Pooled Trusts: An Introduction and Personal HistoryNAELA Special Needs Summit (2010)
A "pooled trust" -- or a (d)(4)(c) trust -- is unique in several ways: (a) A pooled trust is not restricted to individuals under age 65 (although this is under challenge in certain states); (b) A pooled trust can be established by the individual himself/herself; and (c) The at-death "payback" requirement to satisfy the Medicaid lien at a beneficiary's death is stated differently than the payback requirement of a (d)(4)(A) (or "payback") trust. Trusts in other states other my own state of South Dakota have been established to qualify for the special pooled trust benefits. In 2003, I personally undertook to found a nonprofit entity to manage the trust and to draft the first pooled trust in South Dakota. Once the trust was established, but prior to its first beneficiary being added, I commenced a declaratory action on behalf of the nonprofit entity in order to receive judicial clarification that the trust would actually be respected by the South Dakota Department of Social Services. Eventually, our Circuit Court did confirm the effectiveness of the trust, requiring a few modifications to conform to state and federal law. The court restated and amended the trust to meet these requirements. But the Department has recently departed from the order entered in the declaratory action and started treating trust contributions by beneficiaries age 65 and older as divestments which incur an eligibility penalty.
Perhaps the single greatest benefit to the Pooled Advocate Trust is its ready-made availability to disabled persons. (The same could be said of any pooled trust.) There is no need to draft a qualifying Medicaid trust from whole cloth; the trust is already drafted and a applicant/beneficiary need only complete the joinder agreement and submit it for review and approval to the trustee and nonprofit overseer. With the Pooled Advocate Trust, there is also no minimum trust contribution, the application fee is only $100, and the trustee charges reduced trustee fees. Thus, the trust has proven popular especially with disabled persons of limited means, which is probably just what Congress intended when it enacted the pooled trust rules in 1993.
The South Dakota Pooled Advocate Trust was the first of its kind in South Dakota and probably the first of its kind in the entire country insofar as the "asset protection" provisions it features. Assets contributed to the trust by a disabled person are - subject to limited exceptions - exempt from that person's creditors because the trust qualifies as a "domestic asset protection trust" (DAPT). This can be a great benefit to disabled persons who may be vulnerable to predatory credit card offers or overzealous plaintiffs who want to pursue the deep pockets of a disabled individual.
An additional advantage and unique aspect of South Dakota's pooled trust is the inclusion of a "trust advocate" role. The trust advocate is an individual whose role is to assist the trustee in identifying needs of the beneficiary, and advocating for the beneficiary's best interests. This allows family members to continue to be involved in the administration of the trust, without taking away ultimate responsibility of investments, distributions, and accountings.
Citation InformationThomas E. Simmons, Pooled Trusts: An Introduction and Personal History, Presentation at the NAELA Special Needs Summit, New Orleans, La. (2010)