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Trusts Allowed Under Medicaid Rules

Qualifying Income Trust / Special Needs Trust

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In some states (Texas being one of them) when the income of an applicant for Medicaid exceeds the monthly limit a special type of document is necessary to meet income eligibility rules. The “official name of this document is a Qualifying Income Trust, but most folks know it as a “Miller Trust” (so named for the family that brought the court action that now makes the solution possible.)

The document establishes a set of special instructions for managing the the monthly income of the person seeking Medicaid assistance. These instructions are referred to as a “trust”. Since only income is allowed to be deposited in these types of trust, these are generically referred to as income trusts.

What is a Qualifying Income Trust (QIT)?

A Qualifying Income Trust is designed for one reason and one reason only – to process the income of the Medicaid applicant so that he or she meets Medicaid income rules.

Why Qualified Income Trusts are Needed...

In 2019 in most states, the maximum amount that can be allocated to a non-applicant spouse is $3,160.50 per month. Nursing home Medicaid and HCBS Waivers typically have the same financial eligibility criteria. However, one can also receive home care from Medicaid under “Aged, Blind or Disabled” (ABD) Medicaid.  If your income is more than the monthly amount Medicaid permits, special rules allow you to redirect your income to a Miller Trust. You do this by depositing specific income received into a checking account titled in the trust name.

For eligibility purposes, the Medicaid agency ignores this income when deciding income eligibility. Correctly using the trust reduces countable income so the person needing care meets the income rules.

How Income Flows Through the Trust

The purpose of the trust is to help gain financial eligibility. The trust doesn’t shelter income. Most of the money deposited in a Texas Qualified Income Trust flows back out of the trust to the nursing home toward care costs.

Let’s say your dad needs nursing home care. He receives a monthly Social Security payment of $2,200. He’s over the limit of $2,163 and would not qualify for Medicaid. But if that check were deposited into the Miller Trust bank account, he would. For the most part, he will be allowed to retain only $60 of the $2,200 for his personal needs.

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Qualified Income Trust Allowable Expenses

To determine how much a person must pay for care, Medicaid adds up the entire amount of an applicant’s income. From that amount, the trust is allowed to pay health insurance premiums (i.e. Medicare Part B, Prescription Drug plans, group retirement health insurance and dental coverage). The trust can also allow for payment of medical expenses not covered by Medicare and Medicaid. The trustee (the person managing the trust) cannot use trust funds for any other purpose than what Medicaid allows.

If the person requiring care is married, the trust allows for a portion of the applicant’s income to be protected and paid to the spouse. How much the spouse can receive from the trust is determined by the Spousal Income Protection rules. The minimum amount that a state must allow a community spouse to keep is $2,057.50, and the maximum is $3,160.50 (this amount changes each year in July).

Payback Provision

Typically, all income deposited into the trust will be spent each month to cover the person’s cost of care. Accumulating money in the trust is unlikely. Rarely will any money remain in the trust account upon the care recipient’s death. From the balance remaining at the death of the Medicaid recipient, the state can recover what it spent on behalf of the applicant. Amounts remaining in the trust after the state is repaid are paid to those named as other beneficiaries in the trust document.

As you can see, setting up and managing a Qualified Income Trust is not a simple “do-it-yourself” project. If a Qualifying Income Trust t is not set up correctly, you can lose thousands of dollars of benefits. If you or a family member have income too high to qualify for Medicaid use a Qualified Income Trust prepared by a an Elder Care attorney.

What is a Special Needs Trust?

A special needs trust is a trust designed for beneficiaries who are disabled, either physically or mentally. A special needs trust is set up for a person with special needs to supplement any benefits the person with special needs may receive from government programs. A properly drafted trust will allow the beneficiary to receive government benefits while still receiving funds from the trust.

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Disclaimer: Elder Options of Texas is not rendering any legal or professional advice.  If legal advice is necessary the reader should consult a competent attorney.

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