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By John M. Bigler This month I take the opportunity to discuss a relatively new and very effective planning tool for people who are interested in medical assistance through the Medicaid program in the community. I am going to discuss the pooled charitable income trust.
For most people interested in community Medicaid, satisfying the medical need is simply a matter of having the doctor prepare a form indicating what services are necessary, such as home health aide, adult day care or even the need for prescription coverage.
In 2005 the resource limitation for an individual on Medicaid is $4,000. However, since 1989, when the Medicaid Catastrophic Coverage Act went into effect in New York State, there are no penalties for transferring assets, so it is relatively easy for an individual to meet the resource requirement by simply transferring assets over and above the resource limitation.
The problem for many seniors in applying for community Medicaid has been the income limitation. In 2005 an individual applying for Medicaid is allowed to keep only $687 a month. Any income over and above that amount would have to be spent on the individual's medical needs before Medicaid would pay the balance of the monthly medical expenses. The $687 is designated for those items that are considered "luxuries" under Medicaid - for example, food, clothing and shelter.
I am not aware of too many people on Long Island that can survive paying their basic needs on $687 a month. Therefore, the problem would be for an individual whose resources are limited and could not afford to pay for home health care on their own, but who were living on their monthly income check that possibly totaled $1,687. That individual would have to use $1,000 each month for their own medical expenses before Medicaid would pay the balance of their monthly bill. Unfortunately, this put many people in this situation where they could not afford to stay in the community. These people would actually end up being forced into a nursing home, where all of their food, shelter and clothing expenses were taken care of.
Now, however, we have a charity pool income trust that can be used by an individual to protect his or her income over the monthly Medicaid allowance. Here's how. A reputable charity will set up a main trust. The individual applying for Medicaid sets up a sub-trust with the charity. He or she pays the charity a nominal annual fee, as well as a monthly charge. Rather than paying his or her excess income for medical expenses they will instead turn it over to the charity instead. The monies are deposited into a separately maintained sub-trust account; but for investment purposes, the charity is permitted to pool various sub-trust accounts.
Since transfers are not penalized under the Medicaid home care rules, the individual applying for Medicaid has no excess income. That individual must send a copy of the executed agreement and proof that the excess income has been deposited with the sub-trust account to Medicaid and request that the excess monthly income be eliminated.
The individual will then submits to the sub-trust his or her bills for ordinary living expenses such as rent, utilities, food and clothing. The trust pays those bills for the disabled person directly to the third parties identified on the bills. The idea is that the bills will consume the entire amount of excess income on a monthly basis.
For awhile it appeared as if the local Medicaid departments would challenge these trusts. However, there was a fair hearing at which the City of New York challenged the trust and the State Department of Social Services upheld the validity of the pooled trust. And the City of New York has now issued an alert instructing its employees on how to deal with the trust. This now means that many individuals who prior to this were either forced into a nursing home or forced to live at an unrealistic income level can remain in the community, pay their bills and obtain medical help through the Medicaid program. It is also a benefit to the charity, which, as noted, gets paid a fee. And if there are any monies left in the trust at the time of the Medicaid recipient's death, that money will be for the benefit of the charity.
In these difficult times where there is the constant threat of Medicaid cut-backs and the reduction of services, it's nice to see that the State of New York is being forward thinking and actually encouraging individuals to remain in the community rather than being forced into nursing homes.
Reprinted with permission of the Suffolk Times © 2005 [ Contact Us ] [ Guestbook ] [ Email ]  The Law Offices of John M. Bigler, Attorney At Law 1421 Wantagh Avenue, Wantagh, New York 11793-2206 1-888-ELDER-LAW · 516-409-6565 · Fax: 516-409-6522 E-Mail: info@biglerlaw.com · Web Site: www.biglerlaw.com |
In order to be eligible for community Medicaid there is a three prong test. An individual must be medically in need, must have limited resources and must have limited income.