Consider A Pooled Trust If An Immediate LTC Need Arises

In order to best protect assets from long-term care costs, pre-planning is always the best option.

A wide array of planning strategies are available to help keep property in the family or to protect property for charitable beneficiaries. Even for individuals going into long-term care immediately, what we call the "crisis case," a high percentage of assets can be protected by using a combination of trust planning and Medicaid compliant annuities.

Because Medicaid eligibility requires less than $2,000 in assets (with some exceptions), anyone with resources higher than that threshold will find they will not qualify until they have spent down the excess. For those with significant property, trust creation is well worth the cost and time.

However, those with limited assets who simply need immediate qualification, individual trust planning is not the best option. An often overlooked option for those with a disability and limited assets is the pooled trust.

Pooled trusts are a type of special needs trust. Unlike first-party special needs trusts, which can be funded only until the recipient reaches 65 years of age, pooled trusts can be established for any age, although they are most frequently used for individuals older than 65.

Pooled trusts are authorized specifically under federal law and are mirrored under state law. Unlike traditional asset protection trusts or special needs trusts, which generally have friends or family members as trustees, pooled trusts are serviced by non-profit, tax-exempt agencies within each state. Kentucky has four pooled trusts: CPT Institute, Kentucky Pooled Trust, Life Plan of Kentucky Inc. and Midwest Special Needs Trust.

Funds within pooled trusts are invested together, but each recipient maintains a separate account. This money can be used to meet additional needs not covered by Medicaid or Medicare. For recipients of Medicaid for Long-Term Care, a pooled trust could cover additional living expenses such as clothing, beauty and hair care, and supplemental health aids. For recipients of Medicaid through a Home & Community Based Waiver program or another type of Medicaid waiver program that allows individuals to remain at home, the pooled trust could be used to help cover living expenses and care-giving costs.

There are several benefits of utilizing a pooled trust. It allows an individual to protect his or her own assets for immediate qualification for government benefits. By pooling the assets, the agency is better able to invest, giving more stability to the pooled trust.

Assets will last longer as a supplement to the additional government benefits, rather than supplanting benefits. Pooled trusts also do not have the upfront cost of a traditional trust.

A pooled trust also is a good option for those already qualified for government benefits who receive a small amount of money, usually through an inheritance or lawsuit, but enough to potentially make them ineligible for benefits. The individual simply fills out the pooled trust contract to set up the account, then deposits the money that is in excess of the asset limit into the trust. The pooled trust agency works with the recipient to make a plan for the money.

The primary disadvantage of using a pooled trust is it has a payback provision to the state. This allows the recipient to obtain government benefits immediately, but the trust will be required to reimburse the state with any remaining funds upon the recipient's death.

Pooled trusts are best suited for disabled individuals with limited assets who need to immediately qualify for government benefits, which usually are medical benefits. For those individuals, the advantages far outweigh the disadvantages and may provide a small level of ongoing financial independence to the recipient.