Disabled Americans often face extremely difficult choices when it comes to financial planning. Going over maximum income levels, even by a few dollars, can make you ineligible for benefits that you absolutely require to maintain an acceptable quality of life. That’s where outside-the-box solutions like a pooled income trust come into play.
Why Pooled Income Trusts Are Necessary
Medicaid uses extremely low asset and income thresholds to determine eligibility for benefits. Anything over the cap must be “spent down” for you to qualify for Medicaid coverage. Unfortunately, under New York Medicaid rules, income over the maximum cap can’t be spent on the basic cost of living expenses like phone, rent, food, or utility bills.
That “excess” income must instead be spent down on in-home care or other medical costs, which frequently puts disabled individuals in a situation where they don’t have enough money to pay both medical and basic living costs.
Normally, assets placed into standard types of trusts still count against income maximums for Medicaid coverage. There is a workaround available, though. Assets placed into a pooled income trust don’t count at all and are disregarded by Medicaid when the program looks at your monthly income and expenses. That means a pooled income trust can be extremely helpful for:
- Anyone considering applying for government benefits
- Accident victims who have received a personal injury settlement but still need assistance from Medicaid
- Younger New York residents with disabilities or special needs
- Elderly people facing the prospect of either a nursing home stay or making expensive changes at home to age in place
How a Pooled Income Trust Works
In order to benefit from a pooled income trust, you must either be disabled or over the age of 65. If you qualify, you can join an existing pooled income trust as a beneficiary and are then assigned an individual account. In some cases, the account can be set up by a disabled person’s parent, guardian, grandparent, or count-appointee instead.
Each person who joins as a beneficiary deposits money from their regular income to the trust account monthly. That income could come from sources like settlements, retirement funds, social security, IRA distributions, and so on.
You can’t withdraw those assets from the trust in the form of cash. Instead, you submit cost of living bills—like cell phones, electricity, mortgage, and so on—that would have been paid with those assets. Someone who works at the trust uses the funds in your account to pay them on your behalf while skirting Medicaid’s income spend down requirements.
While this is an extremely useful way to use income for necessary expenses and still utilize Medicaid, there are restrictions you need to know about ahead of time. For instance, assets in your account can only be used to pay for personal expenses, which means purchases must be approved by the trust. The upside is that you can use a credit card for payment for necessary items like clothing or travel expenses on a credit card, and then submit the credit card bill to be paid by the trust.
There are additional pros and cons to be considered, as each trust is administered differently by various nonprofit organizations, and they can have varying fees. An experienced New York attorney can help determine which trust might be the best fit for you. After joining a pooled income trust, an attorney can also assist if you have difficulties with the paperwork or need to understand why certain bills were approved or denied.
Talk With a New York Medicaid Planning Attorney
If you find yourself needing Medicaid coverage immediately and can’t spend down your money (or run into issues with the program’s five-year lookback period), we want to help. If you’re considering joining a pooled income trust to help with Medicaid benefits or are looking for other options suited to your unique financial and family situation, get in touch today.
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