Qualified Income Trust Spending Rules: What Medicaid Allows vs. What's Forbidden | Repair The Roof Podcast

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Attorney Ted Gudorf reveals how Qualified Income Trusts (QITs) can help families earning above Medicaid’s income limits still qualify for long-term care benefits. He breaks down the strict spending rules, smart strategies to enhance quality of care, and the importance of expert guidance to avoid costly mistakes.

Qualified Income Trusts: The Medicaid Strategy Few Families Know About

Are you worried that your income is just a little too high to qualify for Medicaid long-term care benefits? If so, you’re not alone. Thousands of families find themselves in this exact position every year—earning just over the limit, but facing staggering nursing home bills that can quickly drain life savings.

Here’s the surprising truth: even if your income exceeds Medicaid limits, there’s a little-known legal tool that could change everything. It’s called a Qualified Income Trust (QIT), also known as a Miller Trust. And when used correctly, it can open the door to benefits you thought were out of reach—while still protecting your assets and quality of care.

Key Takeaways:

  • A Qualified Income Trust (QIT) helps qualify for Medicaid despite high income.
  • Funds in a QIT must be spent on health-related expenses only.
  • Medicaid has strict income limits for long-term care services.
  • Trust funds can cover health insurance premiums and dental expenses.
  • Prescription medications can be paid for using trust funds.
  • Alternative therapies and treatments qualify for trust fund spending.
  • Trust funds can be used for hiring additional home care assistants.
  • It's crucial to keep detailed records of all expenditures from trust funds.
  • Trust funds should be spent down regularly, not accumulated.
  • Professional guidance is essential for effective Medicaid planning.

Why Income Limits Block So Many Families

Medicaid is often the only realistic way to pay for long-term care. Whether it’s home care, assisted living, or a nursing home, the monthly costs are simply out of reach for most families. But Medicaid comes with strict income limits that vary by state and change each year.

  • Social Security, pensions, retirement distributions, and other income sources are all counted.

  • If your combined monthly income is even slightly above the cap, you are automatically disqualified.

That’s where a QIT becomes essential. Instead of being locked out of benefits, excess income can be redirected into the trust—removing it from Medicaid’s calculation and allowing you to qualify.

How a Qualified Income Trust Works

The process is simple but powerful:

  • Each month, any income that pushes you over Medicaid’s limit must be deposited into the trust.

  • The trust is restricted—funds can’t be spent on just anything.

  • Instead, they must be used according to Medicaid’s rules, strictly for health, wellness, or medical-related expenses.

This ensures that your resources go toward improving your care and health, not disqualifying you from much-needed benefits.

What You Can Spend Trust Funds On

Here’s where many families are pleasantly surprised. While the rules are strict, the range of allowable expenses is wider than most expect:

  • Health insurance premiums – Keep your Medicare supplement plan so you can continue seeing the doctors you trust.

  • Dental care – Routine checkups, major dental work, and even enhanced dental coverage.

  • Medical supplies – Incontinence products, diabetic testing supplies, ostomy care, and more.

  • Prescription coverage – Upgrading to more comprehensive plans with lower co-pays.

  • Alternative therapies – Physical or occupational therapy, chiropractic, or other wellness treatments not covered by insurance.

  • Home care assistants – Supplemental caregivers or geriatric care managers who provide personalized support.

  • Mobility aids & durable equipment – Higher-quality wheelchairs, walkers, or hospital beds that improve comfort and safety.

  • Hearing & vision care – Premium hearing aids, eye exams, glasses, or even corrective procedures not fully covered by Medicaid.

For those in nursing homes, QIT funds can also significantly improve quality of life—paying for premium care products, private care advocates, or specialized therapies.

What You Cannot Spend Trust Funds On

This part is just as important. Using trust funds incorrectly can jeopardize your eligibility.

Prohibited expenses include:

  • Property taxes, mortgage, or household utilities

  • Entertainment, travel, or vacations

  • Gifts or transfers to family members

  • General household purchases without medical purpose

The golden rule: every expense must have a clear and documented connection to your health or wellness.

