A Qualified Income Trust: Keep Your Medicaid Eligibility

by Kathy Wechsler on Sun, 2005-04-03 17:00

One of the principal responsibilities of Medicaid is to pay for nursing home care for those who qualify for this federal health care assistance program.

If you’re going into a nursing home and your state disqualifies you from receiving benefits because your income exceeds the Medicaid limit, you may feel as if you’re swimming against a strong current: You can’t qualify for nursing home Medicaid benefits because your monthly income exceeds the income cap, but you don’t receive enough monthly income to pay for your nursing home without help from Medicaid. What to do?

Used in states that have income caps on those who qualify for Medicaid benefits for institutionalized care, the Qualified Income Trust (QIT, also known as a Miller Trust) is a legal way around the income limit, says K. Gabriel Heiser, an elder-law attorney in Boulder, Colo.

What’s a QIT?

A QIT is an account in which you deposit enough of your income — earned, pension, Social Security, etc. — to reduce your qualifying income for Medicaid coverage of your nursing home care. In most states, the income cap is $1,737 per month, or three times the current Supplemental Security Income [SSI] benefit.

Placing funds into a QIT lets you qualify for Medicaid eligibility for benefits such as long-term care programs, according to a Florida Department of Children & Families (FDCF) official. For other restrictions on the QIT, see “Medicaid and Your Money.”

When creating a QIT, make sure you’re dealing with someone experienced in the Medicaid arena, such as an elder-law attorney who’s familiar with QIT accounts and how they work, advises Charles Robinson, an elder-law attorney in Clearwater, Fla. To find such an expert in your area, visit the National Academy of Elder Law Attorneys Web site at www.naela.org.

Both Heiser and Robinson recommend appointing a QIT trustee; one isn’t required but is helpful.

It’s important to note that you don’t set up a QIT in advance, but rather in the first month that you’re in the nursing home and seeking Medicaid benefits, Heiser says. Your attorney will help you set up a special bank account (usually a checking account) to be used specifically for the QIT.

The account then pays you a monthly personal needs allowance (which varies from state to state; e.g., it’s $35 in Florida and $50 in Colorado).

If you’re married, the QIT may also pay your spouse living at home an income allowance, if his or her income doesn’t meet your state’s allowance level.

The amount remaining in the QIT after the two allowances are paid, along with your Medicaid qualifying income, is paid to the nursing home. Medicaid then covers the difference between what you’ve paid and the nursing home’s actual charges. The QIT’s resources and your income will then be entirely exhausted.

When you die, the state receives all money remaining in the trust up to the amount that Medicaid has paid on your behalf.

$ 1,900
monthly income
$ 6,000
nursing home cost
income cap
paid by client
$ 163
to QIT
$ 4,263
$ -50
personal needs allowance
$ - 113
paid by QIT
$ 113
$ 4,150
paid by Medicaid

A simple sample

“Bob,” who’s 41 and lives in Colorado, received a diagnosis of ALS three years ago and is now looking for a good long-term care facility in the area.

Bob’s assets are below $2,000, but he isn’t eligible to receive Medicaid benefits because his monthly income, from Social Security benefits and his pension, is $1,900, which is $163 over the income limit of $1,737. Without help from Medicaid, there’s no way he can pay the $6,000 monthly bill from the nursing home.

That’s where the QIT comes in. Because he wants his Medicaid benefits to start in February when he moves into the facility, Bob and his sister Sue visit Richard Jones, a local elder-law attorney in February. Sue is named Bob’s trustee, and Jones establishes a separate bank account in her name for the QIT.

Each month, Bob’s excess income ($163) is transferred to the QIT, and Bob pays the nursing home $1,737. Then, Bob’s monthly personal needs allowance of $50 is paid out of the QIT by Sue. Sue then pays the nursing home the remaining $113 and the trust balance goes to zero. Medicaid pays the facility the balance of $4,150.

QIT benefits outside a nursing home

Can you use a QIT to qualify for Medicaid benefits if you’re not going into a nursing home? The answer varies from state to state.

Some states, such as Florida, have nursing home diversion Medicaid waiver programs, which allow for care at home. Depending on the state, Medicaid might pay for an assisted living facility. To use a QIT, you need to be going into a long-term care program, not just looking for Medicaid assistance with prescriptions or physician visits.

The contents of this article are intended to be general information and shouldn’t be construed as legal, tax or financial advice.

Medicaid is a federal program, but it’s administered by the individual states. That means the guidelines and regulations on QIT and other Medicaid programs vary from state to state.

To find out whether you’re eligible for Medicaid assistance, check with the Medicaid office in your state. Each state establishes its own eligibility requirements based on three criteria: your care needs, your income and your assets.

Earned wages, Social Security, disability insurance, retirement, pension and alimony all count toward the income cap for Medicaid eligibility.

There’s also an asset limit imposed on Medicaid recipients: $2,000 for an individual seeking institutional care and $3,000 if both spouses need institutional care. Assets consist of bank accounts, brokerage accounts, stocks and bonds, loans, annuities, and any resource of value owned jointly by you and your spouse. In most states you’re allowed to retain one home and one vehicle outside the asset limit, but things like your boat and your private airplane count against you.

Once you’re eligible for Medicaid, most states also cover physician, psychologist, rehabilitation, chiropractic, dental, laboratory and X-ray services, hospital visits, prescription drugs and prosthetic devices.

To learn the rules of your state’s Medicaid program, visit www.cms.gov/home/medicaid.asp, and click on your state; and call your Medicaid agency. You also can call Centers for Medicare & Medicaid Services at (877) 267-2323.

Kathy Wechsler
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