John Crow 
Updated March 9, 2025
A Qualified Income Trust (QIT)—also called a Miller Trust or Income Diversion Trust—is a special type of irrevocable trust that allows a person to qualify for long-term care Medicaid benefits even when that person’s monthly income is higher than the TennCare income limit.
These trust instruments are commonly used when someone needs nursing home care but earns too much income to qualify for TennCare. By directing income into a properly structured Qualified Income Trust, the applicant can meet Medicaid’s income eligibility rules and still receive assistance paying for long-term care.
Qualified Income Trusts are authorized under Section 1917 of the Social Security Act (42 U.S.C. §1396p(d)(4)(B)), which permits certain trusts to be used when determining Medicaid eligibility. When structured correctly, a QIT allows excess income to be placed into a trust account so that the applicant’s income falls within TennCare’s eligibility requirements.
This planning tool is particularly important in Tennessee, which is considered an “income cap state.” In income cap states, individuals whose income exceeds the Medicaid income limit, even by a small amount, can be denied benefits unless a Qualified Income Trust is used.
Because the cost of nursing home care in Tennessee often ranges from $8,000 to more than $10,000 per month, many families rely on TennCare to help cover these expenses. A properly drafted QIT can make the difference between qualifying for TennCare benefits and being denied coverage due to excess income.
Qualified Income Trusts are often used by individuals whose income comes from sources such as:
- Social Security benefits
- Pension income
- Retirement account distributions
- Annuity payments
Because TennCare applies strict rules regarding how these trusts must be drafted, funded, and administered, a Qualified Income Trust should generally be prepared with the assistance of an attorney experienced in Tennessee Medicaid and TennCare planning.
TennCare Income Limits for 2026
For individuals applying for TennCare long-term care benefits, the monthly income limit is based on 300% of the federal Supplemental Security Income (SSI) benefit rate.
As of 2026, the TennCare income limit for a single Medicaid applicant is approximately $2,982 per month. When determining eligibility, TennCare generally counts most types of recurring income, including Social Security benefits, pension payments, retirement account distributions, and annuity income.
If an applicant’s income exceeds this limit, they may still qualify for TennCare through the use of a Qualified Income Trust (QIT). A properly structured QIT allows excess income to be directed into a trust account so that the applicant can meet TennCare’s income eligibility requirements.
It is also important to understand that the income limit is not automatically doubled for married couples. TennCare typically evaluates the income of the individual’s spouse applying for long-term care separately, while providing certain financial protections for the spouse who remains at home, often called the community spouse.
Because these income eligibility rules can be complicated, many families seek legal guidance when planning for nursing home care and TennCare qualification.
Example:
If an applicant receives monthly personal income of $3,400 in Social Security and pension income, that amount would exceed the TennCare income limit. In that situation, a Qualified Income Trust may allow the applicant to remain eligible for TennCare benefits.
How a Qualified Income Trust (QIT) Works for Medicaid in Tennessee
Setting up a Qualified Income Trust involves several specific steps. Because TennCare applies strict eligibility rules, the trust must be properly drafted, funded, and administered each month.
Step 1: The Trust Document Is Created
First, a Qualified Income Trust document must be prepared. The trust must be irrevocable and must meet federal Medicaid requirements under 42 U.S.C. §1396p(d)(4)(B).
The trust may be created by:
- the Medicaid applicant
- a court-appointed guardian
- an agent acting under a valid power of attorney
Once signed, the trust becomes a legal entity used solely for TennCare eligibility purposes.
Step 2: A Separate Bank Account Is Opened
After the trust is created, a separate bank account must be opened in the name of the trust in order to deposit the Medicaid recipient’s income.
The account must clearly show the trustee and the name of the Qualified Income Trust. This account is used only for the Medicaid applicant’s income and should never contain other assets or savings.
Step 3: Monthly Income Is Deposited into the Trust
Each month, a portion of the Medicaid applicant’s income must be deposited into the Qualified Income Trust account.
In Tennessee, the deposit typically consists of the amount of remaining income that exceeds the TennCare income cap. These deposits are usually made after income such as Social Security or pension payments are received. In some cases, income may be directly deposited into the QIT account.
No other assets may be deposited into the trust. The law requires that only income be placed into the account. If other assets are added, the trust may become invalid for TennCare eligibility purposes.
Step 4: The Trustee Manages the Trust Account
The Qualified Income Trust must have a trustee, who is responsible for managing the trust account and making authorized payments.
