Q. Account Size: Is the PSNT only suitable for small accounts, or can it work for accounts over $100,000?
A. The PSNT ("pooled special needs trust" or (d)(4)(C)) is suitable for small and large sums of money. A key benefit of a PSNT is that small accounts can be accepted and combined or "pooled" with other trust accounts. However, contrary to information presented in articles and opinions it is not a prerequisite for the account to be small. Administration fees are less than they are for an individually managed SNT (individual payback trust or (D)(4)(A)), and many PSNT Trustees offer the same high level of service as an individual Trustee. Pooled investment options are generally conservative in nature, due to the conservative characteristics of Special Needs Trusts. Some PSNT Trustees offer more aggressive investment options for those who want to be positioned more aggressively when restrictions have not been placed on the investment options by a Guardian Ad Litem or a judge.
Q. Remainder Beneficiary: Does the trust retain the money when the beneficiary dies?
A. It is NOT a requirement that the PSNT permanently retain funds remaining when the beneficiary of a trust share passes away. The Trustee must retain funds until Medicaid is paid back for services for which they have paid. Once the Medicaid lien has been paid back, the Trustee can pay the remainder of the monies to the beneficiary designated when the PSNT share was initially established. A nonprofit organization administering a (d)(4)(C) trust has the OPTION to retain the remainder of a trust after a beneficiary dies. However, the other OPTION is to name, in the Joinder Agreement, a remainder beneficiary chosen by the family or the individual. Secured Futures, Inc makes it a matter of standard practice to always establish and name a remainder beneficiary of the family's choice in the Joinder Agreement.
Q. Payback: Does the PSNT have to pay back Medicaid for any liens when the beneficiary dies?
A. First party funded trusts have a payback clause, but third party funded trusts generally do NOT have a payback clause. Part of the record keeping element of what some Non Profit Pooled Trust Administration firms do is to maintain records including if a trust is first or third party funded.
Q. First Party Trust/Third Party Trust: Is the PSNT suitable for both first and third party trusts? What are payback requirements for each?
A. The D4C trust can be used for both first and third party funded trusts. The ability to accept first and third party under one Master Trust Agreement is unique to Secured Futures. When the trust share is established, the Trustee notes in the "Joinder Agreement" if the funds are first party funds (belonging to the beneficiary) or third party funds (coming from a source other than the beneficiary's own funds). The Joinder Agreement is the application to join the PSNT, and it also acts to set specific parameters for the individual trust share. The Medicaid lien must be paid back for first party trust shares, but generally there is no obligation to pay Medicaid back for services it's paid for throughout the years if the funds come from a third party source. Trust contains a payback clause to reimburse the state for Medicaid benefits paid during the lifetime of the beneficiary (including a provision apportioning payback among different states); note that the statute does not require that the state be fully paid from the trust but only that to the extent there are any remaining funds, that the state is the first payee ("amounts remaining in the trust"); the policy of allowing this trust is for the disabled beneficiary to be the sole beneficiary and to actually benefit from distributions during their lifetime. First party trusts have a payback clause, but third party trusts generally do NOT have a payback clause. Part of the record keeping element of what some Non Profit Pooled Trust Administration firms do is to maintain records including if a trust is first or third party.
Q. How is a PSNT account established (who does the work)? Who does reporting?
A. The educational process and completion of paperwork is led by the referring attorney who is able to be completely involved in the entire process, or as uninvolved as he/she chooses. Before paperwork is completed, the referring attorney speaks with a member of the Secured Futures education team. It's the referring attorney's choice as to how the client is educated: the attorney and client (client's representative and/or family) can have a joint conference call with someone in the Secured Futures educational department, or the client can speak directly with Secured Futures. The referring attorney can complete the Joinder Agreement and submit it to Secured Futures, or the client can interact directly with Secured Futures. The person wishing to establish the trust account (or their legally appointed representative) completes the Joinder Agreement with the aid of a Secured Futures educational team member, and executes it. The Trustee then accepts this request to join the Pooled Special Needs Trust and executes the agreement on behalf of the trust. It is the obligation of the beneficiary to inform Social Security Administration (SSA) and Medicaid of a material change in circumstance in the ten day period after which it has occurred. However, the PSNT administration will send both SSA and the Medicaid office information related to the establishment of the trust: the executed Joinder Agreement, the letter of approval of Secured Futures from the SSA, a copy of the check or wire transfer to fund the PSNT share, and a request to call Secured Futures if there are further questions. The nonprofit trust administration establishes the account through the execution of a "Joinder" agreement. The nonprofit trust administrator is responsible for the investment, disbursement and reporting of the trust resources.
