Photo by Tim Mossholder on Unsplash

Question:

I am considering a Pooled Disability Trusts for a family member who is over 65. It would be a self-funded trust. What happens if I start the trust process, but the relative passes before the trust is completely set up? Secondly, if the trust is completely set up and funded, does it go through probate when the relative passes?

Response:

As you know, many public benefit programs such as Medicaid and Supplemental Security Income require those seeking benefits to spend down virtually all their assets before they will be eligible for coverage. They also penalize most transfers of assets with a period of ineligibility of up to five years following the transfer. One exception is transfers to special “safe harbor” trusts, often referred to as (d)(4)(A) or (d)(4)(C) trusts, referring to the statutes that authorize their creation. Both types of trusts only work if they provide that any funds remaining upon the beneficiary’s death be paid back to the state to the extent of its Medicaid expenditures on the beneficiary’s behalf. So called (d)(4)(A) trusts are individual trusts that must be created and funded before the beneficiary reaches age 65. So called (d)(4)(C) or “pooled disability” trusts are created and administered by non-profit organizations for many beneficiaries. Some states allow their funding after age 65, which appears to be the case in your state.

With that background, we can now turn to your questions. First, if you haven’t yet funded the trust before the beneficiary passes away, you won’t have to go complete the process. You can stop at that point.

Second, if the trust is funded during the beneficiary’s life, you should not need to go through probate upon his or her death. The trust should pay out under the terms of the trust whatever is left after Medicaid reimbursement (and any hold back trust may require according to its policies). But check with the particular pooled disability trust to be certain that it gives you the same answers.

Related Articles

(d)(4)(C) or Pooled Disability Trusts Shelter Assets for the Disabled What Can I Do If My Pooled Trust Screws Up? How does Plan for Child with Disability Affect Mom’s Medicaid Planning