Houston Estate Planning and Elder Law Attorney Blog
Texas Medicaid allows a person receiving long-term care to keep only $2,000 in countable resources, and families with an older relative who has modest savings above that line often hear that a special needs trust is the answer. For a person 65 or older, the usual first-party special needs trust is no longer available. A pooled trust is, but Texas treats money placed into one after 65 differently from money placed in earlier, and that difference shapes whether the trust helps.
A pooled trust is a trust run by a nonprofit association that keeps a separate account for each disabled beneficiary and pools those accounts for investment. Federal law places no age limit on joining one. Texas Medicaid does not count the account as a resource, but its handbook applies transfer-of-assets rules to money contributed for a person who is 65 or older, which can create a period of Medicaid ineligibility. McCulloch & Miller, PLLC advises Austin families on this trade-off through its special needs planning practice.
Why the Age of 65 Changes the Options
Federal Medicaid law, at 42 U.S.C. § 1396p(d)(4), describes the trusts that can hold a disabled person’s own assets without disqualifying them. The first-party special needs trust in subsection (d)(4)(A) is limited to an individual under age 65. The pooled trust in subsection (d)(4)(C) carries no age limit. It must meet four conditions:
- it is established and managed by a nonprofit association;
- a separate account is kept for each beneficiary, while the accounts are pooled for investment;
- each account is established solely for a disabled individual, by the individual, a parent, a grandparent, a legal guardian, or a court; and
- at the beneficiary’s death, amounts the trust does not retain are paid to the State up to the total Medicaid paid on the beneficiary’s behalf.
That is why a pooled trust is the trust most often discussed for an older applicant. It is the only one of the three that remains open after 65.
How Texas Treats a Pooled Trust Contribution After 65
The federal rule that exempts transfers into a trust from the Medicaid penalty covers a trust for a disabled individual under 65. Texas follows that line. The handbook’s pooled trust appendix says transfer-of-assets policy does not apply when a pooled trust is established for someone under 65. It does apply when a pooled trust is established, or a contribution is made, for someone 65 or older.
A contribution at 68 is therefore reviewed under the same transfer rules that apply to a gift. Texas looks back 60 months for transfers, and an uncompensated transfer is measured as days of ineligibility using a daily divisor the handbook currently sets at $262.37. The account itself is still excluded as a resource, so what the contribution can cost is time on Medicaid rather than the money in the account.
For a disabled relative approaching 65, the line gives a reason to look at funding before the birthday rather than after it. McCulloch & Miller talks these questions through with families before any document is drafted. Call (713) 333-8900 to schedule a consultation.
What a Pooled Trust Account Can Pay For
Distributions from a pooled trust count differently depending on what they buy. Under the handbook, payments for medical or social services are not counted as income to the beneficiary. Cash paid to the beneficiary, and payments for food, clothing, or shelter, are treated as income to the beneficiary. A payment into an ABLE account is also excluded. Transfer-of-assets policy also applies, at any age, if a beneficiary’s money in the pooled trust is moved to another person.
In practice, the account works best when it pays providers directly for things Medicaid does not cover, and less well as a way to hand the beneficiary money. How much of a remaining balance the trust keeps at death is set by that trust’s own terms rather than by statute, so the terms differ from one pooled trust to the next. The handbook also states that a legal review of the document creating the pooled trust is necessary.
Questions Families Ask About Pooled Trusts in Texas
Is a Pooled Trust Account Counted as a Resource for Texas Medicaid?
No. The handbook says a qualifying pooled trust is not counted as a resource. The transfer-of-assets rules for contributions made at 65 or older are a separate question.
Can a Pooled Trust Pay a Beneficiary’s Rent or Groceries?
It can, but Texas counts payments for food and shelter, and cash paid to the beneficiary, as income. Payments for medical and social services are not counted.
What Happens to the Account When the Beneficiary Dies?
The trust may keep part of what remains, as its own terms provide. Federal law requires that amounts the trust does not keep be paid to the State, up to the total Medicaid paid for the beneficiary.
Deciding Whether a Pooled Trust Fits
A pooled trust can protect savings for an older relative, but after 65 it does not avoid the transfer review, and the decision turns on when care will be needed and how the money would be spent. McCulloch & Miller has more than 35 years of experience with Texas families planning for long-term care, and its Medicaid crisis planning work often starts with exactly this comparison. To go through your situation with the firm, call (713) 333-8900 or send a message through the contact page. Flat fees are available for much of this work.