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Using a Pooled Trust for Medicaid Planning

If you’re disabled and trying to qualify for Medicaid, one option that can help you is a pooled trust. A special needs trust is often used to help a person get under the $2,000 countable asset limit, which can make the difference in whether they qualify for Medicaid services or not. There are options for moving assets into a trust for both personal and certain types of medical needs, most typically for people who are under age 65 and become disabled.

For beneficiaries over 65 a transfer penalty may apply. But the best news about a pooled trust is that it can help a disabled person receive the long-term nursing home care they need. When getting that care is vital and being on Medicaid is needed due to the costs incurred, putting money in a pooled trust can address important financial and medical care concerns to provide much-needed help. Here is everything you need to know about pooled trusts, and how they relate to Medicaid eligibility.

What is a Pooled Trust?

A pooled trust contains assets from many people, managed by one administration but separated into sub-accounts belonging to the individuals. Pooling the money can make it easier to invest and manage it correctly. It can help beneficiaries and their families have fewer worries about where the money is, where it’s going, and the right ways to manage it. It’s similar to a bank in the way a bank pools money from deposits, but every customer still has a separate account belonging to them.

This kind of trust can only be maintained by a nonprofit organization. Assets are all pooled together for management and investment while each sub-account is only used for the disabled person. Beneficiaries of these sub-accounts must be disabled, or they won’t qualify to be part of the trust. For purposes of SSI, being disabled means they have a severe impairment that prevents them from working and that disability will last at least one year.

Why Use a Pooled Trust?

There are many reasons to use a pooled trust. One of the main reasons is that managing a trust or other funds for a disabled person can be stressful and become too much responsibility for a family member to handle. Having a professional nonprofit organization managing the account avoids that stress. It also helps family members focus on spending time with the disabled person and handle basic life activities, without worrying about the management of money.

For disabled individuals that don’t have a living parent or family member, a trust can be set up by the beneficiary themselves. There will be fewer worries when it’s set up and managed to ensure that important medical expenses will be covered. This also helps protect a disabled person from caregivers or others who could potentially take advantage of them when they seek help. It can be reassuring to know a nonprofit organization will correctly manage their money and that money will be used properly for their needs.

How Can You Spend Funds in a Pooled Trust?

Assets included in a pooled trust are only for the benefit of the disabled person, who is the beneficiary of the trust. No one else will have access to the money or is able to use it for their own needs or costs. Expenses that can be paid out of the trust include:

  • Health insurance premiums
  • Medical expenses
  • Legal expenses
  • Living expenses
  • Spousal maintenance allowance

There are also many expenses that cannot come from the trust, including:

  • Gifts or payments to anyone who’s not the beneficiary
  • Debt payments
  • Vacation expenses for family members
  • Health insurance premiums for other people

Any nonprofit organization managing a pooled trust will follow these rules, to ensure there won’t be any mismanagement of a disabled person’s money. It’s important to have a very clear understanding of what can and cannot be paid from a pooled trust before agreeing to one. This reduces stress and helps ensure the beneficiary and any family members are onboard with the decision.

Are There Downsides to a Pooled Trust?

As with any arrangement that involves an organization managing money for an individual, there can be downsides to the use of a pooled trust. The largest downside is that any assets left in the trust after the beneficiary passes away aren’t passed down to living relatives. That’s very different from what might happen if the money was kept in a different type of trust managed by a spouse or other family, where it could be passed along via the beneficiaries last will and testament.

Instead of going to the family, any left-over funds will be used to repay Medicaid expenses to the state or donated to the nonprofit that managed the trust. If the beneficiary had significant assets placed into the trust, that could result in a loss of assets that could have gone to relatives or friends.

Is a Pooled Trust the Right Choice for You?

Whether a pooled trust is the right choice for your needs is a very individual decision. It’s also one you shouldn’t make without quality legal representation that protects your interests. Special needs pooled trusts are used for situations that are very specific. When you work with an Elder Law and Special Needs Planning Attorney, you can navigate these complicated waters more easily.

The Siegel Law Group specializes in Elder Law and Medicaid planning. Reach out to us today and let us help you determine whether a pooled trust is in your and your family’s best interest. Call us today for a complimentary consultation at (561) 955-8515, or contact us through our website for more information.

Barry Siegel is the founder and managing partner of The Siegel Law Group, P.A., a Law Firm in Boca Raton, Florida that focuses on comprehensive Estate Planning and Elder Law Planning for clients throughout South Florida. The Siegel legal team is dedicated to providing compassionate counsel and effective legal representation in matters pertaining to Estate Planning, Elder Law, Probate and Trust Administration, Asset Protection Planning, and much more. Subscribe to our newsletter for the most current legal news and updates.

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