Pooled Income Trusts

Help Provide for your Disabled Loved One with a Third Party Supplemental Needs Trust

If you are disabled and a friend or family member wants to help provide for your care without endangering your Medicaid or SSI benefits, how can they help?

The answer here is usually a Third Party Supplemental Needs Trust. The person providing the assets would put them directly into the trust, rather than transferring them to the disabled person directly. The beneficiary’s government benefits are not impacted by a properly drafted Third Party Supplemental Needs Trust. With this type of trust, there is no age limit for the beneficiary, and there is no “pay back” provision to Medicaid. The grantor of the trust is free to name contingent beneficiaries, who would benefit after the disabled person has passed on.

Any person who wants to assist you financially can create this type of trust while he or she is alive, or establish the trust under their Will. If the creator of the trust is your spouse, he or she must set it up in a Will. As with other types of trusts, a Third Party Supplemental Needs Trust offers protection against future creditors and lawsuits in addition to helping to preserve Medicaid benefits.

As with any trust, it is best to work with an experienced attorney when setting up your Third Party Supplemental Needs Trust. Lamson & Cutner has years of experience helping our clients with these trusts, and we are here to help you too. Give our office a call at: (212) 447-8690.

Download our Estate Planning Handout

Trusts in Elder Law and Estate Planning

Trusts are among the main workhorses of Elder Law and estate planning, and are some of its most powerful and valuable tools.  They serve a number of useful purposes.  Most people understand the concept of a Will, but a Trust can serve the identical function as a Will without its inconveniences, and provide significant additional advantages as well.

The grantor names the “trustee,” to hold and manage assets on behalf of a beneficiary or beneficiaries.  The trust itself is legally a “person,” and is the owner of the assets that the grantor (or others) transfer to it.

Download our Estate Planning Handout

If you create a trust and place your assets into your trust, you might not need a Will at all.  You can designate in the trust agreement what happens to your assets upon your death, in the same way that you would in your Will.

Assets that are in your name alone at the time of your death are subject to your Will, and are required to go through a court process called “probate” before they can be distributed.  Probate is public, and often expensive, frustrating, uncertain and time-consuming.

A benefit of all trusts is that assets in the trust are not subject to probate.  Distributions can be made quickly and efficiently, the process is private, and far less costly and time-consuming than a probate proceeding.

Different kinds of trusts have different requirements and benefits, and different levels of control by the grantor. Revocable trusts are used for estate planning, avoiding probate, and maintaining privacy.  Irrevocable trusts also avoid probate, but at the same time they afford asset protection and facilitate eligibility for government benefit programs such as Medicaid.

Supplemental Needs Trusts, also known as Special Needs Trusts, provide support for persons with disabilities without compromising their eligibility for government benefit programs.

The first step in creating a trust generally involves meeting with a trust lawyer who will review your assets, income, goals, and objectives.  Then, he or she will create the trust agreement and help you “fund” the trust.  The experienced attorneys at Lamson & Cutner have the knowledge and skills in elder law trusts to help you preserve your assets and income to the greatest extent possible, while ensuring efficient and prompt distribution of your assets to your chosen beneficiaries upon your death.

The types of trusts for the elderly typically used in Elder Law planning include:

Every case is individual and unique, and you’ll need proper advice on what trust configuration will deliver the maximum advantage for you.  Different trust strategies apply to various economic and family situations, and often depend on whether you need, or want to plan against the risk of needing, home care or nursing facility care.   Trusts are the most effective and prudent way to hold and protect your assets, and they’re fully authorized for this purpose under Federal and New York State laws.

If you already have a trust created for estate planning purposes, your trust should be evaluated by an Elder Law attorney.  Make sure that you have focused on the serious financial risks that you may face, in particular the potential need for long-term care at some point. The goal of our services is always to put you in the best position possible to maintain your lifestyle, and to protect your and your family’s financial future.

When you need a trust attorney, choose the caring, experienced legal professionals at Lamson & Cutner.  With offices in both NYC and Westchester County, we are conveniently located and prepared to help you create or update elder law trusts.  You can speak to us from the comfort of your own home, if you prefer, via Zoom or conference call.  To learn more about your options or to schedule a consultation with an estate planning attorney or Medicaid trust attorney, contact us today.

Medicaid Fair Hearing

If you are not satisfied with a decision made by Medicaid, you may request what is called a “Fair Hearing.” This is a legal proceeding, heard by an administrative Law Judge (ALJ). Both your arguments and those of the Medicaid department are presented, and the judge makes a decision.

There are numerous reasons why you might request a Fair Hearing. Medicaid may deny your application. You may disagree with the type of care, or the amount of care you are granted. Also, Medicaid requires you to contribute toward the cost of your care from your monthly income. There may be a difference of opinion about what your monthly contribution should be.

