Question:
In Pennsylvania, does money in a third-party trust count as Medicaid income or asset if a beneficiary or his wife is on SSDI?
Response:
I can’t tell you about Pennsylvania in particular (I practice in Massachusetts), but the rules should be the same in all states and the results depend on the terms of the trust in question. Funds in a trust are an asset, not income. However, money distributed to the beneficiary may or may not be considered to be income.
If the trust is a third-party trust as you indicate, meaning that it was created and funded by someone other than the beneficiary, in most cases it will not be considered an asset of the beneficiary. However, there are two circumstances that might cause the trust assets to be deemed to belong to the individual applying for Medicaid.
First, if the trustee has an obligation to distribute the funds in the trust, then they are considered available to the beneficiary. If distributions are discretionary, then they are not countable.
Second, if the beneficiary has the right to withdraw funds from the trust, then they will be considered available and could make the beneficiary ineligible for Medicaid benefits.
That’s the asset side of the story.With respect to income, distributions from the trust to the beneficiary generally are considered to be income for Medicaid purposes. However, distributions made on behalf of the beneficiary generally are not considered to be income. For instance, if the trust distributes $1,000 a month to the beneficiary and the beneficiary uses that to pay their rent, that would most likely be considered to be income for Medicaid eligibility purposes. However, if the trust pays the landlord directly, it won’t count as income. (The rules are somewhat different for Supplemental Security Income (SSI), but you say that the beneficiary or his wife are receiving Social Security Disability Income (SSDI), not SSI.)
