What Is A Pooled Trust?

In the highly competitive environment that prevails today literally in every nook and cranny around us, merely hard work is often not enough to propel us towards success. Rather, having all the requisite information and working in a manner that is smart is much more useful. This applies to just about everything, and of course especially more so to income and savings.

When it comes to planning for the future, particularly in terms of savings and health care, it is pertinent that we employ far-sightedness. Here is everything you need to know about a pooled trust that can help you make an informed financial decision:

A Pooled Trust – What Is It Exactly?

A pooled trust is labeled as such since it is administered and managed by an organization that is not-for-profit. For every beneficiary who deposits resources into the trust, a completely distinct and separate account is opened. However, for all major purposes such as investment as well as management of all the funds that have been deposited by the beneficiaries, the resources are gathered or “pooled” together.

When Does a Pooled Trust Come In Handy?

A pooled trust is a particularly handy one for those individuals who are availing benefits from say, Supplemental Security Income (SSI), and Medicaid. While these programs are comprehensive enough in themselves as they have been meticulously designed in order to cater to the requirements of those who need financial assistance, there might still be in need of certain benefits not being catered to by these programs.

One of the pre-requisites of such programs as Supplemental Security Income and Medicaid is that the beneficiaries ought to be poor. Hence, the downside is that when such beneficiaries come into an inheritance say through family members, this can make them lose the benefits they rely on so much.

Other instances that can cause them to lose out on such benefits are the receipt of a large sum of money from any form of settlement or through the accumulation of excess money in a bank account. Even though this money may simply be accumulated with the purpose of being there in instances of dire need. Therefore, through the transferring of all excess assets into a pooled trust, individuals can stay registered with and therefore receive benefits of the mentioned programs as well as retain ownership of their assets.

Advantages of a Pooled Trust

There are numerous individuals and households who fret about not being able to afford long term care if ever needed. There are yet others who have family members that need to be placed in long term care and are unable to do so. Some may simply not have the resources needed to avail the services of a nursing home, while others may have just enough to disqualify them from the cutoff for Medicaid, yet not enough to be able to fully afford it.

Being able to deposit excess resources into a pooled trust and thereby qualifying for Medicaid or Supplementary Security Income, is one of the biggest benefits of a pooled trust because the assets that are part of a pooled trust are excluded from the calculations for Medicaid eligibility. A pooled trust is a prime example of the multitudes of benefits that come along with planning ahead.

While this is probably the largest benefit of a pooled trust, and one that holds sway for a great many people, this is definitely not the only one. Other invaluable benefits of a pooled trust include:

  • A distinct and traditional Special Needs Trust requires considerable resources. A pooled trust provides an affordable option for doing the same.
  • One of the major concerns for trusts is whether the trustee is qualified and appropriate for the purpose of funds management. With a pooled trust this very real apprehension is totally removed, as it is managed by a non-profit organization.
  • A pooled trust may also operate at a higher level of efficiency. This is because the management of the trust is bestowed to individuals who are experts in the fields.
  • For the most part, the directors of such trusts are those that are relatives of people who are living with disabilities. This fact makes them more attuned and sympathetic to the needs and requirements of such individuals, thus ascertaining in quite a major way their commitment and loyalty.

Disadvantages of a Pooled Trust

The essence of a pooled trust is that the funds or excess assets deposited by beneficiaries are pooled together for the purposes of management and investments, as well as all other related decisions that may need to be taken. From this arises the first element that may be considered as a disadvantage by some.

Since the trust is basically an accumulation of several smaller trusts or sub-trusts, the decisions that pertain to management and investment aren’t made considering each sub-trust. Rather, decisions are taken considering the best course of action for all the funds at the disposal of trustees. Therefore, the element of a unique and tailored approach is lacking.

Further, the trust in itself is only an accumulation of resources. It will perform well to render benefits only if those in charge have the qualification and experience to do so. Since those in charge of management and investment decisions would obviously change from time to time, these changes can go either way as far as it relates to the performance of the fund. Since pooled trusts are for the most part inflexible, the beneficiary has no choice but to stick it out regardless of the way the trust is performing.

After the death of the individual contributing resources to a pooled trust, any assets remaining aren’t returned to family members. Rather, these resources are transferred to the state as a way of reimbursement for the benefits that have been availed by the beneficiary. This, of course, is considered a great disadvantage but pertains only to the family and not to the beneficiaries themselves.

Bottom Line

Investing in a pooled trust is a monumental decision as it may chart the course of your life. Therefore, what is most important is to undertake as thorough research as possible before committing to a decision. After all, it’s your future that’s at stake here.