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5 Things to Know About Pooled Trusts in Florida

5 Things to Know About Pooled Trusts in Florida
October 30, 2022

Healthcare for aging or disabled individuals can become a huge financial burden. Medical treatments, long-term care, and expensive medications can easily blow through someone’s entire life savings. So, if you don’t qualify for Medicaid programs, how can you prevent yourself from going broke paying for your care later in life? That’s where pooled trusts - one of a number of Medicaid-planning strategies, come into play.

An elder needs lawyer in Florida can work with you to ensure your money is protected legally and ethically using estate planning strategies and financial tools.

Here are five things to know about pooled trusts in Florida:

If you're on a long-term care Medicaid plan, anything in a pooled trust does not count against your $2,000 asset limit.

This is really important for folks who are on the Florida QMB, Medicaid waiver or the Medicaid ICP program. Whether you’re receiving care at home or in a facility, you are typically only allowed to have $2,000 to your name. You could have any amount more than that if it's in a pooled special needs trust. 

However, it is important to note that pooled trusts are not without their drawbacks. Our elder care lawyers do not always recommend pooled special needs trusts, and when we do Pooled Trusts are usually paired with other Medicaid-planning tools. However, in the right circumstances, pooled special needs trusts are wonderful ways to keep our Medicaid applicant eligible and financially liquid.

Money placed into a pooled special needs trust is not a gift.

That's very important because Florida long-term care Medicaid plans prohibit gifting. If you take money out of your name – within five years of applying – and transfer it to a friend or a family member, that's considered a gift and there will be a resulting penalty. However, transferring money instead to a pooled special needs trust will not result in a gift penalty.

Money in a pooled trust can be used for anything that the disabled Medicaid recipient needs or wants with very, very few restrictions.

The only time that there are restrictions is if the Medicaid recipient is also a social security income (not social security retirement, but social security income benefit). If the Medicaid applicant is also on SSI, then (and only then) there is a list of 10 items that the trust cannot pay for (referred to as "in-kind support and maintenance", but if you're not on SSI – if you're only on Social Security retirement – then a pooled trust can pay for anything that the Medicaid or disabled beneficiary needs or wants.

It can pay for necessities like additional home care hours, or entertainment expenses, like going to a baseball game or going to the theater or travel expenses. However, pool trust will not allow you to abuse this.

What I mean by that is, let's say that a special needs individual wants to take a vacation or a trip. The pool trust is not paying for a family reunion. The pool trust will pay for whatever is reasonable for the disabled beneficiary to be able to handle traveling. So, they'll pay for their hotel, their airline expenses, and maybe for the hotel and airline expenses for one other individual - if they need someone's assistance in order to successfully travel. But they're not going to pay for the whole family to go on their trip.

Another way pool trust companies sometimes see this – the attempted abuse – is, for example, if a disabled elderly relative is living with someone who isn't disabled and who isn't on Medicaid, and let's say there's a mortgage payment. Let’s say there are home expenses. Well, there are three people living in the home, one of which is on Medicaid, who is the beneficiary of a pooled trust. They are not going to pay for all of the housing expenses that go along with maintaining that house, but they may pay for a third of it, right? If there's three people living in a house, that might make some sense. So, these trusts really are designed to only pay for what the disabled individual needs or wants or their fair share of expenses.

Pooled Special Needs Trusts can be used for Excess Income

Qualified Income Trusts (aka Miller Trusts) are the go-to tool when income exceeds the income cap. However, QITs have the drawback re: how funds can be spent (i.e. QIT withdrawals can only be spent on health or medical expenses). However, Pooled Special Needs Trusts have no such restriction and can be used in lieu of Income Trusts for those who have too much combined income.

A relative cannot be the trustee of a pooled trust or a pooled special needs trust.

You have to use a non-profit professional trustee. These are not free, but typically their fees are very reasonable. You'll typically find a one-time entrance fee – usually around $500 to $1,000; and that's their welcome-to-the-family-fee. Then, on a yearly basis, they'll charge somewhere typically between two and 3% of whatever they're managing.

