Individuals with disabilities often rely on public benefits
from programs like Supplemental Security Income (SSI) and Medicaid to meet
their basic needs. These programs require beneficiaries to have limited
financial resources. The receipt of a small inheritance or the settlement of a
law suit can cost the individual his or her benefits.
What is a Pooled
Trust?
A pooled trust is a way for individuals with disabilities to maintain
their public benefits while setting aside some funds with which to pay for their
special needs. The trust is managed by a nonprofit organization that receives
assets from multiple beneficiaries, maintaining a separate account for each,
but pooling the accounts for purposes of investment and management.
Funds such as an otherwise disqualifying inheritance or
settlement can be transferred to a pooled trust account for the disabled
person. Accounts in a pooled trust may be established by the parent,
grandparent or legal guardian of the individual with a disability, by the
individual with a disability or by a court.
Congress has favored the use of pooled trusts since 1993 when
it exempted them from the normal Medicaid long-term care resource and transfer
restrictions. (Note that funds placed in a pooled trust account established for
someone age 65 or older may be subject to a transfer penalty). The federal
law governing pooled trusts is set out in 42 U.S.C. §1396p(d)(4)(C).
Federal law provides that to the extent that amounts are
remaining in a pooled trust beneficiary’s account at death the balance of the
account may be retained by the trust and used to benefit its other
beneficiaries. Any amounts that are not retained by the trust must be paid to
reimburse the State up to the total amount of medical assistance it paid on
behalf of the beneficiary.
Act 42: Pennsylvania
Attempts to Limit Pooled Trusts
In Act 42 of 2005, Pennsylvania enacted a number of questionable
restrictions on the operation of pooled trusts. Included in Section 1414 of Act
42 (62 Pa. Stat. Ann. §1414) was a provision that a pooled trust could retain
no more than 50% of the amount remaining in the account of a deceased
beneficiary. This was contrary to the federal law which allows the trust to
retain 100%.
Act 186 of 2014
Senate Bill 428 was initially introduced to make a slight
change in the wording of the Pennsylvania statute governing pooled trusts. (See
the Senate
Co-sponsorship Memorandum). As initially introduced the bill would have re-codified
the mandatory 50% state reimbursement requirement that had been already been thrown
out by the Federal court.
Aghast elder law attorneys noticed the bill and informed its
sponsors that their legislative proposal would re-enact a provision that was in
violation of federal Medicaid law. Eventually, after much discussion (which
included legislative consultation with federal Medicaid authorities) the
sponsors agreed and modified the bill to delete the illegal state reimbursement
provision.
SB 428 as amended was passed by the legislature and has now
been signed into law by Governor Corbett as Act
186 of 2014. Act 186 does not actually change the enforceable law. It just cleans up
Pennsylvania law on pooled trusts by deleting the 50% state reimbursement
requirement that has been thrown out by the Federal Court.
Regarding state reimbursement, Pennsylvania law will
now provide that “any money remaining in a beneficiary’s account upon the death of
the beneficiary that is not retained by the trust will be paid to the
Commonwealth, up to the total amount of Medical Assistance paid on behalf of
the beneficiaries.”
The Bottom Line
Pooled Trusts represent an important planning option for disabled
individuals and those who want to help provide for them. For more information
on whether a pooled trust is right for your situation Pennsylvania residents
should talk with a knowledgeable elder law attorney like those at Marshall, Parker and Weber (1-800-401-4552)
or contact one of Pennsylvania’s pooled trusts such as Achieva Family Trust (1-888-272-7229).
