Qualified Income Trusts For Medicaid Planning

It is becoming more common in today’s environment for individuals requiring long term care, including nursing facility services, to apply for Medicaid in order to finance the overwhelming cost for health services. If the individual’s income level exceeds the eligible amount allowed under each state’s laws and regulations, he or she may be ineligible to receive Medicaid benefits. However, a Qualified Income Trust “QIT” (also known as a “Miller Trust”), is one option that could be used in order to still qualify the individual for Medicaid coverage, while maintaining real estate or other assets.

In October of 1993, a federal law was passed which allowed Medicaid applicants, who otherwise would be ineligible to receive benefits due their particular state’s income cap, to establish a trust in order to become qualified.¹ A QIT is a legal instrument used by an individual who resides in a State which makes Medicaid available to individuals with incomes at or below a “special income level” but does not provide Medicaid benefits to those that are in need of a nursing facility or other long term care services.²    Florida, Georgia, Tennessee, and Ohio are some of the states that allow the creation of a QIT.

A QIT is a special irrevocable trust that can be created for an individual and is exempted from being considered as a countable resource for Medicaid eligibility. In order to qualify for exempt status, the trust must have been created on or after October 1, 1993.³  For those individuals with income that exceeds a particular state’s required eligibility, any excess income may be placed into a QIT account. Typically, a QIT qualifies as an acceptable trust only if it includes the following requirements:⁴

• The trust is composed only of pension, social security, and other income to the individual, including accumulated interest
• No resources may be used to establish or augment the trust
• The trust must be composed of income first received by the individual and then deposited into the trust. The right to receive income cannot be assigned or transferred to the trust.
• Must contain a provision requiring upon death of the individual the State providing the benefit will receive all amounts remaining in the trust up to an amount equal to the total amount of medical assistance paid on behalf of the individual.
• Any income generated by the trust that remains in the trust is not income available to the individual.

For QIT to operate properly, sufficient income needs to be deposited into the trust account during the eligibility period. At a minimum, the amount of income in excess of the State’s required income cap needs to be deposited each month into the trust.⁵    Failure to deposit the minimum amount in a given month could result in the individual not receiving benefits for that month.⁶    Any income generated from federal benefits, such as social security, is prohibited from being directly deposited into the trust.⁷

In addition, if the particular health care program requires a patient liability payment, the trustee should use the monies in the trust to pay the provider. Otherwise, the monies in the trust can only be used for specific purposes as allowed under state law, such as an allowance used by the trustee to pay for the individual’s personal needs and/or for support of a community spouse. For example, payments made from the QIT account to the individual’s personal needs account on deposit with a nursing home⁸  to cover such things as grooming products, books, and/or personal clothing items. Generally, the particular state laws will not allow for any cash amount to be given back to the individual for spending purposes because it would be consider income under the eligibility cap.⁹

Although there are resources available online to create a QIT, it is best for the individual and/or their family representative to speak to an attorney about properly preparing an income trust document. In addition, an attorney who specializes in estate and/or Medicaid planning will be knowledgeable in properly setting up a QIT bank account and on the process of how the deposits and withdraws within trust should operate. Given the particular state requirements for a properly established QIT, an improper deposit, withdraw, and/or use of the trust funds could jeopardize one’s eligibility to receive Medicaid benefits.

For long term care providers, most States require that funds deposited into the account should be used to pay an individual’s patient liability.¹⁰    Therefore, for collection of these payments a provider should look to the named trustee(s) who has access and authority over the trust funds to make the required monthly payments. If a health care provider is facing challenges in receiving timely payments and/or has any questions regarding a QIT, they should contact Weltman’s HealthCare Collections Group at wwr-healthcare@weltman.com.

-

¹http://www.galongtermcare.org
²http://policy.ssa.gov/poms.nsf/lnx/0501730048
³http://elderplanningall.com/info/income_trust.asp
⁴OAC 5101:1-39-27.1 (C) (3) (b); See also http://jfs.ohio.gov/ohp/bltcf/reports/er/ER_A.pdf at Ch. 8.
⁵http://elderplanningall.com/info/income_trust.asp
⁶Id.
⁷Id.
⁸http://www.tn.gov/comaging/documents/TRUSTEE%20GUIDE.pdf
⁹http://elderplanningall.com/info/income_trust.asp
¹⁰http://www.galongtermcare.org