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 What is a Pooled Trust?

In general, a trust is a special fiduciary arrangement that is formed between three parties: the settlor (i.e., the creator of the trust), the trustee (i.e., the person who oversees the trust), and one or more trust beneficiaries (i.e., the recipients of the trust).

The main purpose of a trust is to provide legal protection over the property and assets held within a trust. However, a trust may be used to accomplish many other objectives. Thus, it is very important that you are careful in selecting the formation of a trust since there are many different types of trusts and each one will have its own requirements.

For example, a pooled trust is a specific subcategory of a special needs trust. Pooled trusts are aptly named for the type of trust arrangement they create wherein multiple parties or individuals “pool” together their assets into one large trust account.

Despite the pooling of resources, each person who contributes to a pool trust will be given access to their funds through a separate “sub-account”. The sub-account allows a person to retain some level of control over their individual assets. The reason as to why the assets are initially aggregated is to make it easier for the parties overseeing the trust to manage, invest, and administer the funds.

Finally, one last important fact to keep in mind about pooled trusts is that they are typically established and maintained by legitimate non-profit organizations. As such, a person will normally need to decide to join an already existing pooled trust, as opposed to creating one themselves as they would with other types of trust.

Thus, if you intend to opt-in to an already established pooled trust, just make sure it is being used for the reasons that prompted you to join a particular pooled trust (e.g., retirement needs or disability benefits).

What are Some Requirements for Forming a Pooled Trust?

Pooled trusts are created in accordance with various federal laws. While these trusts generally do not impose an age requirement in order to join them, there are many guidelines that must be complied with when forming a pooled trust.

Some basic requirements for forming or joining a pooled trust include:

  • A pooled trust must be established and managed by a valid non-profit organization;
  • The assets in a pooled trust must be pooled together for administrative and investment purposes in a way that conforms to the terms of the trust documents;
  • Each individual must then be granted access to their own separate sub-account, which can only be used for their own benefit;
  • A sub-account can be created by the individual themselves or by a parent, grandparent, legal guardian, or the court; and
  • In the event that the owner of the sub-account dies, the pooled trust must pay the remaining amount of their assets to the state that is equivalent to the amount of medical expenses that the state paid on behalf of the individual under their benefits plan.

In addition, the funds in an individual’s pooled trust sub-account can only be used to cover certain costs, such as:

  • Rental expenses like rent payments or property repair fees;
  • Some travel and entertainment expenses;
  • Supplemental home care services (e.g., an overnight nurse);
  • Geriatric care providers;
  • Attorneys’ fees, court costs, or fees for legal guardians;
  • Home expenses (e.g., property taxes, utilities, etc.);
  • Medical procedures or treatments that are not already covered through governmental assistance;
  • Living costs, such as clothing, food, or shelter; and/or
  • Various other life expenses that are not offered via a governmental assistance program.

In contrast, there are also some expenses that the funds in an individual’s pooled trust sub-account can never be used for, such as payments that are made and are not for the benefit of the owner of the sub-account. Some other types of costs that an individual can be penalized for if they use their funds for inappropriate items include:

  • Alimony payments and/or child support;
  • Payments to reduce overdue debts;
  • Income tax balances;
  • Health insurance premiums for other parties or payments for the entire cost of a shared household;
  • For burial purposes that do not satisfy the requirements contained in a state statute;
  • Vacation costs for family members or close friends (e.g., travel, hotel expenses, recreational activities, etc.); and/or
  • Contributions made to loans, work payments, or gifts that are being used for someone else and not the individual themselves.

Lastly, depending on the terms of the pooled trust and the individual’s circumstances, it may also be helpful to draft a letter of intent. A letter of intent simply provides directions for outside parties like family members and friends, so that they know how the money in the trust should be used and how to take care of the beneficiary in the event that something happens to their primary caregiver.

What Happens if I Have a Dispute Over a Pooled Trust?

Unlike many other types of trusts, a pooled trust is typically well-established and properly managed by a legitimate non-profit organization. This means that there is less of a risk that a pooled trust dispute will arise. However, just because the circumstances dictate that there should be fewer reasons for a pooled trust dispute to occur, does not necessarily mean that will be the case for every individual.

For instance, a dispute over a pooled trust can easily happen when there is some kind of unlawful conduct associated with the trust, such as a mistake, clerical error, misrepresentation, or fraud issue. Another common example of when there might be a dispute over a pooled trust is if an elderly citizen or an incapacitated individual was scammed into joining a pooled trust.

Generally speaking, scams involving pooled trusts occur more often than they should. Thus, it is very important that an individual only participates in a pooled trust that is founded by a reputable non-profit organization. A lawyer may be able to assist in determining whether a certain pooled trust is connected to a bona fide organization.

Do I Need a Lawyer for Help With a Pooled Trust?

If you have any questions or need assistance with joining a pooled trust, then it may be in your best interest to contact a local trust lawyer for further advice. An experienced trust lawyer will be able to determine if a pooled trust is the right type of trust to use based on your situation. If it is, your lawyer can assist you in drafting the trust documents and making sure that they contain the proper language.

On the other hand, if your lawyer decides that a pooled trust is not the right fit for you, they will be able to recommend some other estate planning options. Regardless of the type of trust you end up setting up, a qualified trust lawyer will already be familiar with trust laws and know which requirements that your particular trust must satisfy.

In addition, if you have any questions or concerns about pooled trusts, your lawyer will be able to provide in-depth answers and resolutions. Also, if you are being sued by another party or need to file a lawsuit involving a dispute over a pooled trust, your attorney will be able to help you prepare and file the necessary legal documents, as well as will be able to represent your interests before the court.

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