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Qualifying Income Trust (QIT)

Texas Medicaid Nursing Home Coverage

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Income trusts are a legal to qualify for Medicaid nursing home coverage when you have too much income. Income trusts are a type of special purpose trust that can be helpful to Medicaid applicants in states that have a set income limit for qualifying for Medicaid, such as Texas and Arizona.

The document establishes a set of special instructions for managing the the monthly income of the person seeking Medicaid assistance. These instructions are referred to as a “trust”. Since only income is allowed to be deposited in these types of trust, these are generically referred to as income trusts.

Qualifying Income Trust

A Qualifying Income Trust (QIT) is a trust that allows the beneficiary to control the amount of income that is used to determine Medicaid eligibility. A qualified income trust in Texas helps people qualify for Medicaid but it doesn't shelter income. Money deposited into trust bank account typically flows out of the trust to pay the nursing home. It's designed to cover part of the care costs. The balance of the nursing home payment comes from Medicaid.

Why Qualified Income Trusts are Needed...

It's used to process the Medicaid applicant's income so that it fits Medicaid's income rules. The trust must follow special rules for managing the monthly income of the person seeking Medicaid's help.

The trust in turn, "flows" all of its income received from the operating entity out to unitholders. The distributions paid or payable to unitholders reduces a trust's taxable income, so the net result is that a trust would also pay little to no income tax.

Qualified Income Trust Allowable Expenses

Examples include premiums for Medicare Part B, Prescription Drug plans, group retirement health insurance and dental coverage. Payment of medical expenses not otherwise covered by Medicare and Medicaid is also allowed from through the trust.

The Medicaid agency figures out how much of the long term care costs an individual must pay. They add up the amount of income received each month. From that they allow payments for health insurance premiums. Examples include premiums for Medicare Part B, Prescription Drug plans, group retirement health insurance and dental coverage.

Payment of medical expenses not otherwise covered by Medicare and Medicaid is also allowed from through the trust. The trustee (the person managing the trust) cannot use trust funds for any other purpose than what Medicaid allows. Your dad also gets to keep a $60 out of the $2,400 for his personal needs.

If an applicant has a spouse, the trust can may be able to distribute part of the income to the spouse. This allotment is called the Minimum Monthly Maintenance Needs Allowance. The size of this monthly allowance is determined by the Spousal Income Protection rules. For 2018, the largest allocation in Texas is $3,090 per month.

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Payback Provision

The trust will typically distribute all deposited funds each month to cover the items detailed above. There is little chance any money will grow in the trust. It is rare for a Medicaid recipient to die with a balance left in the qualified income trust account. If it happens, the state can recover what it spent on the applicant’s care. After the state is repaid, the trustee can distribute the rest to beneficiaries named in the document.

Setting up and managing a Miller Trust is not a “do-it-yourself” project. The rules are too complicated.

Set up the wrong way, you face a real risk of losing thousands of dollars’ worth of benefits. Bear in mind once you lose those benefits, they are lost to you forever. If you have income that’s too high to qualify for Medicaid, a Qualifying Income Trust makes sense. But, it’s critical you execute each step the right way.

Find an experienced Miller Trust attorney to guide you. A skilled attorney will prepare the specific instructions needed for the trust. You’ll get advice on how the trust should be set up and how to fund it. It’s the best way to avoid the pitfalls and get all the benefits out of qualified income trusts in Texas.

What is a Special Needs Trust?

A special needs trust is a trust tailored to a person with special needs that is designed to manage assets for that person's benefit while not compromising access to important government benefits. There are three main types of special needs trusts: the first-party trust, the third-party trust, and the pooled trust.

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Disclaimer: Elder Options of Texas is not rendering any legal or professional advice.  If legal advice is necessary the reader should consult a competent attorney.

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