What happens when a loved one needs Medicaid and TennCare benefits to pay for nursing home care, but your loved one earns too much money in order to qualify for this government aid?
There is a way to work around this problem through a Qualified Income Trust. Here is how it works:
A qualified income trust (QIT), also known as a Miller trust, is a special trust that allows Tennessee residents to qualify for Medicaid and TennCare CHOICES, even if their gross monthly income exceeds Medicaid's income cap.
Medicaid is the federal government's health insurance program for individuals with disabilities or low income. Each state runs its own Medicaid program according to rules set by the federal government, and the federal government pays for a specific portion of Medicaid expenses in each state. The Medicaid program in Tennessee is called TennCare.
Qualifying for Medicaid
The monthly cost of a nursing home can easily exceed $5,000 in most Tennessee counties. In fact, the range of nursing home care in most major Tennessee cities exceed $6,000-$8,000 per month. As a result, few people can afford the costs of ongoing full-time care.
To qualify for Medicaid, individuals must meet specific income requirements. The income limit is three times the federal benefit rate, which in 2020 is $2,349 per month for a single individual. Married couples that jointly apply may double this exemption to $4,698 per month.
With expensive nursing home or long-term care, a QIT becomes critical. The QIT allows those with income exceeding the monthly limit to still qualify for Medicaid.
Note that individuals cannot simply give the extra money away because that would violate Medicaid rules. Understand that the governmental rules are very strict when it comes to qualification. The government has purposely made it difficult as this type of aid is only meant for the truly needy.
How does a qualified income trust work?
A QIT is not an option in all states, but it is in Tennessee. With a QIT, a person hoping to qualify for Medicaid will contribute all of their income that exceeds the Medicaid limit to the trust. For example, if the Medicaid income limit is $2,349 and an individual has $3,000 in gross monthly income, they can place the additional $651 in a qualified income trust and still qualify for Medicaid. The individual must appoint a QIT trustee, usually a friend or family member.
In most states, the primary beneficiary of the trust must be Medicaid. If the patient is in a nursing home, all of the money deposited in the QIT goes to the nursing home, as well as the rest of the resident's income – the remaining $2,349 – before Medicaid will pay the rest of the money necessary to cover the monthly cost of care. However, there are some exceptions, such as the cost of health care and a spouse income allowance.
Who needs a qualifying income trust?
A QIT may work for anyone struggling to pay for medical care with a monthly income that exceeds the amount allowed to qualify for Medicaid. While these trusts aren't available in every state, they are a good option for Tennessee residents who need expensive long-term or nursing home care.
There are a few specific requirements for a QIT such as:
- It must be irrevocable;
- The account can only contain the income of the individual;
- The account can't contain resources, such as the proceeds of the sale of property or savings account money;
- The account must have a trustee to manage the account and expenditures;
- Upon the death of the individual, Medicaid must be the primary recipient of the QIT funds, up to the amount Medicaid spent on the recipient (any excess funds can go back to the family);
- The trustee can only spend the account funds on expenses allowed by federal and state law and should consult with Medicaid to ensure that paid expenses comply with applicable laws.
If you believe you or a loved one needs a QIT, it's a good idea to seek guidance from an experienced attorney who regularly handles estate planning and elder law matters. An attorney can guide you through the process and advise you on allowable expenses and other possible options.
How do I manage a qualifying income trust?
If appointed to manage a qualified income trust, you'll need to ensure that you move any income over the income cap to the QIT account. You can set a monthly automatic transfer of funds. You will then pay monthly expenses out of the QIT account each month.
The trust documents should list qualifying expenses such as:
- Monthly maintenance needs of a spouse;
- A personal needs allowance;
- Medicare premiums;
- Medical expenses not paid by Medicaid; and
- Payments to a nursing home to supplement care costs.
When does a qualifying income trust end?
A QIT ends with the death of the Medicaid recipient or when the recipient no longer needs the account. For example, if their monthly income decreases to the amount below the income cap.
Qualified Income Trusts are a useful tool to help a loved one qualify for Medicaid. Some of the rules surrounding the use of QITs can be complex so its always a good idea to consult with an attorney that has experience in preparing these types of trusts to make sure that your application to Medicaid will be processed correctly.