Benefit Development Resource Toolkit: Resource Management

If a person has more assets than Medicaid allows, there are several ways they can appropriately shelter their assets for Medicaid purposes.

Management of resources should ensure that funds are used for the person’s advantage and well-being, reflect the individual’s desires and preferences, and ensure their continued receipt of entitlements and benefits. Appropriate actions must be taken to protect and preserve the resources for the individual’s future wants and needs. The Personal Allowance Manual includes information on common lump sum benefits at https://opwdd.ny.gov/providers/personal-allowance/other-influences-personal-allowance.

Four mechanisms that may be used to manage resources (Trusts, NY ABLE Accounts, burial funds, pre-need burial agreements) are discussed below

In general, a trust is a legal instrument where control over the resources of an individual (the beneficiary) is given to another (the trustee). The trustee spends the resources according to the instructions of the individual or entity who created the trust (the grantor). In order to make a decision as to which type of trust is best for an individual,  evaluate the age of the individual at the time the trust is created, the source of the trust funds, the relationship of the grantor to the individual, the distribution of remaining trust funds (remainder) upon the beneficiary's death, and the specific language of the trust. Many trusts name additional (“successor”) trustees who will be responsible when the original trustee is unable to perform their duties. To protect the funds in the trust, the trustee may be required to file a bond.

When a trust is needed to control funds for a disabled person, it is essential that the individual, a family member, advocate, or the agency serving the person find a qualified attorney to help with the process. The assistance of an attorney specializing in elder law or Medicaid regulations is recommended. OPWDD does not provide referrals.  A list of practicing attorneys can be obtained through the local county bar association.

Exception trusts are trusts that are required to be disregarded as available income and resources in determining Medicaid eligibility pursuant to the provisions of 366(2)(b)(2)

of the Social Services Law and 18 NYCRR 360-4.5(b)(5). Generally, an exception trust established on or after August 11, 1993 is an exempt resource for Medicaid, SSI, and SNAP as long as the trust strictly conforms to the exception trust rules. The local Medicaid district and/or Social Security office will need to review the trust and advise if it is acceptable.  Do not deposit monies into a trust until this review is done.

Income placed directly into an exception trust will not be counted by Medicaid if the person has community Medicaid. For information on protecting monthly income in a trust, talk to a lawyer or visit: www.health.ny.gov/health_care/medicaid/publications/docs/gis/19ma04.pdf.

The two types of exception trusts that can be used for the benefit of individuals served by OPWDD are supplemental needs trusts and pooled trusts. They are described below.

A supplemental needs trust or SNT is a type of exception trust created for the benefit of a disabled person under the age of 65. It is used for expenses that Medicaid or Medicare won’t cover. For Medicaid to consider a supplemental needs trust as a valid type of exception trust, the trust must:

• Be created with the individual's own assets (i.e., income and/or resources)
• Be created by the disabled individual, parent or grandparent, legal guardian of the individual, or by a court of competent jurisdiction
• Be created prior to the individual’s 65th birthday. Once established, additional funds can be added to the trust until the person reaches age 65. However, any additions to the trust made after the individual reaches age 65 are treated as a transfer of assets by Medicaid and may invoke the imposition of a penalty period (see below)
• Include language specifying that upon the death of the disabled individual, Medicaid will receive all the money remaining in the trust, up to the amount of Medicaid spent on behalf of the individual

A pooled trust is another type of exception trust that can be used for things Medicaid and Medicare won’t pay for. As opposed to a supplemental needs trust, a pooled trust can be created for a disabled individual of any age. The main features of a pooled trust are described below:

• The trust is established and managed by a non-profit
• While the individual’s monies are pooled for investment purposes, the organization maintains separate sub-accounts for each individual whose assets are included in the pooled trust
• The disabled individual's account within a pooled trust can be established by the disabled individual, by the disabled individual's parent, grandparent, or legal guardian, or by a court of competent jurisdiction.
• The trust will be disregarded for Medicaid purposes regardless of the age of the individual when the pooled trust account is established or when assets are added to the pooled trust account
• On the death of the individual, funds retained by the non-profit association can be shared with the other individuals who have accounts with the trust

Although a disabled person 65 years of age or older may transfer funds to a pooled trust, if they require institutional level of services (e.g., nursing home, ICF/IDD) within 5 years, there is no exception to the Medicaid transfer of assets transfer rules. This may jeopardize Medicaid eligibility if an individual must enter a nursing home, ICF/IDD or other medical institution within 5 years of the transfer of funds to the pooled trust.

The disabled individual will have to prove they used any funds from the trust to pay for their needs for the 5 years prior to the nursing home or ICF/IDD admission.

An unofficial listing of pooled trusts in New York is at http://health.wnylc.com/health/entry/4/.

A third-party trust is established with resources belonging to a person other than the individual. An individual may be named as the beneficiary of a trust as created by a parent or other party. The most common trust of this type is when a parent creates a trust for the benefit of their child during the child’s lifetime. The trust may or may not be considered an available asset depending on the language of the trust document which is usually the parent's last will and testament. The remainder interest in this type of trust is specified in the trust and can be any individual (or institution such as a charitable agency) chosen by the person whose money went into the trust.

This kind of trust is created using an individual's own resources but does not exempt those resources in determining Medicaid or SSI eligibility. This kind of trust may prevent the individual from qualifying for Medicaid. An example of a non-exception trust is a first party trust which does NOT say that Medicaid will receive all amounts remaining in the trust upon the death of the disabled person.

