Pooled Trusts for those over 65

For quite some time, attorneys in Michigan and other states have been unclear on whether transfers by individuals over 65 to a pooled trust constitute divestment under the Medicaid rules for patients of nursing homes. Divestments are penalized, meaning that Medicaid benefits are not provided until a certain point when the penalty expires. Pooled trusts "pool" the funds of many beneficiaries. Non-profit associations then manage the trusts. Pooled trusts have generally been considered good public policy.



The Centers for Medicare and Medicaid Services (CMS) recently issued a bulletin on this issue. CMS confirms that such transfers may be penalized.



Elder Law Answers provided the following discussion to its members:



Discussion among attorney members of the Acadmey of Special Needs Planners has raised questions about the memo's applicability.
Because the CMS bulletin on pooled trusts is a regional bulletin, it is likely the bulletin applies only to Medicaid agencies in Region I, which covers Connecticut, Massachusetts, Maine, New Hampshire, Rhode Island, and Vermont. There is also an argument the policy applies only to subsequent funding or augmentation of an existing trust, not the initial funding.
A pooled trust is a trust established for a disabled individual under §1917(d)(4)(C) and are often called (d)(4)(C) trusts. The bulletin issued on May 12, 2008, states that "funds placed in a pooled trust established for an individual age 65 or older may be subject to penalty as a transfer of assets for less than market value."
It is unclear whether states in Region I will need to change their regulations to come into compliance with the new directive or whether pooled trusts can still be used as a Medicaid planning technique.