When a loved one relies on government benefits such as MassHealth or Supplemental Security Income (SSI), families often worry about how savings or an unexpected inheritance might affect eligibility. In Massachusetts, these programs have strict financial limits, and even a modest amount of money can cause someone to lose benefits.[1]
One planning tool that can help in these situations is known as a State Pooled Trust, often referred to as a “D4C Trust.” When used properly, a pooled trust can allow an individual to maintain eligibility for benefits while still preserving funds to improve their quality of life.
Understanding the Asset Limits
Many public benefit programs limit the amount of assets a person can have. For example, individuals receiving SSI or MassHealth long-term care benefits are typically limited to $2,000 in countable assets.
This means that if someone receives:
- an inheritance
- a personal injury settlement
- proceeds from the sale of property
- or other funds
those assets could immediately make the person ineligible for benefits unless proper planning is done.
Without planning, the individual may be required to spend down those assets on care or living expenses before benefits resume.
What Is a Pooled Trust?
A pooled trust is a special type of trust authorized under federal law under 42 U.S.C. §1396p(d)(4)(C). Because of this statute, these trusts are commonly called d4C trusts.
In Massachusetts, pooled trusts are managed by nonprofit organizations that administer the trust and oversee the funds.
Although the assets of many beneficiaries are pooled together for administrative and investment purposes, each beneficiary has their own individual account within the trust.
When structured properly, assets placed into a pooled trust are not counted as available resources for purposes of MassHealth or SSI eligibility.
How the Trust Funds Can Be Used
Funds held in a pooled trust are intended to supplement government benefits, not replace them.
This means the trust can pay for goods and services that improve the beneficiary’s quality of life but are not covered by public programs.
Examples may include:
- clothing and personal items
- transportation
- companion care
- travel or recreation
- computers, phones, or electronics
- dental care or medical expenses not covered by insurance
- education or training opportunities
Generally, funds are not distributed directly as cash to the beneficiary, but are instead used to pay for approved expenses on the beneficiary’s behalf.
When a Pooled Trust May Be Helpful
A pooled trust may be appropriate in several common situations in Massachusetts.
For example:
- An individual receiving SSI or MassHealth receives an inheritance from a parent or family member.
• Someone receives a legal settlement or insurance payment.
• A family wants to protect funds for a loved one with disabilities but does not have someone available to serve as trustee.
A pooled trust can also be useful when an individual has too many assets to qualify for MassHealth but does not want to lose those funds through a traditional spend-down. By transferring certain assets into a properly structured pooled trust, the funds may no longer be counted toward eligibility limits while still being available to pay for approved supplemental expenses for the beneficiary.
Because pooled trusts are administered by nonprofit organizations experienced in benefit rules, they can be a practical solution when a traditional special needs trust is not feasible.
What Happens When the Beneficiary Passes Away?
Most pooled trusts include what is called a MassHealth payback provision.
This means that when the beneficiary passes away, MassHealth may be reimbursed for benefits that were provided during the individual’s lifetime.
Depending on the trust agreement, any remaining funds may either be used to reimburse MassHealth or may remain with the nonprofit organization to help support other individuals participating in the pooled trust.
For this reason, pooled trusts are generally used as a way to preserve funds during a person’s lifetime and reduce the cost of the nursing home at Masshealth rates, rather than as a way to pass assets to heirs.
Planning Matters
MassHealth eligibility rules can be complex, and transferring assets without proper planning can result in penalties or periods of ineligibility.
Establishing and funding a pooled trust must be done carefully to ensure compliance with both federal law and Massachusetts MassHealth regulations.
[1] 130 CMR 520.003 – Massachusetts MassHealth regulation governing countable and non-countable assets for eligibility purposes