The QIT trustee is often a:
- spouse
- adult child
- trusted family member
- professional fiduciary
Only the trustee should have authority to write checks or make distributions from the trust account.
Step 5: Monthly Payments Are Made According to TennCare Rules
After the income is deposited into the trust bank account, the trustee must distribute the funds according to TennCare rules.
Typically, the money is used to pay:
- a small monthly personal needs allowance for the Medicaid recipient
- Medicare or supplemental insurance premiums
- a spousal income allowance, if applicable
- the required patient responsibility payment to the nursing home
After these payments are made, TennCare pays the remaining funds towards the nursing facility cost.
The trustee should maintain clear records of all transactions involving the trust. This includes keeping copies of bank statements and documentation of all expenditures made from the trust account.
Step 6: The QIT Terminates After Death
A QIT terminates when the Medicaid recipient dies.
At the individual’s death, TennCare has the right to be reimbursed from any remaining trust funds in the trust for the cost of Medicaid benefits provided. In most cases, the state’s claim exceeds the remaining funds in the trust account, so any monies left in the trust are typically paid to TennCare.
Legal Requirements for a Qualified Income Trust
In order for a Qualified Income Trust to be accepted for TennCare eligibility purposes, the trust must meet several legal requirements under federal Medicaid law.
Although the specific trust language is typically prepared by an attorney, the basic requirements generally include the following:
- The trust must be irrevocable. Once the irrevocable trust is established, the trust cannot be modified or revoked.
- The trust mustcontain a Medicaid payback provision. After the death of the Medicaid recipient, TennCare must be reimbursed from any remaining trust funds up to the amount of benefits paid.
- Only the Medicaid applicant’s income may be deposited into the trust. Other assets, such as savings or property proceeds, cannot be placed in the trust.
- The trust must be managed by a trustee. The trustee is responsible for administering the trust and making payments in accordance with TennCare rules.
- The trust must be properly funded each month. TennCare eligibility is determined monthly, so required deposits must be made during the month eligibility is sought.
Because these requirements are technical, the trust document must be drafted carefully to comply with federal Medicaid law and TennCare regulations.
What Can QIT Funds Be Used For? When to Create a Qualified Income Trust
A Qualified Income Trust should generally be created just before a TennCare application is filed, and it must be properly funded in the same month for which TennCare eligibility is being requested.
TennCare evaluates Medicaid eligibility on a month-by-month basis. This means that if an applicant’s income exceeds the TennCare income limit during a particular month and a Qualified Income Trust has not been established and funded, the applicant may be ineligible for benefits for that month.
For this reason, Qualified Income Trusts are often created shortly before a TennCare application is submitted or shortly after a person enters a nursing home or long-term care facility.
The trust must also be properly funded each month. If the required deposit is not made during a particular month, TennCare may determine that the applicant was ineligible for benefits during that period.
Who Needs a Qualified Income Trust?
A Qualified Income Trust may be necessary when a person applying for TennCare long-term care benefits earns more than the Medicaid income limit, even if they have very limited assets.
This situation is common for retirees whose income comes from sources such as Social Security benefits, pensions, or retirement account distributions. While these individuals may not have substantial savings, their monthly income may still exceed TennCare’s income cap.
For example, if a person receives $3,400 per month in Social Security and pension income, that income would exceed the TennCare income limit of approximately $2,982 per month. Without additional planning, the individual could be denied TennCare coverage for nursing home care.
In many of these situations, a Qualified Income Trust allows the excess income to be redirected into a trust account, making it possible for the applicant to meet TennCare’s income eligibility rules.
Families often consider a Qualified Income Trust when:
- A loved one needs nursing home care or other long-term care services
- Monthly income is slightly above the TennCare income limit
- The individual otherwise meets TennCare’s asset requirements
- The cost of care would quickly exhaust the family’s savings
Because TennCare eligibility rules are strict and applications are carefully reviewed, a Qualified Income Trust must be properly drafted and administered to ensure compliance with Medicaid regulations.
What Expenses Can Be Paid from a Qualified Income Trust?
Once income is deposited into a Qualified Income Trust, the trustee must distribute the funds according to TennCare rules. These rules are strict, and the trustee generally cannot use the trust funds for ordinary personal expenses.
Instead, the money in the trust is typically used for a limited number of permitted payments each month.
