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Pooled Trusts or How to Wisely Spend Your “Excess Income”

A pooled trust is used to preserve the monthly income of a community based Medicaid (home care) recipient. When someone receives community based Medicaid it is usually to pay for home health aides that can assist with an individual’s “activities of daily living.”  A consequence of receiving community based Medicaid is that the recipient is only allowed to keep $825.00 of their monthly income each month, unless the recipient is over age 65 and can keep of total of $845.00 per month (these are the Medicaid levels in 2015 and they usually change a little each year).

Medicaid requires the recipient to “spend down” their income to the Medicaid level of $825.00 (or $845.00) each month. Disregarded are the costs of Medicare Part B and other health insurance premiums. To qualify for Medicaid, any monthly income beyond the Medicare Part B costs, health insurance premiums, and the permitted amount of $825.00 (or $845.00), must be spent on medical bills. The end result is that the Medicaid recipient has to live on $825.00 (or $845.00) per month (the Medicaid level). This is usually an insurmountable burden.

Pooled trusts are used so that the individual can reside at home, receive community based Medicaid (home health aides), continue to use most of their monthly income above and beyond the $820.00 (or $845.00) per month on living expenses.

Unlike most trusts discussed with your attorney, the pooled trust is not a trust drafted by the attorney. The Medicaid recipient must make an application to become a participant in a pooled trust (there are many choices). Assuming the Medicaid recipient is approved, an individual account is set up into which excess income is deposited each month. Each month the pooled trust will take out a (usually) nominal monthly administrative fee. The balance in the account can be spent on living expenses of the Medicaid recipient. Typical permitted living expenses that will be paid by the pooled trust include: rent, utility bills, mortgage, and credit card bills.

To be continued ….
Aaron E. Futterman, CPA, Esq. is a partner in the law firm of Futterman & Lanza, LLP with offices in Smithtown, NY and clients throughout Suffolk, Nassau, Queens, Brooklyn, Bronx, Richmond, New York, Westchester and Rockland Counties. He concentrates his practice to Elder Law, Medicaid Planning, Medicaid Applications, Estate Planning, Probate, Estate Taxes, and Estate Administration.

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