Pooled Trusts & Medicaid Planning
A powerful tool for Medicaid planning that we are seeing more use from is a Pooled Trust. A Pooled Trust (sometimes referred to as a (d)(4)(C) trust) is a very specific type of trust used to help disabled individuals qualify for the government benefits they need while maintaining some funds set aside for things they may want to preserve the quality of life they are used to. A pooled trust is one of many tools an elder law attorney can use to help a person qualify for Medicaid. There are many different types of trust, and it is important to make sure you have the right trust for your situation. If used in the wrong way, a trust can actually cause more harm than good.
Basics of Medicaid
Medicaid is a needs-based governmental program to help people who cannot afford to pay for their medical care. In order to qualify for Medicaid, one must have less than $2,000 in assets. Once qualified for Medicaid, a person gets to keep $50 per month for personal spending. The rest of their income goes to pay the initial cost of the nursing home. Medicaid then picks up the tab for whatever that income does not cover that month. With the average monthly nursing home cost ranging between $7,000 – $8,000 a month, Medicaid is often the only choice for senior citizens in need of care.
Basics of Pooled Trusts
One thing all trusts have in common is that there are at least three parties to a trust; the Settlor, the Trustee, and the Beneficiary. The Settlor is the person who funds the trust. The Trustee is the person who manages the trust. The Beneficiary is the person who benefits from the trust. Often there is a primary beneficiary and then contingent beneficiaries named for after the primary has passed away.
The purpose of a Pooled Trust is to pay for items or services not provided by Medicaid. These items and services are not meant to replace SSI or Medicaid benefits but rather enhance the life of the beneficiary by supplementing them.
Pooled Trusts must be irrevocable, which means once they are set up and funded, there is no way a person can demand their money back. If they could, the trust would not qualify for Medicaid purposes.
Who can be the Settlor?
Pooled Trusts are unique in that the trust itself is already set up. An individual opts to join into an already established trust. Pooled Trusts get their name from fact that the funds in the trust are “pooled” with funds of other disabled individuals into one main trust and each individual gets their own account when they opt in. The account must be set up solely for one disabled individual’s benefit and must be funded with the individual’s assets. The person who sets up the account can be the disabled individual herself, or her power of attorney, parent, grandparent, legal guardian, or the court.
Who can be the Trustee?
The trust must be managed by a nonprofit organization. Currently in Ohio there are three companies that specialize in pooled trusts to choose from:
- The Community Fund Management Foundation (CFMF) in Cleveland
- The Disability Foundation in Dayton
- The Ohio McGivney Pooled Special Needs Trust in Columbus
Separate from the trustee, who manages the funds, is the Designated Advocate, often a spouse or power of attorney, who represents the beneficiary and submits requests for money on behalf of the beneficiary.
Who can be the Beneficiary?
The primary beneficiary must be the disabled individual. “Disabled” is defined in rules adopted by ODJFS. There is currently no age limit in the state of Ohio on who can be a beneficiary. There can be no other primary beneficiaries named on the account, including the spouse or children.
Once the primary beneficiary has died, the pooled trust must contain an express provision for reimbursement to the state of Ohio for Medicaid services provided. If there are still excess funds remaining in the account once Medicaid has been paid back, those remaining funds may go to the spouse or other named remainder beneficiaries.
Funding the Pooled Trust
The trust is funded exclusively with the individual’s assets. The trust cannot receive funds from people other than the individual. A pooled trust is funded exclusively with cash. You would not put a house or personal property in a pooled trust. Assets that would otherwise be countable for Medicaid can be transferred into the pooled trust penalty free. Excess funds can later be added as they become available such as an inheritance or a lawsuit settlement. The individual can fund the trust with assets or irrevocably assign his or her income to the pooled trust. Generally there is a required minimum initial deposit of at least $5,000 to set up a pooled trust, however there is a method to fund pooled trusts with less.
Getting Money out of the Pooled Trust
Once the trust is set up and the Beneficiary is on Medicaid, the Designated Advocate represents the Beneficiary and submits forms (including receipts) to the pooled trust to request money from the trust account for the Beneficiary’s supplemental services. Once a request is approved, the Trustee releases the money from the trust account for payment to the vendor, service provider, or Designated Advocate. Cash can never be distributed directly to the Beneficiary.
Distribution requests can be submitted at any time and there is no limit on the number of distribution requests that can be submitted. The entire process may take three to four weeks from the date the request is issued. If there is an emergency, an emergency distribution request can be made at any time, but there is a fee. Reoccurring payments can be set up if the amount of the item or service remains the same, for example, a distribution request can be made for cable TV or other such common expenditure each month.
Money distributed from a trust account must be used for supplemental services for the sole benefit of the Beneficiary. The trust cannot provide for other people in the beneficiary’s life, such as for example, tuition for a child. A request may be denied if the Trustee feels it would interfere with the beneficiary’s governmental benefits, if they do not have proper documents and receipts, or if they feel the request is unreasonable.
A pooled trust can be used only to pay for supplemental services. It cannot be used for food and shelter. Supplemental services are those items or services that will not be paid for by insurance or a government program, but supplement and can enhance the quality of life of an individual with a disability. Examples include:
- Dental Care
- Plastic, cosmetic surgery or non-necessary medical procedures
- Psychological support services
- Recreation and transportation
- Differentials in cost between housing and shelter
- Supplemental nursing care and similar care which public assistance programs may not otherwise provide, including payments to those providing services in the home
- Telephone and television services
- Electric wheelchair and other mobility aids
- Mechanical bed
- Periodic outings and vacations, including costs incurred by caretaker companions
- Hair and nail care
- Stamps and writing supplies
- More sophisticated medical, dental or diagnostic treatment, including experimental treatment, for which there are not funds otherwise available
- Private rehabilitative training
- Payments to bring in family and friends for visitation if the trustee deems that appropriate and reasonable
- Private case management to assist the primary beneficiary, or to aid the trustee in the trustee’s duties
- Medication or drugs prescribed by a physician
- Drug and/or alcohol treatment
- Prepay funeral and burial expenses
- Companions for reading, driving and cultural experiences
A Pooled Trust is one of many tools that can help a person qualify for Medicaid while maintaining some funds that enhance the beneficiary’s life. It can be a powerful tool in your long term care plan. Because all types of trusts are complex, consult your attorney if you feel a Pooled Trust would be advantageous to you or someone you love.