Q. Are there any government benefits that might be affected by the establishment of a PSNT?
A. Those benefits that are entitlement benefits will not be affected: Medicare and SSA. Medicaid, SSDI and SSI will be protected if a PSNT or SNT is used. Food Stamps and Housing Benefits may or may not be affected. The effect that the PSNT will have on Food Stamps and Housing/HUD benefits is dependent upon the state, county, and sometimes even the caseworker. In-Home Care Waivers and Transportation may be affected as well. Public assistance benefits (government) might be impacted if the trust funds are not used in accordance with the rules set forth in Social Security Administration guidelines. The nonprofit trust administrator is responsible to make disbursements that protect and preserve public assistance benefits.
Q. Is the money in the trust invested ? Does the beneficiary earn interest?
A. The trust money is conservatively invested to preserve capital for as long as possible. Interest and gains are part of the beneficiaries trust assets
Q. How does the PSNT work operationally? How does the beneficiary access the money?
A. The beneficiary requests funds and/or payments from their individual account in the pooled trust through a standardized disbursement request process.
Q. Who will interact with my client, the trust beneficiary?
A. At the beginning, the educational team will work with a beneficiary to explain how/why the PSNT will protect your client's government benefits, what expenses the trust can/cannot pay, how distributions will be made, and a road map as to what will happen if the client decides to establish a PSNT share. If the attorney is well versed in Special Needs Trusts and understands Secured Futures operationally, then he /she may be more comfortable handling the education, paperwork and set up of the trust share with minimal involvement of the Secured Futures educational team. After the trust share is funded, the client (beneficiary) will be aligned with Secured Futures trust administration. A trust administrator(s) is assigned to interact, educate and communicate with the beneficiary.
Q. What happens when the beneficiary passes away?
A. The family, or guardian, informs Secured Futures of the passing and sends in a copy of the death certificate. Secured Futures informs Medicaid of the death, and requests a statement of claim if the trust is first party. If it's a third party trust, typically there is no Medicaid involvement or need to inform them. When Secured Futures receives that amount, a check is paid to Medicaid and the remainder of the funds are paid out to the remainder beneficiary named in the Joinder Agreement at inception, or as it has been amended. There is a minimal fee of $500 or 3% for closing out the account
Q. What happens if my client no longer wants to have a PSNT with Secured Futures?
A. There is a "roll out clause" in the Trust Agreement that allows the beneficiary to roll funds out of Secured Futures PSNT into another SNT, either a private or a pooled special needs trust. Because the SNT is irrevocable, Secured Futures is not allowed to send a check for the funds out to the beneficiary, but they can move the funds.
Q. What are reasons why recommending and counseling clients to a (d)(4)(C) trust vs. (d)(4)(A) trust is not a conflicted situation for an Elder Law attorney?
A. Elder Law Attorneys can accrue billable hours from drafting individual SNT's, appointing a family member as Trustee, and doing the annual accounting/review of the trust. With that said, they will lose some of those hours if they refer the client to a (d)(4)(C)pooled trust with Secured Futures; however the hours they lose are very likely the ones that are the most angst-filled for them.
Many attorneys refer to Secured Futures to create and administer a (d)(4)(C) trust and still retain the opportunity to continue billable hours by doing the due diligence on Secured Futures and speaking with the educational team and determining if their client and Secured Futures are a good fit for each other. Then the attorney works with Secured Futures by:
Recommending them to their client while familiarizing the client with the concepts
Remaining involved in the education process (conference calls with Secured Futures educational team)
Completing the Joinder Agreement with their client and sending it to Secured Futures
Receiving and filing notifications to SSA and Medicaid
Acting as intermediary between the client and Secured Futures if the client feels that they need an advocate
- Periodically reviewing the disbursements that have been made on the beneficiary's behalf
Working with Secured Futures to close out the account upon the client's death.
The Elder Law Attorney can be confident that working with Secured Futures administering a (d)(4)(C)trust that there will NOT be a situation where during an annual review, the attorney discovers that the Trustee has disbursed expenses that are not allowed, and has jeopardized the public assistance benefits eligibility of the beneficiary. There will be peace of mind in knowing that a professional trustee has only disbursed funds for allowable expenses and that assets are being protected.
There are times and examples where clients/beneficiaries may be hesitant about paying the Elder Law attorney's bill directly for doing the oversight work outlined above, but it's generally straightforward and acceptable to send Secured Futures a disbursement request with the legal bill attached and have it paid out of the trust. It is still necessary to get the client (or the client's representative) to sign the disbursement form to release the check to the attorney, but that's much easier than having the client write the check himself. There's little resistance to signing the disbursement request as part of the attorney/client meeting.
Working with Secured Futures to provide trustee and trust support services is regarded as a productive, positive, and professional experience for attorneys and client/beneficiaries alike.