Under federal law, any assets held in trust will be counted against recipients of public benefits when those benefits have asset and income limits. Any portion of the trust funds that can be reached by the beneficiary will be counted as an asset, and any portion of the interest that could be paid out will be counted as income, which may result in disqualification for public benefits. In the case of someone who is applying for benefits, the application for public benefits will be denied.
Medicaid and Supplemental Security Income law permit pooled trusts for beneficiaries with special needs. Such trusts pool the resources of many beneficiaries, and those resources are managed by a non-profit association. Unlike individual disability trusts, which may be created only for those under age 65, pooled trusts may be for beneficiaries of any age and may be created by the beneficiary herself. In addition, at the beneficiary’s death the state does not have to be repaid for its Medicaid expenses on her behalf as long as the funds stay in the trust for the benefit of other disabled beneficiaries. (However, some states require reimbursement under all circumstances.) Although a pooled trust is an option for an individual over age 65 who is receiving Medicaid or SSI, those over age 65 who make transfers to the trust will incur a transfer penalty.