What Is a Pooled Special Needs Trust?

DEC. 18, 2020

By Joanne Marcus, MSW

1 in 5 adults have a mental illness and nearly 1 in 25 adults have a serious mental illness. When an illness impacts the individual’s ability to work or manage their finances, a plan is necessary to ensure careful management of funds. There are multiple options for future financial planning for loved ones with mental illness, but one such option is a Pooled Special Needs Trust (PSNT).

This article provides information about PSNTs, the benefits of using a PSNT, what can be paid for by the trust, and the steps to establish one.

 

Understanding PSNTs

A PSNT is administered by a nonprofit organization that manages and invests funds for people with disabilities. The funds are used to enrich the quality of life of the beneficiary and to protect government benefits, such as Supplemental Security Income (SSI) and Medicaid. The funds are pooled together for investment purposes, which reduces administrative fees and provides an opportunity for growth.

There are two types of trusts:

  1. Third-Party: frequently established by a parent or a relative and can be funded with a will, insurance policy or gift.
  2. First-Party: established with the beneficiary’s own funds, usually as a result of a personal injury or workers’ compensation award or social security back payment.

For families that are setting up a third-party PSNT and planning for the future, it is helpful to ask the following questions:

  • What financial support will my loved one need when I am no longer here?
  • Will my loved one be able to enjoy the same quality of life that they have now?
  • Who will administer the trust and ensure that the funds are managed and used for the benefit of my loved one?
  • How can I ensure that eligibility for Medicaid and SSI benefits will not be jeopardized?
 

The Benefits of a PSNT

  • Affordable, comprehensive and specialized services: A PSNT administrator specializes in working with individuals living with mental illness and their representatives. PSNT staff members often have a degree in social work and years of experience.

  • Oversight and impartiality: professional trust administration ensures the trust is used for the sole benefit of the beneficiary, and the funds are spent sensibly, properly invested and disbursed.

  • Protection of public benefits eligibility: PSNT staff members are knowledgeable about the rules governing Supplemental Security Income (SSI) and Medicaid and ensure these benefits are not jeopardized.

  • The funds are pooled together, which reduces administrative fees and provides an opportunity for financial growth.

  • There is fiscal oversight to ensure that funds left for the beneficiary meet their intended goals.
 

What Can the Trust Pay For?

Disbursements are not permitted for food or shelter if the beneficiary receives SSI but can pay for expenses that enrich the quality of life of the beneficiary.

Examples include:

  • Medical/dental services (not covered by insurance)
  • Computer/internet services
  • Pre-paid burial expenses
  • Assistive technology/education expenses
  • Clothing and transportation
  • Caregiver services
 

How Can I Set up a PSNT?

  1. Determine what will fund the trust: Inheritances, life insurance policies, employer benefits and gifts from friends and family are all common ways to fund a PSNT.

  2. Professional advice: The laws pertaining to Pooled Special Needs Trusts are complex. It is therefore essential to seek advice from estate planning attorneys, financial planners and case managers — they are there to help guide you. Each can give their perspectives on long-term financial planning that will best suit your situation. Be sure to discuss their expertise in special needs trusts and how a PSNT could benefit your individual situation. One potential resource is the Special Needs Alliance, an organization comprised of attorneys with specific expertise in financial planning for people with disabilities.

  3. Find the right trust administrator: It is important to find an administrator you can trust. Look for an administrator who is sensitive to people living with mental illness, ensures funds are professionally managed, has a procedure for reviewing disbursement requests fairly and handles them promptly. Compare fees, funding requirements and remainder policies.

  4. Ask questions and do your research: Planning for the future requires special attention and consideration. Decisions should reflect concerns and hopes for the future as well as thoughtful planning for the resources that will be available to address an individual’s needs.

With its many benefits, a PSNT can be a convenient and cost-effective option for those living with mental illness.

 

Joanne Marcus, MSW, is the Executive Director of Commonwealth Community Trust (CCT), a 501(c)(3) nonprofit organization that administers affordable and efficient pooled special needs trusts. Founded in 1990, CCT has served more than 1,800 clients nationwide. With expertise in benefits protection, the CCT staff provides responsive trust administration services in a cost-effective and compassionate manner. For more information about CCT, contact Joanne at jmarcus@trustcct.org or 804-740-6930. Visit www.trustCCT.org for information and additional resources.

Note: This blog is not an endorsement of any specific organization or its services.

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