Medicaid is a lifeline for many seniors and individuals with disabilities who need long-term care but cannot afford the high costs of nursing homes or in-home services. However, Medicaid,
also known as TennCare here in Tennessee, has strict income limits, and exceeding those limits by even a small amount can lead to disqualification. This leaves many people in a difficult position, earning too much to qualify for Medicaid but not enough to pay for the care they need. This is where a Qualified Income Trust (QIT) can make a difference. But can a Qualified Income Trust protect your Medicaid eligibility? The short answer is yes, for those who meet the criteria and follow the proper setup and administration of the trust.
How A Qualified Income Trust Works
A Qualified Income Trust, sometimes referred to as a Miller Trust, is a legal tool that allows individuals to redirect excess income into a dedicated account to help them meet Medicaid’s financial eligibility requirements. Since Medicaid has strict income thresholds, individuals who exceed those limits would normally be denied coverage. A QIT provides a structured way to deposit surplus income so it is no longer counted against Medicaid eligibility.
For example, if Medicaid’s income limit in a particular state is $2,500 per month and an applicant receives $3,000 in monthly income, they would be considered ineligible for benefits. However, if they establish a Qualified Income Trust and deposit the excess $500 into the trust each month, Medicaid will no longer count that extra income when determining eligibility. The funds in the trust can then be used for approved expenses. Guidelines for approved expenses are prescribed by law. Some examples are medical expenses not paid by Medicaid or bank fees related to the QIT’s maintenance. Other examples are an allocated spousal allowance or a personal needs allowance. Both those monetary allowances are set annually by the government.
Who Needs A Qualified Income Trust?
Not everyone applying for Medicaid will need a Qualified Income Trust. It is specifically designed for individuals who earn more than Medicaid’s income cap but do not have enough personal resources to pay for long-term care services on their own. In many states, Medicaid’s income limits are relatively low, leaving middle-income seniors in a difficult position where they need care but do not qualify.
For example, an individual receiving Social Security, a small pension, and veterans’ benefits may find that their total income exceeds Medicaid’s threshold by just a few hundred dollars. Without a QIT, they would be denied Medicaid coverage and expected to pay for nursing home care, which can exceed $8,000 per month. By establishing a Qualified Income Trust, they can legally reduce their countable income and maintain Medicaid eligibility while ensuring that their medical needs are met.
How To Set Up A Qualified Income Trust
Since a Qualified Income Trust is a legal arrangement, it must be set up correctly to ensure Medicaid compliance. The trust must be irrevocable, meaning that once funds are deposited, they cannot be taken out for non-approved expenses. The trust must also be properly administered, with an appointed trustee, typically a family member or legal representative, managing the funds.
The process involves drafting a trust agreement, setting up a dedicated trust bank account, and ensuring that the applicant’s excess income is deposited into the account each month. Funds from the trust can then be used for expenses allowed under Medicaid guidelines Any remaining balance in the trust after the individual passes away is typically required to be paid to the state as reimbursement for Medicaid benefits provided.
Common Mistakes To Avoid When Using A Qualified Income Trust
While a Qualified Income Trust can protect your Medicaid eligibility, improper setup or mismanagement of the trust can lead to delays or denials of benefits. One common mistake is failing to deposit all excess income into the trust each month. If even one month’s income is not transferred correctly, Medicaid may disqualify the applicant.
Another issue arises when families attempt to set up a QIT without proper legal guidance. Medicaid rules vary by state, and a trust that does not meet all state requirements may not be accepted. Additionally, some individuals mistakenly believe that a QIT can be used to shelter assets, but this is not the case. A Qualified Income Trust only applies to income and does not protect savings, investments, or other financial resources from Medicaid’s asset limits.
Can A Qualified Income Trust Protect Your Medicaid Eligibility, And Who Can Help?
Understanding how a Qualified Income Trust can protect your Medicaid eligibility is important for those who are trying to secure long-term care coverage. However, setting up and managing a QIT requires careful attention to detail to ensure that all Medicaid guidelines are met. The team at Johnson McGinnis Elder Care Law & Estate Planning has extensive experience helping individuals and families establish QITs correctly, ensuring that their Medicaid applications are approved without unnecessary delays.
A Qualified Income Trust may be the solution if you or a loved one needs Medicaid for long-term care but earns more than the income limit. Contact Johnson McGinnis Elder Care Law & Estate Planning to discuss your options in the Nashville and surrounding areas, and take the necessary steps to secure your benefits.
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