Common distributions from a Qualified Income Trust may include:
- a personal needs allowance for the Medicaid recipient (currently about $70 per month in Tennessee)
- Medicare premiums and certain supplemental health insurance premiums
- a spousal income allowance if the Medicaid recipient has a spouse living at home
- the required patient responsibility payment to the nursing facility
After these required payments are made, TennCare generally covers the remaining cost of the individual’s nursing home care.
Because the rules governing these distributions are strict, the trustee should not make other payments from the trust account unless they are specifically authorized under TennCare regulations. Improper distributions can create problems with Medicaid eligibility.
TennCare Estate Recovery and Qualified Income Trusts
Many families are concerned about what happens to a Qualified Income Trust after the Medicaid recipient dies. Like most Medicaid programs, TennCare is required by federal law to seek reimbursement for certain long-term care benefits that were paid on behalf of a beneficiary.
This process is known as Medicaid Estate Recovery.
Because Qualified Income Trusts are created specifically to qualify an individual for TennCare benefits, federal law requires that the trust include a payback provision. This provision states that after the death of the Medicaid recipient, TennCare has the right to recover funds remaining in the trust up to the amount of benefits the state paid for the individual’s care.
In practice, this means that any money left in the Qualified Income Trust at the time of the recipient’s death must first be used to reimburse TennCare for long-term care expenses.
In most cases, the balance remaining in the trust is relatively small because the funds are typically distributed each month to pay nursing home costs and other approved expenses. As a result, there are often little or no funds remaining in the trust after the recipient’s death.
If any funds remain after TennCare’s claim has been satisfied, the trust document will determine how those funds are distributed.
Understanding TennCare estate recovery rules is an important part of Medicaid planning, and families often benefit from legal guidance when evaluating long-term care planning options.
Common Mistakes with Qualified Income Trusts
Although Qualified Income Trusts are a useful tool for TennCare planning, mistakes in how the trust is created or administered can lead to delays or even denial of Medicaid benefits.
Some of the most common problems include:
- Failing to create the trust before the eligibility month. TennCare eligibility is determined on a monthly basis. If the trust is not established and funded during the month eligibility is requested, benefits may be denied for that month.
- Depositing the wrong funds into the trust. Only the Medicaid applicant’s income may be deposited into a Qualified Income Trust. Depositing other assets, such as savings or proceeds from the sale of property, can invalidate the trust for Medicaid purposes.
- Failing to make the required monthly deposit. If the required income deposit is not made in a particular month, TennCare may determine that the applicant was not eligible for benefits during that period.
- Making unauthorized withdrawals from the trust account. Funds in the trust may only be used for certain permitted expenses under TennCare rules.
- Improperly drafted trust documents. If the trust document does not meet federal Medicaid requirements, TennCare may reject the trust entirely.
How Much Does It Cost to Set Up a Qualified Income Trust?
The cost of establishing a Qualified Income Trust can vary depending on the attorney preparing the trust and the complexity of the situation. Fees often differ from one law firm to another based on the scope of services provided and whether the trust is prepared as part of a broader TennCare planning engagement.
In many cases, the cost of preparing a Qualified Income Trust typically ranges from approximately $750 to $2,000, although costs can vary depending on the circumstances and the attorney involved.
While there is a cost associated with preparing a Qualified Income Trust, it is often modest when compared to the cost of long-term care. Nursing home care in Tennessee frequently exceeds $8,000 to $10,000 per month, meaning that proper TennCare planning can have significant financial implications for many families.
Because each situation is different, families are often encouraged to consult with an elder law attorney experienced in TennCare planning to determine the most appropriate strategy and associated costs.
Frequently Asked Questions About Qualified Income Trusts in Tennessee
What is the income limit for TennCare in 2026?
For long-term care TennCare benefits, the income limit is based on 300% of the federal Supplemental Security Income (SSI) benefit rate. As of 2026, the income cap is approximately $2,982 per month for a single applicant.
If an applicant’s monthly income exceeds this amount, they may still qualify for TennCare through the use of a Qualified Income Trust (QIT).
What is another name for a Qualified Income Trust?
A Qualified Income Trust is commonly referred to as a Miller Trust or Income Diversion Trust. All of these terms refer to the same type of trust used to help individuals qualify for Medicaid in states with income limits.
Can a power of attorney create a Qualified Income Trust?
Yes. In many cases, a Qualified Income Trust can be created by an agent acting under a valid power of attorney, provided the power of attorney document authorizes the agent to create trusts or engage in Medicaid planning.
If the power of attorney does not include this authority, court approval may sometimes be required.
Does a Qualified Income Trust protect assets?
