As a person ages, she may need long-term care that her family may not be able or willing to provide. Medicaid can help cover health care expenses, but a person must meet certain income and asset requirements. If a person’s income exceeds the current requirements, she may have options. Although Medicaid rules impose restrictions on transferring income and assets, one way to reduce income is to create a qualifying income trust.
Costs of Long-Term Care
Long-term care, such as living in a nursing home, is expensive. The costs vary by state and are subject to change. According to Richard L. Shea, a Texas attorney, nursing home costs often exceed more than $100 per day in Texas. Medicaid can help cover those costs. If a person’s income exceeds the Medicaid limitations, she needs to find a legal way to reduce her income so that she can qualify.
Qualified Income Trust
A qualified income trust, also known as a Miller trust, is a way for a person to reduce his income so that he qualifies for Medicaid coverage. It's an irrevocable trust, which means that once it's set up, the person can't revoke or change the trust without court action, subject to limited circumstances. In a qualified income trust, a person places money into a trust account. As soon as the money is placed into the trust account, the person loses control and access to it — as if he has given it away as a gift. The money in the trust goes toward covering the Medicaid costs; when the person dies, if any money is left in the trust, it's paid to the state.
Eligibility and Function
Income and asset eligibility limits are subject to change and may vary by state. In Texas, for example, a person can't have more than $2,022 of income and no more than $2,000 in resources to qualify for Medicaid in 2011. A qualified income trust only handles money: A person can't place assets into the trust. To qualify for Medicaid in Texas, a person can create a Miller trust and transfer enough money into the trust each month so that her income is less than $2,022. She must find different ways to reduce assets that count toward her resources if the resources exceed $2,000. If she owns stocks, for example, she can liquidate the stocks and transfer the money into her Miller trust.
A qualified income trust is a legal document that must comply with certain requirements. In Florida, for instance, the trust document must meet requirements set by the Department of Children and Families and be approved by that office. State laws may vary as to the specifics required. A Miller trust isn't suitable for every person and should only be created after careful consideration. Because of the legal nature of the trust, individuals should seek independent legal advice before proceeding.
- Texas Medicaid Solutions; Medicaid Eligibility 2011; Richard L. Shea; January 2011
- Florida Department of Children and Families: Qualified Income Trust Information Sheet
- Douglas K. Cook, Esq.; Miller Trust (Qualified Income Trust); June 2011
- Kentucky Cabinet for Health Services: Qualifying Income Trust Frequently Asked Questions