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CMS Says Transfers to Pooled Trusts Subject to Transfer Penalties for those over Age 64.

The Centers for Medicare and Medicaid Services (CMS) have issued a new bulletin clarifying policy on the application of transfer of asset provisions to pooled trusts established by individuals age 65 and older. According to CMS, transfers to these pooled trusts are subject to transfer penalties for Medicaid eligibility purposes. The Bulletin says that States may need to change their regulations to come into compliance with the new directive.

A pooled trust is a trust established for a disabled individual under United States Code Section 1917(d)(4)(C) and they are often called (d)(4)(C) trusts. The bulletin issued on May 12, 2008, states that “funds placed in a pooled trust established for an individual age 65 or older may be subject to penalty as a transfer of assets for less than market value.” The bulletin says that these trusts may be established for a disabled individual of any age, but the transfer to the trust for a person age 65 and over is a disqualifying transfer for Medicaid eligibility purposes.

Since the Deficit Reduction Act of 2005 (DRA) was enacted in February of 2006, Elder Law attorneys have been struggling to find ways to protect their elderly clients from the impoverishment required by the Medicaid rules and regulations. The Pooled Trust had looked like a great way to provide elders with needs that the Medicaid program fails to fulfill, while also serving a charitable purpose and protecting other similarly situated frail elders. This new directive means that these hopes may be dashed and new options must be explored.