Pooled Income Trusts: A New Path for CPT Institute

July 7, 2024

By: William Lindahl, Executive Director

A Pooled Income Trust is a strategic financial tool that enables individuals to have their funds managed by a charitable organization, which helps them maintain eligibility for Medicaid by excluding the trust’s assets from their income. Here’s how it operates:

  • The trust can cover essential living costs such as housing, sustenance, attire, leisure, and travel.
  • It also pays for medical treatments not covered by government programs, as well as legal and guardian fees.

However, there are restrictions on what the trust cannot fund:

  • No gifts, loans, or payments to third parties.
  • Child support and alimony are excluded.
  • Family members’ vacation expenses are not covered.
  • Health insurance premiums for others are not payable through the trust.

Any funds not used monthly accumulate for future expenses, but upon the beneficiary’s demise, the remaining balance is transferred to the non-profit managing the trust.

The trust functions similarly to a managed bank account, handling fixed bills like housing and healthcare premiums directly. Variable expenses are charged to a credit card and reimbursed by the trust.

In New York, Medicaid eligibility requires one to be 65+ (or under 65 with a disability) and have limited assets. The income threshold is $884 plus $20 for miscellaneous expenses. Exceeding this limit necessitates spending down to qualify for Medicaid. However, contributions to a Pooled Income Trust are exempt from this income calculation, allowing beneficiaries to retain Medicaid coverage while using the trust for other expenses.

Establishing a Medicaid spenddown via a Pooled Income Trust involves paperwork: enrolling in the trust, submitting documents, and requesting Medicaid budget adjustments. Ensuring accurate Medicaid rebudgeting is crucial.

Allowable Distributions from a Pooled Income Trust:

  • Rent or mortgage payments
  • Utility bills
  • Food and groceries
  • Clothing purchases
  • Entertainment and travel costs
  • Uncovered medical procedures
  • Attorney and guardian fees

Understanding Pooled Income Trusts

Also known as (d)(4)(C) Trusts, these trusts serve disabled Medicaid applicants as defined by SSI standards. While most states mandate creating the trust before age 65, some are more flexible. A Pooled Income Trust can be established by various parties and is managed by non-profits within the resident state. Contributions are pooled for investment, hence the name.

The trust aims to defray living expenses and services not covered by Medicaid. After the beneficiary’s death, remaining funds either benefit other disabled trust participants or repay the state Medicaid program. State-specific laws dictate the fate of any leftover funds.

State rules for Pooled Income Trusts vary, making local knowledge essential. Not all states view these trusts as viable Medicaid planning tools. For state-specific advice, consult an experienced Medicaid Planning Professional.