could be paid out will be counted as income, which may result in disqualification for public benefits. In the case of someone who is applying for benefits, the application for public benefits will be denied.

Medicaid and SSI law permit "(d)(4)(C)" or "pooled trusts" for beneficiaries with special needs. Such trusts pool the resources of many beneficiaries, and those resources are managed by a non-profit association. Unlike individual disability trusts, which may be created only for those under age 65, pooled trusts may be for beneficiaries of any age and may be created by the beneficiary herself. In addition, at the beneficiary's death the state does not have to be repaid for its Medicaid expenses on her behalf as long as the funds stay in the trust for the benefit of other disabled beneficiaries. (However, some states require reimbursement under all circumstances.) Although a pooled trust is an option for an individual over age 65 who is receiving Medicaid or SSI, those over age 65 who make transfers to the trust will incur a transfer penalty.

Pooled trust programs vary by state. There may not be a pooled trust program in your area or state. Many states have one or more pooled trust programs, while other states do not have any. Families set up a sub-account with a trust program. The program then pools these funds to manage and invest as one account. Pooling reduces administrative fees and increases the principal for investment purposes. Pooling may also allow access to better quality investments that pay a higher rate of return than what is available for a small individual trust. Beneficiaries of these trusts usually receive earnings based on their share of the principal. Accounting methods can separate out each person's account. Some states actually use separate trust agreements for each beneficiary, but pool all funds for investment.