These trusts may be either revocable, meaning that individual has the right to terminate the trust, or irrevocable, meaning that the individual may not terminate the trust. There are no restrictions as to who may create a non-exception trust.

If a trust is set up in such a way as to negatively affect the individual’s benefits, the trustee should convert the trust legally to a type that does not negatively affect benefits

The ABLE Program is similar to the 529 College Savings Program but is for people with disabilities. ABLE accounts can have up to $100,000 without affecting SSI and other government benefits. Medicaid eligibility is not affected by any level of funds saved in the accounts. In order to use an ABLE Account, onset of the disability must be before the age of 26. Annual contributions cannot exceed $15,000. If the disabled individual works, they can also put their earnings (up to a certain amount) into the ABLE Account. A 529 College Savings Program account can be rolled over into an ABLE Account.

Unlike trusts, a NY ABLE account does not need to be established through the courts. Also unlike trusts, which are used for supplemental wants, the funds put into a NY ABLE account can only be used for disability related expenses. ABLE accounts cannot be used to shelter income from a spend down.  Further information is available at www.mynyable.org.

In planning for the future, it is important to recognize the wants, needs and preferences of the individual and their family in making burial arrangements. Under the rules of the SSI and Medicaid programs, individuals may purchase burial space items. Individuals can also set aside money for burial expenses – this is called a burial fund. The money in a burial fund can be used to purchase burial space items. Burial space items, like graves or headstones, do not have to be associated with a funeral home.  

An individual on Medicaid can have up to $1,500 (or $3,000 for a couple) in assets to be used for burial expenses, unless a higher amount is authorized through a court order. The $1,500 maximum applies to the combined value of any burial funds, life insurance (with a combined face value greater than $1,500), and non-burial space items included in an irrevocable pre-need funeral agreement.

Burial funds can be in the form of burial contracts and revocable agreements, cash that is identified in a specific account as being held as a burial fund, savings bonds, and any separately identifiable accounts that are clearly designated as set aside for the expenses connected with the disposition of the individual’s remains after death. It is important that burial funds are kept separate from the individual’s other resources. If a burial fund is combined with any funds that are not related to burial expenses, Medicaid and SSI will consider it a countable resource.

Interest accumulated on an exempt burial fund is also an exempt resource.

An individual with a burial fund may use money from the burial fund to purchase burial space items. After the purchase, he or she can then begin to add money to the burial fund or create a new one to save for another burial space purchase. This is a way to use extra income and to plan for the future.

Life Insurance policies are another way to plan for final expenses. A disabled individual receiving SSI or Medicaid must consider the value of any life insurance policies when determining whether a burial fund will be exempt. If a person has one or more life insurance policies and the face values of those policies total $1,500 or less, he or she can add an exempt burial fund. The amount of the exempt burial fund is limited to an amount that, when added to the combined face values of the life insurance policies, totals no more than $1,500.

When the combined face values of life insurance policies exceed $1,500, the cash values are considered countable resources for determining benefit eligibility. If both the face value and the cash value of a life insurance policy exceed $1,500, only $1,500 of the total cash value is considered exempt as a burial fund. For the cash value of $1,500 to be exempt, the individual must designate in writing the entire cash value as a burial fund. If the individual does not provide a written statement to the local Medicaid district, the $1,500 is not considered an exempt resource.

If an individual dies without funds or burial space items, they will receive a simple burial. For an individual who is enrolled in an OPWDD operated residential program, OPWDD will provide a simple burial. For individuals in other situations, the county provides an indigent’s burial, which covers the basic disposition of the body. The typical indigent burial might provide brief calling hours at a funeral home, a basic cloth-covered particleboard casket, and a religious service if desired. Burial would not include a marker

A pre-need burial agreement is a contract in which an individual pays a funeral firm, undertaker, cemetery or other entity to provide certain services or merchandise when the individual dies. This kind of contract is an excellent way of documenting the individual’s burial wishes.

Burial agreements can be used to prevent resources from being considered for Medicaid and SSI eligibility. In order to be considered exempt, burial agreements must be irrevocable pre-need burial agreements. An irrevocable burial agreement is a pre-payment for services/merchandise. There is no limit on the dollar amount of an irrevocable burial agreement, and it may include both burial space items and/or non-burial space items.

NYS DOH defines burial space items in their Medicaid Resource Guide at: https://www.health.ny.gov/health_care/medicaid/reference/mrg/june2010/page303-3.pdf

All items not determined burial space items by the definition above are considered non-burial space items, including any funds indicated for miscellaneous expenses.

There is no prescribed form used when establishing an irrevocable burial agreement, but the document must contain specific language referencing the law, and that monies will only be used for funeral expenses. The document must also contain other required language which can be found in the Medicaid Reference Guide, https://www.health.ny.gov/health_care/medicaid/reference/mrg/mrg.pdf, under “PRE-NEED FUNERAL AGREEMENTS”.

An individual with Medicaid before January 1, 1997 and who had a revocable pre-need funeral agreement in place that was considered exempt, may either keep the revocable agreement or transfer to an irrevocable agreement.

A person who did not receive Medicaid before January 1, 1997 and who has a revocable funeral agreement for more than $1,500, must convert the agreement to an irrevocable pre-need funeral agreement in order to have the entire agreement disregarded as a resource for Medicaid.