Medicaid provides essential healthcare coverage for low-income individuals, including seniors and people with disabilities. However, to qualify, applicants must meet strict income and asset limits. In many states, an individual cannot have more than $2,000 in countable assets. If they exceed this limit, they must “spend down” their excess funds before becoming eligible for benefits. For those who require Medicaid but have too much in savings or investments, a pooled trust offers a way to preserve their assets while maintaining eligibility.

What Is A Pooled Trust?

A pooled trust is a professionally managed account designed to assist individuals with disabilities and seniors in maintaining Medicaid eligibility while still using their funds for necessary expenses. The money deposited into the pooled trust is managed by a trustee, who then disburses payments on behalf of the individual according to the terms of the trust.

Unlike certain types of trusts that restrict distributions to medical necessities, pooled trusts allow for a broader range of expenses. Funds can be used for various personal needs, such as housing costs, utilities, entertainment, and other living expenses. However, all distributions must be approved by the trustee.

Without a pooled trust, excess funds in a checking or savings account would disqualify an individual from Medicaid, forcing them to deplete their assets before becoming eligible.

Advantages of A Pooled Trust

One of the key advantages of a pooled trust is its flexibility in spending. Unlike other Medicaid planning strategies, pooled trust funds can be used for both essential and non-essential expenses, such as travel, home modifications, or entertainment. Additionally, because the trust is professionally managed, individuals benefit from responsible oversight and financial planning. Some pooled trusts also invest the funds, potentially earning returns that help offset administrative fees.

Drawbacks to Consider

Since the trust is professionally administered, fees are charged for managing and disbursing the funds, and investment returns are subject to market fluctuations. Additionally, upon the individual’s passing, any remaining funds in the trust must first be used to reimburse Medicaid for the cost of care provided. As a result, little to no money is left for heirs, making pooled trusts less ideal for those looking to leave an inheritance.

Is A Pooled Trust Right For You?

Pooled trusts are a powerful Medicaid planning tool for individuals who need assistance but have assets above the eligibility limit. While they provide an immediate path to qualification and offer spending flexibility, they may not be the best option for those hoping to pass down wealth to family members.

If you or a loved one need Medicaid planning assistance, contact an estate planning and elder law attorney to discuss your options.