What is a Qualified Income Trust?
Qualified income trusts (QITs), commonly referred to as Miller Trusts, are trusts solely designed to own income to allow an applicant to qualify for Medicaid Long Term Care.
In 2020, the income limit for a Medicaid recipient is $2,349 per month as an individual and $4,698 per month for couples.
Medicaid counts all gross income (aka income before deductions, taxes, or insurance premiums) from all sources of income.
If an applicant is over the monthly income by just a dollar they will be disqualified from all of the benefits!
When evaluating an applicant’s income, it is important to look at all individual income statements as opposed to just bank statements, which typically do not reflect automatic deductions that would be counted as income by Medicaid (even though they never appear in the applicant’s bank account).
As you can see, it would not take much income for an individual to be disqualified from Medicaid, while at the same time not have the financial ability to pay for assisted living or long-term care that they may require. Oftentimes, the solution to this problem is a QIT.
QITs are a form of irrevocable trust (for more information on trusts click HERE) that are an excellent tool to legally separate income to allow an applicant to be qualified for Medicaid.
How Qualified Income Trusts Work
The QIT must be properly drafted and executed according to Florida formalities. Then the QIT is taken to a bank to open up a qualified income trust bank account. The existing bank account which receives the recipient’s income will then be set up to automatically transfer income into the new QIT bank account.
Funds in the QIT bank account can then be used to pay the Medicaid recipient a monthly personal needs allowance of $130 per month (as of January 1, 2020).
These funds can be used to purchase pleasantries by the recipient that Medicaid may not provide for such as haircuts, a new entertainment subscription, clothes, candy, or even a bottle of wine!
If the Medicaid recipient is legally married to a spouse that does not require Medicaid Long Term Care, a QIT also provides some additional financial flexibility by allowing the trust to write a check to the spouse not in need long-term care, oftentimes referred to as the “community spouse.”
For more information on this, click out the article on Minimum Monthly Needs Allowance.
If there are excess funds in the QIT account after the recipient dies, Florida Medicaid is entitled to those funds after the recipient’s death.
Therefore, QITs are more beneficial for an applicant who is slightly or moderately over the monthly income levels and they may not be the preferred choice for an applicant who has significantly higher monthly income than what is allowed by Medicaid.