Becoming eligible for MassHealth, the Massachusetts version of Medicaid, requires walking a financial tightrope. An applicant with too much money must get rid of it in order to become eligible – but once she’s approved, she may not have enough to cover basic needs, let alone incidentals. For people in that situation, maintaining the financial balance that MassHealth requires is a monthly struggle.
Creating a pooled trust is one workaround to this conundrum. This is particularly useful for people with disabilities. Using pooled trusts can be a great way to become eligible for MassHealth without spending down all your assets.
Walking the MassHealth Tightrope
Like other state-run Medicaid programs, MassHealth has strict asset limits. It will only pay for long-term care for residents who don’t have the means to afford their own care. Currently, MassHealth will only accept an applicant with less than $2,000 in countable assets in his or her name. Giving money to a relative or friend isn’t a viable path to eligibility. MassHealth looks back over five years of an applicant’s financial records and making large gifts is also grounds for rejection.
If you’re deemed eligible, MassHealth will continue to monitor your financial picture. That picture can be bleak: MassHealth only allows each member to keep $72.80 per month for personal needs. Residents in long-term care have their food and lodging covered, but other expenses must come out of that $72.80. Those expenses might include household supplies, clothing, gifts, travel, entertainment and medical bills not covered by MassHealth (such as dental work and eye glasses).
Obviously, this restriction is a significant hardship for many people, and it forces Massachusetts residents to strategically manage their assets.
How Pooled Trusts Work
A pooled trust is a type of trust that’s opened and administered by a nonprofit organization to protect the assets of people with disabilities. (Elderly people who need intensive care can qualify, as can younger people with special needs.) Many beneficiaries pay into a single trust. All the money is pooled, but individuals maintain their own separate sub-trust. Trust administrators use the pooled money to make investments, and beneficiaries typically pay small administrative fees.
Money that’s kept in the pooled trust is exempt from the MassHealth asset limits, so someone who has $2,500 or $5,000 in a pooled trust can maintain MassHealth eligibility and receive public benefits, while still having access to that supplemental money.
Pooled trusts are similar to but not synonymous with special needs trusts. A special needs trust may be administered by someone close to the beneficiary, while pooled trusts are managed by third-party administrators. Another key difference is that special needs trusts have age limits. Pooled trusts don’t, so MassHealth applicants older than 65 may participate in them. Administrative fees are generally lower with pooled trusts than with special needs trusts.
Before entering a pooled trust, it’s important to understand what will happen to your pooled assets after you die. The funds you pay into the pool won’t become part of your probate estate and be automatically passed on to the named beneficiaries. MassHealth is the primary beneficiary, and the agency can also recover money from your sub-trust as reimbursement for the benefits it provided during your lifetime (after your death). If there’s anything left, that money can be distributed to the secondary beneficiaries named by the deceased.
If you or a loved one anticipates applying for MassHealth coverage, now’s the time to consider joining a pooled trust. Contact the Ladimer Law Office with any questions about pooled trusts and other estate planning issues.
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