Types of Trusts & When to Use Them
There are many different types of trusts and each of them serve a different purpose. This blog series, Types of Trusts and When to Use Them, is going to address a new type of Master/Pooled trust program offered by our charity as a tax exempt non-profit trustee. See our bimonthly blog which will be published on our website and LinkedIn. Please be sure to add one of the authors on LinkedIn to stay current on CPT’s Blog Posts. Master trusts/Pooled Trusts have one Trust instrument with many trust beneficiaries/people with their own trust account. It is important to note that the descriptions provided are generalities and an individual should consult a Special Needs Planning attorney for legal advice to discuss his/her individual circumstances before establishing a trust. However, an individual does not need an attorney to establish a Special Needs Trust (SNT) (SI 01120.203, SI 01120.202).
Before we begin, we need to discuss some basic vocabulary used in this realm. The following definitions have been modified from Administering the California Special Needs Trust: A Guide for Trustees and Those Who Advise Them, written by Kevin Urbatsch and Michele Fuller.
First-Party Individual SNTs are established under the same statutory protection offered by First-Party Pooled SNTs (42 U.S.C. §1396p(d)(4)), but are “individually” drafted by an attorney. This usually results in a higher cost to establish the SNT for the beneficiary. “Pooled” SNTs usually have a significantly lower cost to establish. We normally work with the potential Beneficiary, and often their legal representation, to address their immediate needs and administer the SNT accordingly. CPT’s Pooled Trust Program is the most automated system available. We provide Android and iOS Applications for submitting requests, checks are mailed from different locations nationwide based upon the zip code of the trust beneficiary to assure prompt payments. We use a proprietary secure extranet that posts your requests directly to the bank. Our staff does not have access to your assets. Checks are processed and issued by the bank. Having a non-profit, tax-exempt Charity like CPT as a trustee has notable advantages. The area of professional administration of any SNT is dynamic and should not be attempted by an unqualified individual or organization. If you are considering naming a family member as Trustee please first consider this blog post by The Academy of Special Needs Planners, experts in this area of law: When a Family Member Serves as Trustee – “Fair and Honest Is Not Enough”.
Here are some examples of when our Pooled SNT program may benefit you:
Case 1: My client has SSI, state Medicaid, and a Medicare Set-aside (MSA). Do they need a SNT?
Yes, the client needs to protect SSI and Medicaid. A MSA is a countable asset according to Social Security Administration (SSA) rules. If a MSA account is held inside of a SNT, it will not be considered a countable asset for SSI or Medicaid eligibility. Furthermore, there are no ongoing annual administration fees for MSA’s held in our program.
Case 2: My client receives Social Security Retirement benefits. Do they need a SNT?
It depends. Generally, no. However, if the client is receiving Social Security Retirement benefits and are totally and permanently disabled, the client may also qualify for traditional Medicaid. If he/she is eligible for traditional Medicaid, he/she may benefit from establishing a SNT.
Case 3: I’m receiving an Inheritance and I’m currently on state Medicaid. Do I need an SNT?
Yes, you may benefit from a SNT to protect your Medicaid eligibility. However, it is important to determine if the funds you are receiving from an inheritance is First-Party or Third-Party funds. Contact us to determine if you would benefit from our Third Party SNT trust program which does NOT allow the state to recover Medicaid medical costs.
Case 4: My client is not on SSI or state Medicaid, but is vulnerable do to his/her age, an addiction problem, or an intellectual disability. Do they need an SNT?
Not if currently insured. However, if he/she needs an independent third party low cost trustee to protect their financial well fare and make sure all assets are spent on the beneficiary, we can help. We can protect the future need for needs based government benefits with our Settlement Management Trust program (which will be discussed later in this series). The Settlement Management Trust has springing power to become a Special Needs Trust in the future if the beneficiary ever needs to qualify for needs-based benefits. We offer one of the lowest cost/flat rate trustee fees in the industry.
When in doubt, it is best to consult with your attorney, then one of our Trust Officers by calling 855.278.7681 to determine the best options for you. Calls usually takes about ten minutes depending on specific case dynamics.
DISCLAIMER: The information provided by CPT is for informational purposes only and is intended to be used as a non-legal guide prior to consultation with an attorney familiar with your specific legal situation. CPT is not engaged in the practice of law or in rendering legal advice or counsel. No such legal advice or counseling is either expressly or impliedly intended. This form is not a substitute for the advice or counsel of an attorney. If you require legal advice, you should seek the services of an attorney. © 2017 CPT All rights reserved.
Urbatsch, K., & Fuller, M. (2016). Administering the California special needs trust: A guide for trustees and those who advise them (2nd ed.). Bloomington, IN: IUniverse.
William E. Lindahl, MBA, CLPF