Asked and Answered: Thomas V. Trainer on Pooled Trusts

By Steve Thorpe

Legal News

The federal Omnibus Budget Reconciliation Act of 1993 created a type of exempt pay-back trust in the form of a pooled trust that can be created by a non-profit organization or a non-profit association. Attorneys Thomas V. Trainer and Alan A. May of Kemp Klein Law Firm were instrumental in creating The Elder Law of Michigan Pooled Trust. Trainer recently received the Joe D. Sutton Call to Justice Award for that and other work he has done with Elder Law of Michigan, a 501(c)3 charity and provider of legal advice and assistance to older Michiganians. Trainer served on the Michigan Supreme Court Task Force of Guardianship Reform, and on both the Michigan and the National Advisory Panels on Alzheimer's Diseases and Related Conditions. He is a former chairperson of the Legal Hotline for Older Michiganians and was a member of the Michigan Supreme Court Task Force on Guardianships and Conservatorships. He has held a teaching position in the legal assistant program at Oakland University and is an author and frequent lecturer in the field of elder and special needs planning.

Thorpe: How does a pooled trust work?

Trainer: Pooled Accounts are a form of ''Special Needs Trust,'' one that can be used to hold assets that would otherwise disqualify disabled beneficiaries who receive Medicaid or SSI benefits. These are two government programs which provide basic income support, and medical insurance coverage, to poor individuals who have low or no other income, or who have uncovered medical needs. To be eligible, for either program, a disabled individual cannot have more than $2,000 in ''accessible'' assets, or income above certain limits. Therefore, when a poor and disabled individual receives an inheritance, a lawsuit settlement, proceeds from a relative's IRA or life insurance, and if the proceeds are more than $2,000, or if they constitute an income stream that exceeds the different limits, the individual will lose his or her SSI or Medicaid until such time as the funds are used up in ways allowed by these programs. The federal and state governments allow disabled individuals to place such excess assets (or any assignable ''income stream'') into a properly drawn and established Special Needs Trust, whether it is a ''Pooled Account'' Trust, such as the one operated by the Elder Law of Michigan, or a ''stand-alone'' Special Needs Trust, usually used when large sums of money are received. These ''Special Needs'' trusts, once funded, can then be used to pay for services or merchandise for the benefit of the disabled individual.

Thorpe: When and how was the Michigan program created?

Trainer: Elder Law of Michigan established its first Pooled Account subtrust in May of 2006, following a number of months assessing the need for such a trust, developing a Master Trust Agreement, working out processes for receiving and responding to beneficiary requests, confirming insurance coverage, establishing policies regarding investments and money management, and putting into place software capable of tracking the funds and providing annual accounts. Elder Law of Michigan has since opened more than 200 sub-accounts.

Thorpe: What sorts of expenses can be paid from the trust?

Trainer: While the trustee (agents Tom Trainer or Alan May, subject to review by Elder Law) need to have full discretion as to distributions, as Medicaid and SSI would otherwise continue to treat the trust funds as available to the disabled person if he or she could direct how the funds are used, and so every fact situation is different, typical distributions are for dental services, clothing, cable TV or cell phone bills, transportation costs (including auto repairs and insurance for disabled people who drive), televisions and computers, education or rehabilitation costs, hearing aids, household items, bedding, legal fees such as Guardian ad Litem fees or fees to attorneys representing the disabled individual for estate planning or Probate Court representation, and for special occasions such as sporting events, birthdays and the like. Almost any service or item can be purchased, if it is in the best interests of the beneficiary, and if it seems the best use of the funds, considering the beneficiary's overall needs.

Thorpe: How do trust payments interact with Medicaid and Social Security?

Trainer: The trust cannot make payments directly to the disabled individual, since this will disqualify the individual for the government programs. Payments are instead made on behalf of the disabled individual to third party providers of services or merchandise, or as reimbursement to family members who advance their own funds on smaller amounts as a matter of convenience. These payments will not interfere with the disabled person's continued receipt of Medicaid. Similarly, payments will also not interfere with the individual's SSI income payments, except if the trust pays for ''food or shelter'' expenses for the person, in which case the person's SSI monthly check will be reduced by a maximum of about $250. Trust payments do NOT interfere with regular Social Security Disability payments, or with Medicare coverage.

Thorpe: Is this option meant to be used instead of private retirement tools like IRAs or to supplement them?

Trainer: They can work in a somewhat similar way, in that the funds certainly can be parceled out over a period of time, to cover basic needs such as transportation, Cable or internet charges, or payment for extra and uncovered rehabilitation services. If a disabled individual is just on Medicaid, and NOT on SSI (but instead on Social Security Disability or other income source), the trust can pay for ongoing rental or housing costs as well.

Published: Thu, May 17, 2012