The Elder Law Office of Steven C. Perlis and Associates, P.C.

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Comparison of Special Needs and Pooled Trusts

What is a Trust?

In general, a trust is a legal entity that is created for the purpose of managing assets. The person creating the trust is the “grantor”. The person managing the trust is the “trustee”. The person who benefits from the assets in the trust is the “beneficiary”.

What is a Special Needs Trust?

There are many different types of trusts, but the Special Needs Trust is a very specific and unique type of trust. A Special Needs Trust is used for a disabled or elderly person who would like to qualify for Medicaid benefits, but has too many resources to meet the poverty requirements.

When assets are transferred into a Special Needs Trust, there is no penalty for Medicaid purposes. For example, a person could transfer all their assets into a Special Needs Trust and then qualify for Medicaid.

The assets in the trust may be used to provide for any needs the person has that are not covered by Medicaid. For example, an elderly person in a nursing home may wish to pay the additional cost for a private room, a private care nurse, his or her own doctor, dental expenses, or medical equipment not covered by Medicaid. The trust would be able to pay for these expenses until the trust assets are depleted.

This is an irrevocable trust, which means that once it is set up, it cannot be changed or undone. Therefore, a person should consult with an attorney when they are considering a Special Needs Trust.

What is a Pooled Trust?

The Pooled Trust is a type of Special Needs Trust. When you create a Pooled Trust, you are placing your assets into a pool of investments with other elderly and disabled individuals and asking the professional trustee to manage the assets for you. The trustee will be a bank and a non-profit organization acting together, and you can designate a family member as an advisor to provide continuing personal involvement. The trustees will charge an annual fee based on the amount of assets in the trust. If you decide to create a Pooled Trust, it is irrevocable, meaning that you cannot change or undo the trust at a later date.

When the disabled or elderly person dies, any assets remaining in the trust will be paid back to the state of Illinois as reimbursement for the Medicaid that was paid on the person’s behalf. For this reason, the trust is sometimes referred to as a “pay-back trust.” However, for a nursing home patient, the reimbursement will be calculated at the Medicaid daily rate of care, which is lower than the private pay rate. Any funds remaining after payment to the state may be paid to family members and heirs. In some instances, you may choose to create the Pooled Trust to direct any funds remaining at death to stay in the Pooled Trust and benefit the other members of the trust. In this way, there is no payment to either the state or the family at the person’s death.

Both the Special Needs Trust and the Pooled Trust are based on federal law and Illinois law. The source of the federal law is the Omnibus Budget Reconciliation Act of 1993, so the trust is sometimes referred to as an “OBRA Trust.”

Who would be the Trustee of the Pooled Trust?

There are currently four organizations in Illinois that offer pooled trust services. Each organization is a partnership between a non-profit organization and a bank with a trust department. We recommend that you contact each provider directly to determine which you prefer to work with for your trust.

DayOne Reliance Inc.

Co-Trustee together with GreatBanc Trust

Main contact: Bonnie McCrary 630-208-5555

Illinois Disability Association

Co-Trustee together with Bank of America

Main contact: Howard Berk 312-332-4622

Life’s Plan, Inc. (In association with the Ray Graham Association)

Co-Trustee together with GreatBanc Trust

Main contact: Scott Nixon 630-628-7189

Options for Living (Through American Bank & Trust Co.)

Co-Trustee together with Surrogate Guardian Services, Inc.

Main contact: Jeffrey Schmidt 630-444-2939

There are several questions you will want to ask of each Pooled Trust provider. We have collected some of the answers for you on the next page, but you will still want to speak personally with someone before you select your Pooled Trust provider.

