Medicaid and Pooled Trusts

June 25, 2018 by John Zabkowicz

One of the most overlooked Medicaid planning tools when spending down assets for Medicaid eligibility is the pooled Trust.  What exactly is a pooled Trust?  A pooled Trust is a Trust for a disabled person as determined by SSI rules.

Specifically, to comply with Medicaid rules, a pooled Trust must meet the following requirements:

  1. Must be established and managed by a non-profit association, and
  2. Must have separate accounts, within each fund, which are maintained for each beneficiary or the trust, but for purposes of investment and management of funds, the trust pools these accounts. There may be a separate fund with accounts that include or benefit people who do not have a disability, and
  3. Must contain accounts with the funds of disabled individuals (based upon SSI and Medicaid rules) that are established solely for their benefit by a parent, grandparent, or legal guardian of such individuals, by such individuals, or by a court.
  4. Repay Medicaid to the extent that amounts remaining upon death are not retained by the trust.
    • This requirement can be satisfied when the individual trust account contains liquid assets and has a balance by returning that amount to the Medicaid program after subtracting a reasonable amount for administrative costs.
    • This requirement can also be satisfied when the pooled trust account includes real property, and the real property is retained by the pooled trust so long as the property continues to be used by another Medicaid member who is disabled (as established under SSI rules) or elderly (age 65 years or older). In addition, if the account contains liquid assets that had been used to help maintain the real property, the account funds may be retained to continue to maintain the housing that will be used by another Medicaid member, and
  5. The trust must be established with the funds of a disabled individual of any age. These would be considered “self-funded” trusts, and the age of the disabled individual at the time the trust was created, is irrelevant.

How does this work? Whenever a client comes in and is over-asset for Medicaid eligibility purposes, and has not spent down below the Medicaid maximum requirement ($2,000 by the end of the month of application), we inform that client to place their remaining assets in a pooled trust for that client’s benefit.  This, of course, is after all other spend-down options have been utilized (pre-paid funeral, vehicle, or other personal items that may be needed).

This pooled trust is then exempt for Medicaid purposes and not considered a divestment.  That client is now ready to receive Medicaid benefits!

Attorney John P. Zabkowicz