What Is a Qualified Income Trust?
Introduction to Miller Trusts
A Qualified Income Trust (QIT), also known as a Miller Trust, is designed to help individuals meet Medicaid eligibility requirements when their income exceeds the program’s income limit, but they still can't afford the cost of long term care.
A QIT allows individuals to reduce their countable income to an amount that allows them to qualify for Medicaid by placing their income in the trust. This can be an essential strategy for those who need long term care but are caught in the coverage gap between the income cap for Medicaid eligibility and the actual cost of care.
Income placed in a QIT is not counted toward the Medicaid income limit, making it possible for more people to access nursing home care and other long term care services.
Medicaid benefits
The cost of long term care, especially skilled nursing care at home or nursing home care, can often exceed what most individuals can afford. Even people receiving income from retirement accounts or pensions often cannot afford the cost of long term care. Medicaid provides coverage for such long term care, but it is means tested and unavailable for people whose monthly income is too high.
Coverage gap
Individuals in need of long term care who earn too much to qualify for Medicaid, but don't earn enough to meet the cost of such care, can find themselves in what is known as the coverage gap. In these cases, a QIT can be an effective remedy for this situation in states where they are permitted.
Requirements for a QIT
Irrevocable Trust
A Qualified Income Trusts must be established as an irrevocable trust, meaning it cannot be changed or terminated once created. A QIT can only contain cash from income, property is not allowed to be placed into the trust. Prior savings also can not be placed into the trust.
How can the trust be used? Only active, monthly income can be deposited into a QIT.
The source, or sources of income must be deposited in full and not split for a partial deposit. The funds in the trust must be managed according to Medicaid guidelines.
The funds that are deposited into an QIT can only be used for specific purposes such as paying for long term care and medical costs, Medicaid co-payments, and a personal needs allowance that covers personal care items, non-prescription medications, and things like snacks for the beneficiary.
How is a Qualified Income Trust structured?
Trustee
The trustee manages and administers the trust’s assets. The trustee is responsible for ensuring that income deposited into the trust is managed according to Medicaid rules and that the money is used only for approved expenses.
A primary role of the trustee is to ensure that the funds in the trust are used in compliance with the regulations governing QITs. This includes making sure that the income deposited each month is handled properly. If the money is used outside of the approved guidelines the beneficiary can become ineligible for benefits.
Beneficiary
The beneficiary, also known as a grantor or settlor, is the individual in need of Medicaid services. After the beneficiary passes, any funds remaining in the trust are paid to the state which becomes the beneficiary. The state however could only receive funds up to the amount paid by the state for the Medicaid recipient's care.
Married couples
If one spouse of a married couple becomes in need of long term care, they can still set up a QIT in order to qualify for Medicaid. If the other spouse has an income, that income is not included or deposited into the QIT. In the event that the spouse doesn't have any significant income, they can also receive a separate personal needs allowance.
State specific rules
Not all states allow Miller Trusts with only 25 states, including Georgia and Tennessee, currently permitting them to meet Medicaid’s income limit.
Special Needs Trust
A Qualified Income Trust is different from a Special Needs Trust, which is specifically designed to preserve public assistance eligibility for individuals with disabilities, by holding income and assets without affecting their benefits.
Seeking Legal Counsel
Drawing up a QIT can be an important aspect of retaining Medicaid eligibility. It is not necessary to retain a lawyer to draw up a QIT, but it is a complex document and experienced legal counsel can be of great value.
Jelks Law can advise you on the creation of a qualified income trust so that you can have peace of mind knowing that you, or a loved one, can afford long term care when it becomes medically necessary.