Medicaid recipients are required to contribute their “surplus” monthly income to their care provider before they can receive benefits. Specifically, an individual is only entitled to keep a maximum income allowance each month and any monthly income over this amount must be “spent down” before Medicaid will pay for the individual’s care. However, qualified elderly and disabled individuals in need of home care or community services can use all of their excess income to pay for their living expenses by participating in a Pooled Income-Only Trust.

What Are Pooled Income-Only Trusts? 

Pooled Income-Only Trusts are a type of Special Needs Trust that is established and managed by a not-for-profit, charitable organization. Elderly and disabled participants contribute their excess income to the pooled income-only trust to be managed along with other participants’ funds. The money in the participant’s trust account can be used for the participant’s living expenses, including mortgage payments, rent, food, utilities, recreational activities, clothing, etc. Like all special needs trusts, disbursements from the trust are not issued directly to the individual but rather to the provider of the item or service (landlord, mortgagor, retailers, vendors, etc.). Upon the death of the participant, any balance remaining in the participant’s account will be distributed to the not-for-profit, charitable organization that was managing the pooled income-only trust to further its charitable purposes.

All individuals who qualify as disabled pursuant to Social Security laws are eligible to establish a pooled income-only trust. Pooled income-only trusts allow a qualified individual to retain all of his or her income while remaining eligible for Medicaid community benefits.

Covering Daily Expenses With Pooled Income-Only Trust Assets

You’ve established a pooled income-only trust and your excess monthly income (for Medicaid purposes) is being deposited to your trust account. Now, let’s consider how the beneficiary may use the funds.

What Expenses Can Be Paid With a Pooled Income-Only Trust? 

Each non-profit organization that manages pooled income-only trusts has its own rules, but generally speaking, the following items are approved expenditures:

  • Groceries, toiletries, and clothing purchased for the beneficiary
  • Electronics and furniture purchased for the beneficiary
  • Day trips, including the beneficiary’s ticket/price of admission, meals, and souvenirs
  • Restaurant charges (the beneficiary’s meal only)
  • Rent/mortgage payments (but rent cannot be paid to a family member)
  • Utility bills and real estate taxes on a home owned by the beneficiary
  • Additional companion/aide that is not covered by Medicaid and is employed by a reputable agency
  • Telephone bill or beauty parlor charges incurred in a health care facility
  • Pre-need, Irrevocable funeral plans
  • Legal fees
What Expenses Can Not Be Paid With a Pooled Income-Only Trust?

The following items cannot be paid from an individual’s pooled income-only trust account:

  • Tobacco, alcohol, or firearms
  • Purchases not for the sole benefit of the beneficiary
  • Gifts for others
  • Bills/invoices/receipts not in the beneficiary’s name
  • Medical bills/Co-pays/Prescriptions
  • Nursing home bills (spend down/surplus)
  • Rent/mortgage after the beneficiary has been in a nursing home for three months

All eligible disbursements must be submitted with a disbursement form and a copy of the bill, invoice, or receipt. Some clients prefer to charge all such expenses to a credit card and submit the credit card bill for payment. Note that these lists are for general information purposes only and are not exhaustive. Other expenses may be approved on a case-by-case basis.

There are various options available to care for a special needs adult or child, but proper planning is the key to accomplishing your objectives. A pooled income-only trust may be the best option.