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Special Needs Pooled Trust for Individuals 65 or Older Threatened

Special Needs Pooled Trust for Individuals 65 or Older Threatened: A Radio Interview of Attorney John R. Frazier by Attorney Joseph Pippen


A complete transcript of the program begins below:

Attorney Pippen:             Let’s go to attorney John Frazier calling in. Good morning, John.

Attorney Frazier:              Hey, Joe. How are you doing today?

Attorney Pippen:             I’m doing good. So what’s our Medicaid VA planning tip of the week this week?

Attorney Frazier:              Today, I’m going to talk about some interesting news and a recent development with the Florida Department of Children and Families also known as DCF. Last month, the Department of Children and Families made a very significant change to their policy manual regarding the use of a special needs pooled trust for individuals 65 or older. And there was no notice given to the public regarding this change. And so it raises a lot of concerns as to whether or not this change may violate federal law or violate the Florida Administrative Procedures Act. And last month, the State of Florida made changes to primarily two provisions which impact the use of a pooled trust, 1640.0576.08 and 0.09. And basically, the State of Florida is trying to either curtail or completely eliminate the use of a pooled trust to obtain or shelter assets and/or income to obtain Medicaid benefits for individuals 65 or older.

This type of trust has been authorized under federal law since 1993, under a federal statute called the Omnibus Budget Reconciliation Act of 1993, also known as OBRA ’93. It’s been a very helpful asset restructuring strategy to have for our clients 65 or older. It can also be used to shelter or enable a person whose income is over the Florida income cap to obtain Medicaid. Florida has an income limit for Medicaid and that cap this year is $2,382 per month in gross monthly income. So as a result of these changes, the State of Florida has created uncertainty as to whether or not we can use this trust for individuals 65 or older. As a result of these developments, the Florida Bar Elder Law Section and the Academy of Florida Elder Law Attorneys has a joint task force called the Florida Joint Public Policy Task Force.

And the Task Force immediately addressed this with the State of Florida. And as a result of the quick efforts by the Task Force on May 4th, the Department of Children and Families has decided to put this change on hold as of May 4th. So at the moment, it appears that we can use the trusts for 65 or older individuals. But, I think the future is uncertain. If the State of Florida decides to move forward with this change, I think litigation is highly likely against the State of Florida. So, that’s a basic summary of this recent change.

Attorney Pippen:             All right, John. Give us an example of when a client would use the pooled trust to qualify for Medicaid.

Attorney Frazier:              Okay. I can give two simple examples. In one situation, let’s say you have an individual who has $50,000 in their checking account, and $1,000 a month in Social Security, they’re 70 years old in a nursing facility. So you can take the $49,000 bringing the countable assets to less than $2,000, put those in this trust and then that money is then exempt for Medicaid purposes, and the Medicaid applicant has access to that money for the rest of their life for anything that would benefit them. So the other side or the downside of this is that the State of Florida has a claim on that money when the Medicaid recipient passes away. But during the Medicaid recipients lifetime, the Medicaid recipient has access to that money. In the next example, let’s say that you have an individual with $1,500 in their checking account and $3,000 a month in gross monthly income.

That individual would either need a Qualified Income Trust or a special needs pooled trust to shelter that excess income over the income cap of $2,382 a month. So we could set up the pooled trust, take most of the person’s monthly income each month, put it into either the pooled trust or the Qualified Income Trust and then pay the Medicaid portion called the Medicaid patient responsibility, which is based on the Medicaid applicant’s monthly income, and then the person would be on Medicaid. So it’s a very useful tool to have. And I think it would be very unfortunate if we could no longer use this strategy for individuals 65 or older.

Attorney Pippen:             Now, one of the other options, of course, is not to use those types of funds but use the personal service contract correct?

Attorney Frazier:              Yeah. And that would be on the asset side. So the State of Florida has both a $2,000 asset limit for the Medicaid applicant as well as this income limit of $2,382 a month in gross income. So going back to the $50,000 example, instead of using the pooled trust, we could take the $49,000, pay that to a family member caregiver under written personal services contract and that would be a permissible way to shelter the extra assets over $2,000. The downside of the personal services contract, however, is that the recipient of those funds would have to pay income taxes on those funds. So that’s the problem with that strategy.

Attorney Pippen:             Yeah. When you compare the two though, a person pays income tax on $50,000 as opposed to not getting anything at the end of the day from the… Well, I don’t know, they could be a smaller claim on the income trust, I guess, or on the pooled.

Attorney Frazier:              Well, yeah.

Attorney Pippen:             The State of Florida could just put a claim for $20,000 if that was the expense, and then the heirs would get the rest of the money. Correct?

Attorney Frazier:              Exactly. So I think when you use the pooled trust to shelter assets, I think we make it clear to the family that it’s unlikely that the money will be inherited. However, if the Medicaid lien is less than what’s in the pooled trust at the time of the Medicaid recipients death, you can open up a probate proceeding, pay the State of Florida the Medicaid lien, and then distribute the funds to the beneficiary. So, it is possible that the beneficiaries could receive estate funds through the pooled of trust. It just really depends how long the person has been on Medicaid and how much money is in the pooled trust.

Attorney Pippen:             All right. So the listeners, if you have someone in a nursing home or they’re getting ready to go into a nursing home, you have probably many options. You have many options to plan the estate, to preserve the estate, to protect the legacy, to maximize government benefits, but you need really a qualified Medicaid attorney to maximize benefits in protecting estate. So John, give us all of your contact information, anyone interested in contacting you for further information.

Attorney Frazier:              Sure. In addition to working with Medicaid applicants for our nursing facilities, we also have a large number of clients looking for Medicaid in an assisted living facility. So the planning really applies to both scenarios, assisted living or nursing facility. Same for both with Special Needs Pooled Trust for Individuals 65 or Older Threatened. The office number is (727) 586-3306, extension 104. My cell phone is (727) 748-5374. And my email address is John,

Attorney Pippen:             All right, John, you have a great Sunday. Thanks for calling in.

Attorney Frazier:              Okay. You too. Thank you very much.

Attorney Pippen:             All right. Thank you.

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