In What Scenarios Should I Set Up A Pooled Income Trust?

In caring for elderly loves ones, complex emotions, logistics, and financial details must be considered. When making the best choice for an aging parent who is disabled or has special needs, greater research and a higher complexity of decision-making is required. Setting up a Pooled Trust may be a beneficial option; below are a few scenarios that may offer some insight as to why.

What Is a Pooled Trust?

Pooled Trusts are often referred to as “Community” or “Master” Trusts. A disabled person over 65 whose monthly income is excessive (according to Medicaid guidelines) is not eligible for benefits. If those assets are placed, monthly, into an Individual or Pooled Trust, the elderly’s basic living expenses (such as rent and utility bills) are paid by the trust, the individual now becomes covered by Medicaid, which, in turn, covers the medical bills for home care.

Avoiding a Nursing Home

If the family’s choice is to care for the special needs parent at home, this may be impossible to afford if the monthly income is middle or even slightly above-low. Medicaid qualifiers must show an extremely low income, and without the family actually bankrupting itself, the elderly will not qualify. A Pooled Trust can be beneficial for families who are financially not under the rock, but between a rock and a hard place.

Inability to Set up Other Trusts

Setting up an Individual or a Third Party Trust requires attorneys, financial planning experts, and capital. Many families do not have this ability. Pooled trusts are managed by nonprofit organizations that provide those specialists and resources. According to the American Bar Association, “Because assets are pooled together, the trust is able to maximize the return on investment and at the same time reduce the cost of administration and management.”

Trustee Challenges

With Individual and Third-Party Trusts, trustees must comply with fiduciary duties as outlined in the trust; however, on occasion trustees have been known to misallocate funds. Additionally, with a special needs parent, the responsibility is tremendous. Besides financial compliance, the trustee needs to keep abreast of ever-changing legislation and programs available to that population. The nonprofit organization that is chosen to oversee the Pooled Trust will advocate on behalf of the disabled, giving the family one less task in care-taking.

Pooled Trusts are a terrific alternative but may not be advantageous or even available for every family. Consulting with special needs attorneys, financial planners, and nonprofit organizations can offer specific details that can assist in making the best choice for elderly loved ones.


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