Many individuals have heard of the trusts used in estate planning, such as an Irrevocable Trust, Income Only Trust, or Medicaid Asset Protection Trust. However, there is a trust not so commonly known, a “Pooled Income Trust” which can be established by Medicaid applicants. The seldom mentioned Pooled Income Trust is almost always a necessary component of Community Medicaid long-term care. The purpose of this trust is to obtain home care services while also preserving the recipient’s monthly income for payment of household bills.

Consider this scenario: Your parents are in their eighties and live at home. Mom is in good health, but dad’s health is declining. Mom is able to assist dad in some ways, but there are certain tasks that she cannot safely do alone and could benefit from Medicaid home care services by having an aide in their home. Mom and dad are worried that if they qualify for Medicaid home care services, they will not be able to pay for household expenses and maintain living in their home.

The family in the above scenario are rightfully worried about being able to cover their monthly expenses under the strict income guidelines for Medicaid eligibility. To qualify for Medicaid home care services, there are specific income and resource limits. The allowable income amount is important when considering if a Pooled Income Trust is appropriate. For 2020, a home care Medicaid applicant is permitted to keep $895.00 and remain eligible for these services. Without proper planning, Medicaid would require the applicant’s income above this allowed amount to be paid to the Department of Social Services each month as a contribution toward their care. Any amount over the $895.00 is considered “excess income.” Therefore, when a couple relies on their entire income to live, turning over this “excess” income may leave them impoverished and for that reason, Medicaid would not seem like a viable option.

The good news is that in New York we can use a Pooled Income Trust. Pooled Income Trusts are established and managed by non-profit organizations for the benefit of the disabled beneficiaries. This allows a Medicaid applicant to deposit excess income (any amount over the $895.00 in 2020) into a Pooled Income Trust. Each month the Medicaid recipient deposits excess income into the Pooled Income Trust and this would result in his Medicaid eligibility for the income limit. Then the Medicaid recipient submits bills to the Pooled Income Trust for household expenses paid out for his or her benefit and the trust would use the income deposited to pay such bills. Pooled Income Trusts deduct a small monthly fee for servicing these payments and differ by the specific agency.

What bills can the Pooled Income Trust pay?

When choosing to use a Pooled Income Trust for Medicaid planning it is important to know what types of expenses the trust will pay. Above all, any bills submitted to the trust for payment must be in the name of the Medicaid recipient. Bills in the name of the spouse cannot be paid through this fund. Additionally, trust may only pay non-medical bills on behalf of the Medicaid recipient – to prevent double dipping. This is typically not an issue for most individuals because Medicaid would be covering the recipient’s medical expenses. Lastly, it is important to be aware that at the time of the passing of the Medicaid recipient, the balance of any funds remaining in the trust becomes the property of the trust. Therefore, it is crucial for those using a Pooled Income Trust service to timely submit their monthly bills and not let money accumulate in the trust.

Despite Medicaid’s income restrictions, Pooled Income Trusts are effective planning tools which can allow individuals to comfortably remain in their homes and receive home care services they need. Make sure you learn about new Medicaid changes slated for October 1, 2020 which directly affect eligibility for Community Medicaid.

– Nancy Burner, Esq.