1. What services do you provide?
   1. How involved is the trustee? The family?
   2. How are the funds invested? What has been the investment yield over the prior 1, 3, and 5 years?
   3. How frequent are accountings provided? Can statements be provided more frequently? Is there a fee for receiving statements more often?
   4. What is the process for receiving distributions for items or services that are needed from the trust funds? Is there a limit on the number of distributions, or a fee per distribution?
2. What are your fees and how are they structured?
   1. What is the enrollment/origination fee?
   2. What is the annual fee? When is it paid? Is it due the 1st year?
   3. Is there a fee for the trust’s income tax return? How is it calculated? Do you offer a service to prepare the individual’s income tax return? What is the fee?
   4. After the beneficiary dies, is there a termination fee?
   5. Are there any other fees?
3. What options are available for naming final beneficiaries after the death of the primary beneficiary? In other words, how does the trust pay out at death?
4. Is there a minimum investment amount?

	DayOne Reliance Inc. Bonnie McCrary 630-208-5555	Illinois Disability Assoc. Howard Berk 312-332-4622	Life’s Plan, Inc. Scott Nixon 630-628-7189	Options for Living Jeffrey Schmidt 630-444-2939
A. Services
a. Involvement	The trustee will be the primary decision maker, but they will look to a designated family member for direction on how to administer the trust including the needs of the Beneficiary and to whom disbursements should be made	Same	Same	Same
b. Investments	The bank makes all investment decisions	Same	Same	Same
c. Accountings	Quarterly Statements Online Access Available	Quarterly Statements Online Access Available	Quarterly Statements Online Access to Account	Quarterly Statements (Monthly Statements are Available Upon Request)
d. Distributions	Trustee will make disbursements directly to service providers Unlimited number of Checks No Fee	Trustee will make disbursements directly to service providers 1-25 Checks Per Year are Free Possible fee for additional checks	Trustee will make disbursements directly to service providers Unlimited number of Checks No Fee	Trustee will make disbursements directly to service providers Unlimited number of Checks No Fee
B. Fees
a. Enrollment Fees	Set up Fee $775.00	Set up Fee $400.00	Initial Enrollment Fee $775.00	None
b. Annual Fees	Annual Base Fee (Funded Trust) - $750.00 Annual Base Fee (Unfunded Trust) - $20.00 Annual Asset Value Fee – 1.0% of the Market Value of the Account Plus Annual Bank Management Fee – 0.45% of the market value of the account	Annual Base Fee is $900.00 Plus Management Fee is 1.1% of the Market Value of the Fund	Annual Base Fee is $750.00 Plus Annual Asset Value Fee is 1% of the Market Value of the Fund Plus Annual Bank Management Fee - .45% of the market value of the fund	Annual Base Fee is $2,500.00 Plus Management Fee is .75% of Market Value of the Fund
c. Tax Returns	1041 Preparation - $65.00 1040 Preparation is not available	1041 Preparation $250.00 Post Death only - 1040 Preparation	1041 Preparation $75.00 1040 preparation is not available	1041 – no additional fees 1040 preparation is available
d. Termination Fees	No fees at death.	No fees at death.	No fees at death Possible fee for changing trustees before death	Check current fee schedules
e. Other Fees	Possibly for extraordinary services	Possibly for extraordinary services	Possibly for extraordinary services	Possibly for extraordinary services
C. Beneficiary Options (Payout at Death)	Option A: Funds remain in the trust to benefit other persons with disabilities Option B: A payback to State followed by remainder to family	Option A: Payback to State followed by remainder to family Option B: Funds remain in the trust to benefit other disabled individuals Option C: Payback to the State only if there are enough funds to also benefit family, otherwise all to remain in the trust to benefit others in trust	For payback trust of $70,000 or more, clients will have two Options (A and B) Option A: 15% remainder stays in the trust to cover administrative and closing expenses 10% remainder goes to a charitable fund to benefit disabled individuals Payback to the State Balance returned to family Option B: Payback to the State Remainder balance returned to family	Payback to the State only if there are enough funds to also benefit family, otherwise 100% to the Charitable Fund of the trust to benefit other disabled individuals
D. Minimum Investment Amount?	$10,000	$75,000	$10,000	None (but see annual fee)

information is current as of June 2009. It is important that you call each trustee and speak with them individually to learn more about their trust and to verify if any of this information has changed.