A pooled special needs trust is the only form of a self-funded special needs trust someone who is 65 or older can use. Self-funded means exactly what it sounds like. If I put my money into a trust for my benefit, it is self-funded. If you put your money into a trust for your grandchildren’s benefit it is a third-party trust.
What good is a pooled special needs trust? If your client is seeking TennCare benefits for a nursing home, they are going to have to spend down their resources to less than $2,000. Putting money into a special needs trust means it is not counted toward the $2,000 limit, but can still be spent for the benefit of the applicant. If the client has no family, the money to pay for extra expenses needs to come from somewhere, and a special needs trust can be that source of money.
If your client is married, the spouse is going to be dramatically affected by the spend down. The spouse may have to spend down as well. Not only will the spouse not have the resources they need, their income from the spouse seeking benefits will be drastically reduced. This means the attorney helping them needs to find every ethical way possible to reduce the monies the spouse and family will have to pay for the person in the nursing home. TennCare pays most of the expenses of a nursing home, but not all.
Pullups for incontinence are not generally provided by nursing homes as part of their TennCare charge. The $30 to $50 per month personal allowance of a resident is usually not enough to pay for them. A special needs trust can. Then there are the charges for hair cutting and styling. Personal phones may cost extra, as may TV service in the room. Buying a TV that will fit into the room and not get knocked over by the residents, is a cost a special needs trust can pay. The resident may even want a private room instead of a roommate. A pooled special needs trust allows the person seeking benefits to use some of their money to pay for future expenses instead of their family. In other words, a self-funded special needs trust puts the resident’s money aside to pay for their expenses, while still spending down to less than $2,000.
Beyond what a special needs trust can pay to take some financial burden off the family, a pooled trust can take another significant burden off the family. The rules for operating a special needs trust are complex. Breaching those rules, even unintentionally, can endanger benefits eligibility for the client. A few stray payments of cash to the beneficiary to have some shopping money might ultimately cut off benefits for that person. A family member trustee may not have the time, ability, or energy to go through all the myriad federal rules about special needs trusts. The family member may not have the financial resources to pay a bond. The pooled trust can take care of all of those issues.
Why is the source of funding important? Because the source of funding determines what rules govern the money remaining in the trust after the beneficiary dies. If you put your money in a pooled special needs trust, when you die the government is entitled to “an amount equal to the total amount of medical assistance paid on behalf of the beneficiary.” 42 U.S.C.A. § 1396p. The pooled share has to pay only if there is enough to pay the whole bill. This is different than an individual trust where it has to pay, even if it does not have enough to pay the whole bill. So, even if your client is under 65, there may be an economic advantage to placing client money into a pooled trust because of the potential for some monies going to the family.