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What is a pooled trust, and do I really need one?

This article is not intended to provide you with legal advice. Should you seek legal advice, please consult an attorney. KTS would gladly recommend an attorney should you need one. It’s important to have an attorney take appropriate actions on your behalf and to avoid issues that may be discussed in this article.

A pooled trust does essentially what it says in that it pools together funds or resources of many individuals. By doing so, depending on the type of trust and circumstances, beneficiaries may be able to qualify for government benefits that may otherwise be out of their reach. Being a participant of such a trust becomes especially important to consider when you are trying to qualify for Medicaid benefits.

When should I start thinking about a pooled trust?

As individuals begin to age, concerns over health and long-term care may start to take front and center. Many times, our loved ones are a constant reminder that we need to think about our own future healthcare needs. If we wait too long, we’re faced with tough decisions on what’s best including how and if the government can assist us.

But don’t feel alone. There are many elderly who find themselves having to decide on what their latter years of care will look like. Questions quickly surface on how you can afford to pay for your long-term needs.

What if I didn’t plan for my long-term care needs?

Sometimes life just sneaks up on us and before you know it, we’ve reached the crossroads on figuring out how best to deal with newly found long-term or community healthcare needs. Most people will need to depend on receiving help from the government at this point. This is true for many older adults who failed to plan or did not seek help from an attorney who specializes in long-term care.

But applying for and qualifying to receive Medicaid benefits is not really a slam dunk. Especially when you have more monthly income than is allowed. This surplus or excess income can cause problems in eligibility requirements that must be met in order to receive Medicaid. That’s where a pooled trust can really help.

What is a pooled trust?

According to the government’s general rules regarding pooled trusts under Section 1917(D)(4)(C), this type of trust “contains the assets of many different individuals, each held in separate trust accounts and established through the actions of individuals for separate beneficiaries.” Think of it as a banking institution that services individual account owners by holding their assets.

As is the case with many institutions, Federal and state laws regulate such Medicaid trusts to help protect member participants. Such Medicaid trusts are sometimes referred to as Medicaid qualifying trusts as most joining members are seeking help in becoming eligible and acquiring Medicaid Home Care Benefits.

Who establishes and maintains a pooled trust?

Pooled trusts are managed (and formed) by nonprofit organizations that maintain separate accounts for each of their beneficiaries. The purpose of setting up these community trusts is twofold. One reason is to benefit the participants and the other is for investment purposes. Although assets are pooled together for management and investing, it’s clear that according to the government rules that such “Accounts are established solely for the benefit of the disabled individuals.”

How is a Pooled Income Trust different from other pooled trusts?

In reference to Section 1917(D)(4)(B), a pooled income trust “is composed only of pension, Social Security, and other income to the individual (and accumulated income in the trust).” Pooled Income Trusts are also known as supplemental needs trusts that nonprofit organizations establish to benefit many disabled individuals.

The KTS Pooled Income Trust in New York, for example, was created as a supplemental needs trust. This type of Medicaid trust (NY) is established to help beneficiaries qualify and maintain eligibility for Medicaid benefits when their monthly income exceeds the minimum allowed. Therefore, disabled persons who deposit their income into the KTS Pooled Trust in the state of New York will have that income disregarded relative to their Medicaid budget and eligibility.

How does a pooled income trust work?

The pooled income trust helps beneficiaries eliminate the need to “spend down” this excess income. This spend-down program is called the Medicaid Excess Income program, which requires that any monthly excess income be used to pay medical bills in order to obtain benefits. Other such health-related bills may also apply. For example, prescription drug bills are also allowed in this program.

Participation in a pooled income trust can help to qualify for long-term Medicaid without having to participate in the excess income program. Instead of “spending down” the excess income, the community trust funds can be used to pay monthly living expenses including rent, clothing, food, and utility bills. Other personal needs that are for the beneficiary’s sole benefit are also allowed in such living expenses. Necessary medical expenses and other expenditures may also be paid from these funds.

The pooled trust, therefore, manages your income and pays your bills to avoid the spending down requirement that’s needed to qualify for benefits. And because Medicaid eligibility is determined monthly, any excess income will need to be deposited into the trust each month the surplus exists. It’s worthwhile to note that these trusts can vary from one nonprofit organization to the next. Each organization will have its own established policies, fees, deposit minimums, etc.

The pooled income trust will also need to be approved by Medicaid. In order to be approved, certain documentation will be required in addition to the trust for review.

What are some of the pros (advantages) of joining a pooled trust?

Qualifying for Medicaid in spite of having excess monthly income is one of the biggest advantages of participating in what is also called a master trust. But there are other reasons for considering this alternative to Medicaid’s spending down requirement of surplus income, for example:

●       Joining a pooled trust may be more affordable than a traditional Special Needs trust that is established as a separate trust (stand-alone trust).

●       These community-type trusts are bound by Federal and State laws.

●       Skilled experts who know the rules manage such trusts, which allows for greater efficiency.

●       Individuals who become members and join a pooled trust will not be responsible for finding their own trustee.

Are there any cons (disadvantages) to a pooled trust?

Like most things in life, there are drawbacks to review before considering participation. Ultimately, your decision will likely ride on your particular circumstances. It may be appropriate, in any event, to seek an attorney’s professional advice to be sure you have all the facts and information.

In the meantime, here are a few of the disadvantages:

●       Funds in the trust are not immediately accessible to beneficiaries as they may need a day or two to process.

●       Provider payments must be requested, necessary, and considered reasonable.

●       Decisions made by the trust regarding management and investments may not meet unique beneficiary needs as would a stand-alone trust.

●       After the beneficiary’s death, their assets are not returned to the family as they are used to reimburse the state for lifetime benefits paid to the beneficiary. In other words, if the funds in the beneficiary’s account are not entirely spent, they are required to be sent to the state by the trust.

Seek help in meeting Medicaid eligibility

Medicaid may be the only choice or at least the best available option relative to you or your loved one’s personal situation. But qualifying for Medicaid’s long-term or community benefits can be difficult. So, it may not be wise to try to take on these Medicaid requirements alone.

When planning for your latter years is no longer possible, it may be time to consider a pooled trust and/or consult with an attorney who specializes in elder care. In addition, people may find that their loved ones are currently facing this type of situation and will need assistance in sorting out the available options.

About the author, Carlos Nath:

Carlos Nath is the Senior Trust Advisor with KTS Pooled Trust. As a seasoned professional with over four years of experience in the New York pooled trust space, Carlos has helped thousands to enroll and set up their accounts with KTS. He is proficient in understanding the Medicare process and provides assistance in clarifying what clients may need. Previously, Carlos worked with a Medicaid consulting firm as an advisor who helped clients who were seeking Medicaid assistance.

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New York State Medicaid is a program available to eligible, low-income New York State residents who require additional help paying for their medical expenses.

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New York State Medicaid is a program available to eligible, low-income New York State residents who require additional help paying for their medical expenses.