Many people wonder about the differences between individual SNTs and Pooled Trusts, as well as the relative advantages and disadvantages of each. One major difference is that Pooled Trusts are always Medicaid-exempt for the person who creates it (called the “Settlor”), whereas an individual SNT can be either Medicaid-exempt or not Medicaid-exempt for the Settlor, depending upon whether the Settlor needs Medicaid benefits. If you are someone who wants to create a Disability Trust for someone else (such as a child, grandchild or other relative), but you are sure that you will never need Medicaid yourself, you should not consider a Pooled Trust. The most helpful information on this website for you will be found on our page for Individual Trusts. If you’re not sure whether you need the Medicaid exemption, this issue is discussed on the Disability Trust Programs page of this website.
Pros and Cons
One of the most important limitations on individual SNTs is that, if the person creating the trust needs Medicaid or SSI, the beneficiary must be under the age of 65. If the beneficiary is age 65 or older, a Pooled Trust is the only Medicaid-exempt trust option allowed by Medicaid and/or SSI.
If an individual SNT is an option for you, these trusts have the advantage of offering more flexibility than Pooled Trusts allow. For example, while a non-profit trustee like Community Trust can (and does) serve as trustee for many individual SNTs, the rules for Medicaid and SSI exemption do not require that the trustee is a non-profit organization. Family members or qualified individual fiduciaries can serve as trustee, or successor trustee, for an individual SNT.
Another option that an individual SNT may allow, which a Pooled Trust cannot, is a provision for a Trust Protector, or a Trust Advisors Committee, which gives family members a specific role in communications with the trustee. If there are any unique limits on how benefits should be used, such as a trust for education or sheltered employment but not for other uses, an individual SNT can include those kinds of limits, while a Pooled Trust cannot.
The chief disadvantages of individual SNTs are the set-up costs, and, for very small amounts, the ongoing cost of administration. A written trust instrument must be created individually for each SNT, which requires that a lawyer be hired and paid to write it. For very small amounts of assets, it can be financially impractical to administer the funds as an individual trust, unless someone is willing to serve as trustee without any fee. Without such a volunteer, a Pooled Trust may be the only option for limited amounts, even though the beneficiary is under age 65.
Community Trust can help individuals assess whether an individual SNT is a good option for them or their loved one. As mentioned above, we do require representation by legal counsel in order to step in as a trustee. In some cases we can help to negotiate reduced fees for those for whom the cost of a lawyer may be prohibitive.