If you want to contest any of these (or other) issues, you are not permitted to go to civil court right away. You must first request a Fair Hearing. If you still disagree with the judge’s decision, you are then permitted to pursue other remedies in civil court.

Download our Nursing Home Medicaid Handout

The Pooled Income Trust – It’s Not As Complicated As You Think

If you or a loved one are thinking about accessing Medicaid for care in the community in New York City or its suburbs, you will also probably want to join a Pooled Income Trust.  The goal of using these trusts is to permit you to remain in your home as long as possible, by allowing you to continue to use your income to pay your expenses.

Why are Pooled Income Trusts needed?

Once you are over 65 and your assets are below the Medicaid threshold for a single person (the current level can be found on our Medicaid Quick Reference Chart - "MQRC"), you are eligible for Medicaid.  Your income is not a factor in whether you are eligible to receive Medicaid, but Medicaid does not ignore your income.   If you don’t plan, you will be required to contribute toward the cost of your care.

Once Medicaid is paying for your long-term care, the system has a built-in maximum amount of income that you are normally eligible to keep for yourself – again, the current level can be found on the Quick Reference Chart.  Any amount over that is called “surplus income,” and - unless you sign up for a Pooled Income Trust - the "surplus income" is required to be contributed toward the cost of your care.

In the New York City Metropolitan area in particular, living on the amount that Medicaid permits you to keep is rarely possible.  This is why New Yorkers receiving Medicaid benefits almost always turn to Pooled Income Trusts.

Download our Community Medicaid Handout

What is a Pooled Income Trust?

A Pooled Income Trust is a special kind of trust operated by certain nonprofit organizations.  These organizations manage Pooled Income Trusts as a service to persons who are disabled and as a way of generating funds for charitable purposes.  Examples in New York are UCS Trust Services and NYSARC Inc.

New York’s laws permit you as a Medicaid recipient to contribute your “surplus income” to your account at a Pooled Income Trust instead of contributing it toward the cost of your care if you are “disabled.”  The definition of “disabled” is a flexible one depending on age and health.  Most seniors who need home care will qualify.  As long as you are doing that, your income will not affect your Medicaid benefits.

How Do I Join a Pooled Income Trust?

When you are applying for Community Medicaid in New York, you would also join a Pooled Income Trust at the same time.  You need to sign a Joinder Agreement in order to establish your own personal account at the Trust.  The money you send to the Trust each month will be deposited into your personal account.

Each trust has its own procedures, and its own fee schedule – you should find the one that best suits your personal needs.  If you are using the services of an Elder Law firm, you should ask them for a recommendation.  The Elder Law firm will probably also help you fill out the paperwork to join, and advise you regarding the logistics of paying your bills through the Trust.

Once I Have Joined a Pooled Income Trust, How Do I Use It?

Your Pooled Income Trust account functions a lot like a bank account that someone else manages for you.  Each month you send your bills and receipts for items you have purchased for yourself to the Trust.  This can include rent, your mortgage, grocery bills, utility bills, phone bills, clothing purchases – pretty much any kind of goods or services, as long as they are for you and are not provided by government assistance programs.

The Trust needs to approve the expenses because Pooled Income Trust funds are only permitted to be used to pay for your own expenses.  Once the trust approves the expenditures, they pay your bills for you.

Isn’t it Complicated?

No, it doesn’t have to be.  Most people who need Community Medicaid have pretty similar bills each month.  The monthly non-discretionary bills can go directly to the Trust.  Then, for variable everyday expenses, it simplifies the process if you have a credit card that you can use for purchases that are for you.  The credit card bill can be submitted to the trust at the end of the month as well.

There is some paperwork involved, but our clients quickly get the hang of it.  Sometimes they need assistance if the Trust does not approve a purchase, but that’s one of the reasons they hired our firm in the first place.

How Did This Type of Trust Come About?

Pooled Income Trusts are permitted by law in order to allow disabled persons to supplement the care they receive from government assistance programs such as Medicaid.  It’s also a means of helping people stay in their own homes as long as possible.

Keeping people in their homes actually, saves the government money.  If a senior ends up in a nursing home, it is likely Medicaid that’s paying.  Even at Medicaid’s discounted rate, paying for nursing home care is almost always far more expensive than helping someone to stay in his or her own home.

Make a Pooled Income Trust work for you!  Call us today to begin your plan

What Happens to Your Income When You're in a Home?

