Sheltering Income with a Pooled Trust
To qualify for community based Medicaid, meaning receiving medical care in the home, an individual cannot make more than $884 per month and a married couple cannot make more than $1,300 per month. Obviously, these minimal income standards make it very difficult to qualify for community Medicaid. However, applicants can “spend down” excess income to meet the Medicaid income requirement.
Also, an individual cannot own more than $15,900 in assets and a married couple cannot own more than $23,400 in assets.
There are two ways to spend down income. First, the applicant can reduce the income by paying for care-giving and other medical expenses. Second, the income can be reduced through the use of a “pooled income trust” where participants deposit their funds in a general trust, each with their own sub-account within the pooled trust.
A pooled trust, which is available in all states, must be run by a non-profit organization, and exists for elderly and disabled individuals for the purpose of supplementing the participants’ needs beyond government benefits. In the case of people who may not qualify for community Medicaid because of excess income, the pooled trust can allow them to stay at home, also known as “aging in place.”
“Special” or “supplemental needs” trusts may also be established through a pooled trust for disabled individuals under age 65 but the focus of this chapter is the use of the “pooled income trust” to keep people at home who need long-term care if their income exceeds required levels.
For example, Ralph applies for community Medicaid to allow him to stay at home and have home health aids, paid by Medicaid, to come in to assist in his care. His monthly income is $3,600, and he doesn’t have excess medical costs to spend-down. He can deduct his Medicare Part B premium, his private insurance premium and $20 of income. For this purpose, we’ll estimate total deductions of $260, leaving a countable net income of $3,340. From this amount, you deduct the $884 he’s allowed, which results in a spend-down of $2,456.
When Ralph joins the pooled trust, he sends his spend-down amount of $2,456 to the pooled trust administrator every month. Each month, he submits to the administrator non-medical bills in his name for rent, mortgage, telephone, utilities, cable, life insurance, auto insurance, and the like. The trust pays those bills directly up to the amount he contributed. Ralph does not receive any cash. Medicaid pays for his home care on a level determined necessary by Medicaid, based on Ralph’s medical needs. Assuming he is otherwise eligible for Medicaid, Ralph qualifies for community Medicaid despite his income level.
Several non-profit organizations exist that offer pooled trusts. Applying to join a pooled trust is a formal process. Costs generally include minimal start-up fees, an initial deposit and reasonable maintenance fees. Upon the death of the participant, that individual’s remaining balance stays in the pooled trust to benefit other participants.