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About Pooled Disability Trusts

The Omnibus Reconciliation Act of 1993, commonly referred to as OBRA '93, contained several Medicaid reform provisions, designed to close loopholes. The Act also created new planning opportunities for disabled individuals.

OBRA '93 created an exception that allows disabled individuals to retain their funds for their lifetime, yet also to qualify for Medicaid coverage. Without such an exception, a disabled individual could not place his own assets in a trust and still qualify for Medicaid coverage.1 That individual, instead, would have to spend essentially all of his assets before he or she could qualify for Medicaid coverage. For the severely disabled individual, the daily medical and caretaker expenses could deplete all of that person's assets in no time at all.

The exception, created by OBRA '93, permits a disabled individual to place his or her funds in a trust that is set up and managed by a non profit association. As long as the funds are held and managed by the trust, they cannot affect that individual's eligibility for Medicaid coverage.2 And after the disabled individual dies, the trust may retain some of the remaining funds to be used for the benefit of other disabled individuals. The trust must, however, meet the following criteria:
The trust must be set up by a non profit association;

A separate account must be maintained for each beneficiary of the trust, but for management and investment, the funds may be pooled;

The accounts in the trust must be established solely for the benefit of the disabled individual and must be established by that individual's parent, grandparent, legal guardian or a court;

After the death of the disabled individual, the non profit institution may retain any amount of the trust funds; and

After the non profit association has retained its percentage share, the State would have to be paid an amount equal to the total amount of medical assistance paid on behalf of the beneficiary. Thereafter, whatever remains in the trust may be left to beneficiaries specified by the disabled individual, when the funds were initially placed into the trust.

1Medicaid is a program of medical assistance funded by the State and Federal governments. This program is an impoverishment program; an individual must be poor enough to qualify for benefits. It is the most comprehensive insurance program available, as it pays for expenses such as nursing homes, health care, residential and assisted living facilities, and home health aides.

2Eligibility for Medicaid coverage for boarding home and assisted living level Medicaid should be immediate.
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