Your monthly income, no matter how large or small, will not affect your eligibility for Medicaid Home Care.
However, Medicaid does not ignore income, and there is a limit to monthly
income. In 2020, the limit is $895 per month. If your income is above this
amount, you have “surplus income.”
When you have “surplus income,” you must either contribute it towards the cost
of your care, or deposit it each month into a Pooled Income Trust.
The Pooled Income Trust is specifically designed to protect your “surplus income.”
Using the funds you deposit, the trust will pay your normal living expenses, or for
anything else you need or want, including additional care above and beyond what
Medicaid is providing.
There are certain logistics involved in using a Pooled Income Trust. Also, there
are certain limitations: first, any payments or disbursements from your trust
account must be for your benefit, and not for anyone else. And second, any
money you don’t spend will go to charity if you move to a nursing home or you
pass on.

Download our Community Medicaid Handout

Do I Have to Pay Gift Tax?

Do Gifts Count Against Medicaid

“If I make gifts of less than $17,000, are they exempt from Medicaid?”  This is a common question, because gifts of less than $17,000 are not reportable for purposes of US Federal gift and estate taxes.

However, they are not exempt for Medicaid purposes.  Once we’re in the Medicaid world and we’re asking Medicaid to pay for benefits we may be receiving, we need to deal with Medicaid laws.

Gifts made by a Medicaid applicant are subject to a Medicaid penalty if the applicant is asking Medicaid to pay for Nursing Home services. So we need to take that into account when we make gifts of any amount, if we’re asking for Medicaid.

Download our Estate Planning Handout

What Happens to Income on Community Medicaid

Your monthly income, no matter how large or small, will not affect your eligibility for Medicaid.

However, Medicaid does not ignore income, and there is a limit to monthly income.  In 2019, the limit is $879 per month [increased to 904 for 2021]. If your income is above this amount, you have what Medicaid considers “surplus income.”

When you have “surplus income,” unless you take the proper steps, Medicaid requires that you contribute that entire amount towards the cost of your care.  This is a problem, because very few people can pay all their living expenses with only $879 [or $904] per month.  Fortunately, there is an alternative: you can deposit your surplus income into a Pooled Income Trust.  

The Pooled Income Trust is specifically designed to protect this income.  After paying the trust a small fee, the money is yours to spend, as long as you spend it on yourself.

Download our Community Medicaid Handout

Will I Get in Trouble If I Transfer My Assets?

Medicaid eligibility is based on your having only a very small amount of assets.  If you want to become eligible for Medicaid without “spending down” virtually all of your life’s savings, you will likely have to transfer your assets to another person.  

Many people worry that doing this will get them in trouble.  In fact, Medicaid will not claim that you did anything wrong.

Transfers of assets are only an issue when you are applying for Medicaid Nursing Home benefits.  With Nursing Home applications, Medicaid applies the five-year “look back,” which requires you to disclose any gifts or transfers.  If any were made within the five years preceding your application, then you may be ineligible for Medicaid Nursing Home benefits for a period of time based on the amount or value of the transfers.

For Community Medicaid applications, there is no “look back,” so your application will not be affected by any transfers of assets you may have made before you apply.

Download our Nursing Home Medicaid Handout

Use a Caregiver Agreement to Transfer Cash Assets.

This is Strategy #15 from Lamson & Cutner’s publication, “25 Strategies to Prevent Financial Ruin from Long-Term Health Care Costs.”  Click here to see the other strategies.

Caregiver Agreement is a legal contract between an individual who needs various support services and the party who is to provide them. The caregiver can be a son, daughter or other family member, a friend or a home care agency.

Download our Nursing Home Medicaid Handout

The agreement works as follows: the patient pays the caregiver in advance for services to improve well-being and quality of life. The keys to creating an agreement that will be accepted by Medicaid are:

Caregiver Agreements offer a number of advantages and can play an important role in effective planning. First, they’re an excellent way to keep your assets working for you, helping to reduce or eliminate the Medicaid penalties already discussed.

Second, they offer a way for a Medicaid recipient to receive additional care that wouldn’t be covered by Medicaid, and is outside the scope of what a nursing facility or home care attendants can provide.

And third, in the present economic environment, they supply a way for a parent to give financial assistance to children or family members who are out of work or need to supplement their income, without the individuals involved feeling as if they’re taking a handout. In this instance, Caregiver Agreements help to preserve personal dignity on both sides of the contract.

As an example of how these arrangements actually work, Lamson & Cutner drafted a Caregiver Agreement for a client who resided in a nursing home, and needed extra care and companionship beyond what the facility could provide. Her daughter was willing to supply the services, and the firm drafted a Medicaid-compliant contract that allowed her to be compensated with an up-front payment. The happy result was that mother got the extra care she needed, her daughter benefited from the additional income, and the family gained peace of mind. When her mother died, only a very small fraction of the sum the daughter initially received was turned over to Medicaid.