New York Estate Planning & Elder Law Blog
COMMON LEGAL WAY TO PROTECT EXCESS INCOME
Unfortunately many means based programs, such as Medicaid, are strict in their qualifying criteria. Depending on the specific facts you may not qualify for Medicaid and even as little as twenty dollars a month can make a difference. There is no sliding scale of benefits based on your income. Each state has its own financial thresholds for income qualification, given the drastic difference in cost of living throughout the country. New York only allows for up to $845 in income, anything above that will disqualify the potential recipient. So what of the millions of men and women throughout New York that live on modest means and yet still receive more than $845 in monthly income? For example, a person in Manhattan or even Long Island who earns approximately $2,000 per month does not live luxuriantly, yet he/she may need certain services and does not want or even need to go into a nursing home facility for those services.
Pooled trusts allow for seniors to setup their own trusts so that they can still live a respectable and modest life and not be required to turn over all of their income to the state for Medicaid eligibility. In the case of the senior above, he/she would $1,155 ($2,000 – $845) to a pooled trust that they joined so that he/she could still qualify for Medicaid and have money left to pay bills and perhaps enjoy their normal lifestyle with family and friends without much financial impact.
LIFE GOES ON AS BEFORE
Pooled trusts allow life to carry on with little interruption by allowing the beneficiary to pay for their cable bill, internet bill, car note, rent or mortgage, repairs to your home without complication. There are few limits on what a pooled trust is allowed to be used for by the beneficiary. In fact, the only meaningful requirement or limitation on the utilization of the pooled trust is that the money can only be spent by the Medicaid recipient for or on behalf of the Medicaid recipient. In addition, if a pooled trust beneficiary sells an asset, he/she must sell it for fair market value and transfer the money into the pooled trust. If the sale or transfer is for less than fair market value, he/she may be subject to a transfer penalty.
STRICT RULES FOR POOL TRUSTS
Pooled trusts are similar to special needs trusts. The difference and function between the two is largely legal in nature although the legal distinctions between the two matter enough to have a significant impact on the lives of people who make the mistake of choosing one over the other. As such, it is critical that the beneficiary join an established, certified trust to benefit from the legal protections granted to pooled trusts beneficiaries. Money put into a pool trust by beneficiaries over the age of 65 may be subject to certain penalties. Unfortunately, any money left in the trust does not pass to the heirs of the beneficiary. Other than funeral expenses and expenses incurred during the life of the beneficiary, no other expenses may be paid out of the beneficiaries account.
If you or a loved one believe you would benefit from the utilization of a pooled trust, you must consult with an experienced elder law attorney.