Special Needs Trusts: Frequently Asked Questions (FAQ)

Below are answers to some of the questions our team regularly receives about our trust administration services and how special needs trusts/pooled trusts work. Long-term planning is all about making sure that day-to-day needs are met while incorporating plans that allow for the best possible life quality for the trust beneficiary. Ultimately, we offer our clients the peace of mind that comes with putting a long-term financial plan and life plan in place to ensure PLAN beneficiaries will be well cared for.

We hope you won’t hesitate to reach out to us for further clarification of answers below, or with questions and concerns not addressed below. We strive to be the number one and a centralized resource for care planning, financial planning, and estate planning for individuals with special needs and for the family members of individuals living with disability.

How does PLAN fit into the estate planning process?

Special Needs Trusts are an extremely important tool utilized as part of the estate planning process. We work with attorneys and financial planners to provide a comprehensive estate plan. To adequately plan for the future of a loved one with special needs is imperative. PLAN can connect trust donors and trust beneficiaries with other professional service providers who specialize in special needs planning. With over 50 years of experience in this field, PLAN has built a vast network of connections across Massachusetts and Rhode Island. If someone needs legal advice, we make referrals to attorneys who are experienced in elder law or special needs law. Potential beneficiaries and their families are not required to have an attorney to set up a special needs trust, but we typically recommend that trust applicants consult with an attorney because a trust is a legal document. We can also make referrals to financial planners who specialize in special needs planning.

What exactly is a special needs pooled trust?

A Special Needs Pooled Trust is simply a trust that is pooled for investment purposes only. The trust could be First- Party (set up by the special needs trust beneficiary themselves) or Third-Party (set up by a family member or friend of the pooled trust beneficiary ). Each person within the master pooled trust has their own individual sub-account that their funds get disbursed from. The pooling of the trust funds helps to reduce costs and offer more services through the investment of the combined funds from numerous trust beneficiaries.

For individuals over the age of 65 interested in establishing a Special Needs Trust, federal regulations state that a pooled trust is their only option for putting in place a means to ensure their financial and quality of life needs are met as they age while living with a congenital or acquired disability (physical disability and/or mental disability).

What type of disability must a special needs trust beneficiary have in order to participate in a special needs trust?

Whether disability was present at birth (congenital disability) or acquired later on in life, an individual of any age with any type of mental, physical, developmental, or other disability can join the trust. We rely on a self-reported description of disability or medical diagnoses that applicants provide during the trust enrollment process. 

While invisible or not obvious to others, certain chronic illnesses or newly acquired illnesses may be considered disabilities. These include, but are not limited to: Arthritis, Heart Disease, Degenerative Disc Disease, Respiratory Illness, Mental Illness, Cancer, Stroke, Nervous System Disorders, Diabetes, Immune System Disorders.

What is the difference between a first-party and a third-party trust?

A First Party Trust is funded with the special needs trust beneficiary’s own money or assets. Because of this, Medicaid has a lien on the funds and gets a portion of remaining assets upon the death of the beneficiary.

A Third-Party Trust is funded by somebody other than the special needs trust beneficiary (family member, friend, etc.). There is no Medicaid Payback here – the donor gets to decide what to do with the remaining funds upon the death of the beneficiary.

What can the money in the special needs trust be used for?

Funds in the pooled trust or stand-alone trust are used for the sole benefit of the beneficiary to help maintain or enhance their quality of life. Generally, the funds in the trust can be used to pay for things that public benefits, such as social security disability and Medicaid do not cover. These supplemental expenses include, but are not limited to: medical and dental (not otherwise paid for by a public insurance program/benefit), clothing, telephone, internet, transportation, vacation, and alternative therapies not typically covered by medical insurance or dental insurance. There may be additional restrictions on the usage of the funds depending on which public benefits the beneficiary receives. Ultimately, PLAN, as the Trustee, has sole discretion to authorize payments or reimbursements from the beneficiary’s Trust account.

What cannot be purchased through a special needs trust?

Gifts, alcohol, pornography, gambling, guns, and other items that are not for the sole benefit of the special needs trust beneficiary.

Is there a minimum required to establish a trust with PLAN?

No, we accept both pooled trusts and stand-alone trusts of any dollar amount for individuals living with disability/special needs individuals.