No. A Qualified Income Trust is designed to address income eligibility, not asset protection.
TennCare still requires that most applicants have countable assets below the Medicaid resource limit, which is generally $2,000 for a single individual.
Other planning strategies may be used to address asset eligibility issues.
What happens if the Qualified Income Trust is not funded correctly?
TennCare determines eligibility on a month-by-month basis. If the required deposit is not made into the trust during a particular month, the applicant may be ineligible for TennCare benefits for that month.
Because of this rule, the trust must be carefully administered each month.
What happens to a Qualified Income Trust after death?
After the Medicaid recipient dies, TennCare has the right to be reimbursed from any funds remaining in the trust for the cost of Medicaid benefits that were paid on the recipient’s behalf.
In most cases, the remaining trust balance is relatively small because the funds are used each month to help pay for nursing home care.
Do all states allow Qualified Income Trusts?
No. Qualified Income Trusts are primarily used in “income cap states,” where Medicaid eligibility rules limit how much income an applicant can receive.
Tennessee is an income cap state, which is why Qualified Income Trusts are often used in TennCare planning for nursing home care.
Is a QIT a Special Needs Trust?
No. A Qualified Income Trust should not be confused with other Medicaid planning tools, such as Special Needs Trusts. While Special Needs Trusts are often used to protect assets for disabled beneficiaries, a Qualified Income Trust is used specifically to address income eligibility for TennCare.
Are Qualified Income Trusts used for Assisted Living Facilities?
Yes, Qualified Income Trusts may also be used when a person is applying for TennCare benefits that help cover certain assisted living or home and community-based services.
TennCare can cover nursing home care as well as certain services provided in assisted living settings or in a person’s home. The same income eligibility rules generally apply. If an applicant’s income exceeds the TennCare income limit, a Qualified Income Trust may be required in order to qualify for benefits.
However, not every assisted living facility participates in TennCare programs, and TennCare may only cover specific services rather than the full cost of assisted living.
Can Qualified Income Trust funds be used to pay medical expenses?
Yes, certain medical expenses may be paid from a Qualified Income Trust before the remaining funds are paid to the nursing home as the patient responsibility amount.
In Tennessee, permitted payments from a Qualified Income Trust may include expenses such as Medicare premiums, supplemental health insurance premiums, and certain medical costs that are not covered by TennCare. After these authorized expenses are paid, the remaining funds are typically applied toward the Medicaid recipient’s required monthly payment to the nursing home.
Because TennCare rules governing trust distributions are strict, trustees should ensure that any payments made from the trust comply with TennCare regulations. Unauthorized withdrawals or improper payments can create problems with Medicaid eligibility.
Contact a Tennessee Qualified Income Trust Attorney
Qualified Income Trusts can play an important role in helping Tennessee families qualify for TennCare benefits when a loved one needs nursing home care but earns too much income to meet Medicaid eligibility limits. Because Tennessee is an income cap state, even a small amount of excess income can prevent someone from qualifying for TennCare without proper planning.
A properly drafted and administered Qualified Income Trust can allow an applicant to meet TennCare’s income requirements while still receiving the long-term care assistance they need. However, these trusts must be created, funded, and managed carefully in order to comply with TennCare regulations.
For many families, TennCare planning becomes necessary during a stressful and time-sensitive situation, such as when a loved one enters a nursing home or when private pay care quickly becomes financially unsustainable. Understanding the rules and taking the right steps early can make a significant difference in qualifying for benefits.
At Crow Estate Planning & Probate, PLC, our attorneys regularly assist families with TennCare planning, Qualified Income Trusts, and other long-term care strategies. If you or a loved one may need help qualifying for TennCare benefits or paying for nursing home care, our firm can help guide you through the process, provide legal review, and develop a plan tailored to your situation.
About the Author
With nearly two decades of legal experience, John advises individuals and families on wills, trusts, probate matters, and complex inheritance disputes. His practice includes both practical estate planning for families seeking clarity and peace of mind and sophisticated planning for high-net-worth individuals involving advanced trust structures and asset protection strategies.
Over the course of his career, he has helped hundreds of families plan their estates, administer probate estates, and resolve contested inheritance matters.
John earned his Bachelor of Arts in History with honors from Vanderbilt University and his Juris Doctor from Cumberland School of Law at Samford University. He is based in Clarksville, Tennessee and works with clients throughout Middle Tennessee and Western Kentucky. Learn More.
Licensed in Tennessee and Kentucky