How a Pooled Trust can help you retain your independence and stay in your home.
By Jennifer Katz, Esq. Labor & Industry for Education, Inc.
Jennifer Katz, Esq., a LIFE Trust attorney, wrote the following article for Well Beyond 55 Magazine. Well Beyond 55 provides the most current education, tools and professional strategies to support individual planning to ensure living well beyond 55. It is designed to bring you valuable resources that will empower you to navigate your physical health, financial wealth, and ongoing prosperity. Visit www.wellbeyond55.com for more information.
Growing older while endeavoring to stay well and live independently is a journey we will all face. As access to resources for seniors continues to improve, it is becoming increasingly easier for seniors to gracefully maneuver the hardships of aging. However, despite the technological and medical advances being made, the availability of high-quality and affordable home-based care remains problematic for seniors. People crave independence and do not want to be confined to nursing homes. The perfect solution for these people might be Community Medicaid.
Community Medicaid refers to services delivered “in the community,” in a home-based setting or an assisted living facility. Some of the benefits offered by Community Medicaid include a home health aide, who can come to your home and provide services ranging from housekeeping and companionship, to skilled nursing services provided by a Registered Nurse. You may also qualify to receive no-cost or low-cost medical supplies, transportation to doctor’s appointments, and even meal services.
To become eligible for Community Medicaid, an individual must meet certain medical and financial criteria. To fulfill the medical requirement, you must be “disabled”, as defined by the Social Security law. Many people in the aging community would qualify under this definition; the word “disabled” is not to be understood in its common form. Ailments such as diabetes, heart disease, anxiety or even arthritis could qualify an individual to receive Community Medicaid. Younger people, who are developmentally disabled, are also qualified to receive this type of Medicaid. For more information about whether you medically qualify, please consult a qualified elder law attorney or Medicaid specialist.
In order to financially qualify to receive Community Medicaid services, an individual’s monthly income must be below $825 with assets below $14,850. If an individual’s monthly income or assets exceed those strict limits, a pooled trust is the best way to protect that money, and remain eligible to receive Community Medicaid services. The purpose of the pooled trust is to shelter your money from Medicaid, and still allow you to use those funds to pay your own bills. Establishing a pooled trust does not affect eligibility for SSI, food stamps, Section 8 or other governmental benefits. By simply making a deposit of your surplus income into a pooled trust every month, you are automatically eligible for Medicaid.
There is a common misconception that in order to qualify for Medicaid a person must give away all their money, which quite understandably, is something an individual might be hesitant to do. But the pooled income trust acts only as a flow-through for the money.
The money doesn’t remain in the trust, illiquid, or out of your reach. As soon as the surplus is deposited in the trust account, the funds are immediately accessible for use. It can be used to pay bills like rent/mortgage, taxes, utility bills or even credit card bills. The money also rolls over each month, so there is no pressure to spend more money than necessary in any given month. There are two types of pooled trusts–income and asset.
Both can be utilized to shelter money from Medicaid. The more common type is the pooled income trust. For consistent monthly income, from sources such as Social Security, pension, IRA distribution, etc., Medicaid allows an individual no more than $825 per month, and a married couple (with both spouses on Community Medicaid) $1,209 per month. Any income above those limits is referred to as “surplus income”, “excess income” or “spend down.”
Income Depositing the surplus income into the trusts every month ensures that you remain eligible for Medicaid. And the best part is you don’t have to forfeit those funds to Medicaid. You can use your money to pay your own bills. The funds in the trust account can pay for a rent or mortgage, utility bills, taxes, even credit card bills. The trust simply acts as a pass-through for your money.
Here’s an example to illustrate how a pooled income trust operates. John, a widower, receives $1300 every month from Social Security and a pension of $700 a month.
Social Security $1300
Total Monthly Income $2000
John’s total monthly income is $2000. Abiding by the Medicaid guidelines, John is allowed to keep $825, and therefore must deposit $1175 into the pooled trust account.
Total Monthly Income $2000
Medicaid Allowance $825
Deposited Into Trust $1175
(Please also note that are administrative fees associated with all pooled trusts, so make sure you speak with a trust representative before enrolling. For the purpose of this example, we will not consider the fees.) From that $1175, John can instruct the trust to pay his bills.
For instance, if John’s rent is $800, cable bill is $100 and phone bill is $50, John will ask the trust to make 3 payments on his behalf, totaling $950.
Deposited Into Trust $1175
Cable Bill $100
Phone Bill $50
Remaining in Trust $225
Because John’s bills for the month did not equal his surplus amount, he left $225 remaining in his account at the end of the month. One of the great features of pooled trusts is that the money rolls over month to month, so when John deposits $1175 into the trust the following month, he will have a total of $1400 available to him.
Remaining in Trust $225
Next Month’s Surplus $1175
Amount in Trust $1400
Asset The pooled asset trust functions in a similar way. Medicaid allows individuals to keep resources up to $14,850. If an individual has assets (i.e. cash in the bank) above that amount, the surplus can be deposited into the asset trust to shelter it from Medicaid. The most common situations where an asset trust is necessary is when an individual is already receiving Medicaid services and receives a lump sum of money, usually from an inheritance or a lawsuit settlement. The funds are deposited as a one-time deposit, and distributions may be made from the account in whatever frequency the client desires.
Clients may make expenditures from their asset trust in the same way they do from the income trusts. For both trusts, the list of allowable expenses is wide-ranging. The guiding principle is that the expense must be “for the benefit of the client”. Practically, this means that the expenditure cannot be for a friend or family member. There is a short list of items that are prohibited to be paid through the trust: life insurance, health insurance, tobacco products, liquor, firearms, gifts, charity, gambling and illegal activity (i.e. parking tickets).
The most common expenditures made from the trust are rent/mortgage, utility bills, cable bills, and credit card bills. However, there are many types of expenses that fall within the definition of “for the benefit of the client”, including luxuries. The trust funds can pay for a beneficiary’s vacation–-flight, hotel and eating out.
But remember, only the beneficiary’s vacation can be covered–-not any accompanying friends or family members. You can go to the hair salon, nail salon, sporting events, shopping at department stores, and use the funds in the trust to pay for those expenses, without jeopardizing your Medicaid benefits.
Staying at home in a person’s later years can be the best thing to keep them happy, active and productive people. Having home health aides, and the other benefits of Community Medicaid, are a perfect way to help people remain independent and at home. Pooled special needs trusts are an integral part of this process.