New Massachusetts Legislation Restores Pooled Trusts for Seniors Over 65: A Key Tool for Medicaid/MassHealth Planning

On September 6, 2024, Governor Maura Healey signed into law a crucial piece of legislation—H.5033, also known as the Long-Term Care Bill. This new law reverses the harsh changes made earlier in the year, restoring the use of pooled trusts for individuals over the age of 65. With this update, seniors can once again use pooled trusts to spend down their assets and qualify for Medicaid/MassHealth without facing penalties.

This legislative change is a significant victory for elder law advocates and seniors in Massachusetts. In this post, we’ll discuss how pooled trusts work as an asset protection strategy, the March 2024 rule changes that had severely limited their use, and the impact of the new law that will come into effect on December 6, 2024.

What Is a Pooled Trust?

A pooled trust is a type of trust designed to help individuals with disabilities or seniors protect assets while still qualifying for public benefits like Medicaid (known as MassHealth in Massachusetts). These trusts are typically managed by a nonprofit organization, which “pools” the assets of many beneficiaries for investment purposes while maintaining separate sub-accounts for each individual.

Funds placed in a pooled trust are not considered “countable assets” for Medicaid eligibility, allowing individuals to qualify for benefits while preserving some wealth for supplemental needs. The assets in a pooled trust can be used to pay for non-covered medical expenses, caregiving services, home modifications, and other essential items that improve quality of life but are not covered by Medicaid.

How Are Pooled Trusts Used for Medicaid Spend Down?

For seniors facing the high costs of long-term care, qualifying for Medicaid is often essential. However, Medicaid imposes strict asset limits that individuals must meet to qualify. This is where pooled trusts become a valuable planning tool. By transferring assets into a pooled trust, seniors can “spend down” their countable assets to below the Medicaid threshold while still retaining access to funds for supplemental expenses.

Before March 2024, seniors over 65 could freely transfer assets into pooled trusts without being penalized. This allowed individuals to reduce their assets for Medicaid eligibility without fully depleting their resources, preserving funds to pay for additional services that would not be covered by Medicaid.

The March 2024 Rule Changes: A Setback for Seniors

In March 2024, MassHealth implemented a rule change that severely restricted the use of pooled trusts for individuals over the age of 65. Under the new rule, contributions to pooled trusts by individuals over 65 were considered transfers for less than fair market value, triggering penalty periods that delayed Medicaid eligibility.

This rule change was devastating for many seniors, who suddenly found themselves unable to use pooled trusts as a viable Medicaid planning option. Families that had relied on this tool to preserve assets for supplemental care and services were now forced to exhaust all resources before qualifying for Medicaid, leaving them without any means to pay for important expenses.

Elder law advocates, including the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA), lobbied hard against this rule change. They argued that the new restrictions placed an unfair burden on seniors, limiting their ability to plan for the future and protect their assets while accessing necessary long-term care.

The New Law Restores the Use of Pooled Trusts

After months of advocacy and public outcry, the Massachusetts legislature passed H.5033, which was signed into law by Governor Healey in September 2024. This new law reverses the March 2024 restrictions, restoring the ability of seniors over 65 to use pooled trusts without facing penalties.

Under the new law, contributions to pooled trusts by individuals over 65 are now recognized as transactions made for fair market value, provided the trust complies with certain conditions. These conditions include a requirement that MassHealth be reimbursed from any remaining funds in the pooled trust upon the beneficiary’s death, ensuring that the state recoups its costs while still allowing seniors to preserve some assets for their lifetime needs.

When Does the New Law Take Effect?

The new law goes into effect on December 6, 2024, giving families time to adjust their Medicaid planning strategies. Starting on this date, seniors over 65 will be able to transfer assets into pooled trusts without triggering penalty periods, making this an essential planning tool for those who need to qualify for MassHealth but want to preserve funds for supplemental care.

This change is a welcome relief for families who have been concerned about the costs of long-term care and the potential loss of assets. With pooled trusts restored as a viable option, seniors can once again plan for the future with greater financial security.

What Should You Do Next?

If you or a loved one is facing the need for long-term care and are concerned about asset protection, now is the time to review your options. The recent changes to Massachusetts law provide new opportunities to protect your assets while still qualifying for Medicaid. Pooled trusts can be a powerful tool, but navigating the complexities of Medicaid eligibility and trust administration requires expert guidance.

Schedule a Free 15-Minute Discovery Call

At North Shore Planning, we focus on elder law and estate planning. If you’d like to learn more about how pooled trusts can benefit you or your loved one, we invite you to schedule a free, no-obligation 15-minute discovery call.

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