You have a choice, typically, with pooled trusts as to whether or not you want that money invested to try to do better than the two to 3% fee or if you want to hold the money in cash and accept the fact that the administrative fees will somewhat eat into the principal. And that's a very personal decision.

Funds Remaining in a Pooled Trust is Subject to Medicaid Estate Recovery

If there are funds left in the trust when the Medicaid beneficiary passes away, the trust is obligated to notify Medicaid, and Medicaid will then send a bill. They keep track of whatever anyone over the age of 55 has – what bills they've incurred while on the Medicaid program – and Medicaid wants to get paid back first. Only if there's money left over after Medicaid is paid back is there a chance that family members might get to inherit.

There are a couple of exceptions to this. If there is a married couple, and both of them are on Medicaid, you can't have both of them in the pool trust, and if the first spouse to pass away has funds leftover, typically the pooled trust will allow you to transfer whatever's leftover into the surviving spouses account. So that's kind of one exception to that.

But generally, what I tell people is that if you're putting money into a pool trust you do so feeling comfortable that no matter what happens to anyone, money is going to be there for the individual on Medicaid. You don't think of it as inheritance. You don't expect to see any of it after the disabled individual passes away, and that's just something we have to live with.

Typically, especially when we're doing Medicaid planning for someone who has substantial assets, we're never recommending the pooled trust as a standalone Florida Medicaid eligibility strategy. It’s not the only thing that we're doing. We'll use it in combination with other strategies that don't have that Medicaid payback requirement.

So, those are five things that are really important for you to know about pooled trust.

Because our philosophy is to always deliver more than what is expected, here is a bonus note on Pooled Trusts

Pooled Trusts for Those over age 65 who have SSI

Prior to 2022, if someone on SSI (not to be confused with social security retirement or social security disability insurance, SSDI) were to transfer funds to a pooled special needs trust, such transfer would be penalized.

However, some administrative court decisions from 2021 and 2022 have reversed this long-standing policy to now allow SSI-recipients (even if they are over the age of 65) to join pooled trusts provided that doing so is reasonable and that they are doing so for fair market value or other valuable consideration. In the eyes of the social security administration, fair market value means that the funds in the pooled trust will likely be distributed before the SSI-recipients date of death. The SSA's life-expectancy calculator can be found by clicking the link. POMS SI 01150.005.5.C provides the policy that a transfer is fair if the transferor may actually receive the compensation before, at, or after the actual time of transfer (i.e. in other words, you can receive the value after the time of transfer, not necessarily contemporaneously with the transfer, this is why your elder law attorney must show that they will get the funds back within their lifetime).

The ALJ in the case in question found that if these (and some other) conditions are met, that it would invoke 42 USC Section 1382b(c)(1)(C)(iii)(I): which exempts a transfer from being penalized, "if the individual who disposes of the resources intended to dispose of the resources either at fair-market value, or for other valuable consideration." 

If you are anywhere in Florida and you're interested in learning how to protect your assets now to qualify for Medicaid long term care benefits, Elder Needs Law is happy to talk to you. We can discuss pool trusts and all the other great strategies that we have to legally and ethically prevent you from having to go broke before applying for Medicaid.

You don't have to wait five years, that’s another big misconception. If you're interested, please call our office and schedule a consultation. We're here to help.


Find more helpful resources:

●     Can I keep Florida Medicaid if I temporarily have more than $2,000?

●     Dual Eligibility for Medicare and Medicaid: What it means for you

●     Medicare Home Health Care benefit explained

●     Can you get Home Health Care while also on hospice?

●     Nursing home ratings: How to find a high-quality home

Jason Neufeld is the Founder and Managing Partner of Elder Needs Law, a Florida estate planning and elder law firm he created in 2017. With more than 15 years of experience practicing law, he represents clients in a wide range of legal matters, including Medicaid planning, estate planning, elder law, probate, Medicare, and life insurance.

Jason received his Juris Doctor from the University of Miami — School of Law and is a member of the Florida Bar and the Broward County Bar Association. He has received numerous accolades for his work, including being named a Rising Star and Super Lawyer by Super Lawyers and among the Florida Legal Elite by Florida Trend in 2024.

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