Keys to Managing Your Trust Safely

To make sure you stay compliant and maximize the trust’s benefits:

  • Keep detailed records – Save receipts, log all expenses, and document the medical purpose.

  • Spend monthly – Most states require funds to be used within the same month; they’re not meant to accumulate.

  • Plan ahead – Prepay for known medical expenses (like upcoming dental work) to use funds effectively.

  • Work with professionals – Medicaid rules differ by state and can change. An elder law attorney ensures you stay compliant.

The Big Picture: Why This Matters

Long-term care is one of the greatest financial threats families face today. The average nursing home costs more than $100,000 per year, and without careful planning, even middle-class families can lose everything.

Qualified Income Trusts are a lifeline for those caught in the “too much income for Medicaid, but not enough to pay privately” trap. By using this tool, you can:

  • Qualify for Medicaid when you otherwise wouldn’t.

  • Preserve your health coverage and access to quality care.

  • Protect your assets and reduce financial stress for your family.

The Next Step

Understanding how QIT funds can be spent is critical—but it’s only one part of the Medicaid planning puzzle. Another equally important factor is the five-year look-back period, which determines how your past financial moves impact eligibility.

Failing to plan ahead for the look-back can undo all the benefits of a QIT.

That’s why now is the time to take action. Work with an experienced elder law attorney who specializes in Medicaid planning. With the right strategy, you can secure the care you need, protect your family’s savings, and avoid devastating financial mistakes.

Final Thought

Medicaid planning is complicated, but the stakes are too high to leave it to chance. If your income is just over the limit, don’t assume you’re out of options. A Qualified Income Trust could be the key that unlocks life-changing benefits.

Transcript: Prefer to Read — Click to Open

Ted (00:17.208)

Are you worried that your income is too high to qualify for Medicaid long-term care benefits? If you’re earning just over the income limit, you might think you’re stuck paying massive nursing home bills out of pocket. But here’s what most people don’t know. There’s a legal strategy called a Qualified Income Trust, some call it a QIT, that can help you qualify for Medicaid.

even when your income exceeds the Medicaid limits. In this video, I’ll walk you through exactly how these trust funds can be spent, what expenses are allowed, and how this strategy can save your family thousands of dollars in long-term care costs. I’m attorney Ted Gudorf and I’ve helped hundreds of families navigate Medicaid planning over the last 30 years. By the end of this video, you’ll understand the specific rules

for spending qualified income trust funds and how this planning tool can protect your assets while securing the care you need. Let’s start with the basics. A qualified income trust is also called a Miller Trust, is a special type of trust designed specifically for Medicaid planning. Here’s the situation itself. Medicaid has strict income limits for long-term care services.

Whether you need care at home in an assisted living facility or a nursing home, your monthly income cannot exceed a specific dollar amount that changes each year and varies from state to state. If your combined income from all sources, Social Security, pensions, retirement distributions, and any other income exceeds this cap, you’re automatically disqualified.

from receiving Medicaid benefits for long-term care. This is where the QIT becomes a lifesaver. The way it works is straightforward but powerful. Any income that puts you over the Medicaid limit must be deposited into the QIT each month. This effectively removes that excess income from your personal finances for Medicaid eligibility purposes.

Ted (02:41.09)

However, and this is crucial, the money doesn’t just sit in the trust doing nothing. There are specific rules about how these funds can and must be spent. And understanding these rules is essential for anyone considering this strategy. Now, here’s where many people get confused about qualified income trust spending. The funds in your trust aren’t available for just any expense you might have.

Medicaid has established clear guidelines that all spending from the trust must be for health, wellness, or medical related expenses. This restriction is non-negotiable, and violating it can jeopardize your Medicaid eligibility. But within these health related categories, you have more options than you might think. Let’s dive into the specific expenses that are allowed.

First, you can continue paying for health insurance premiums. This is particularly valuable if you have a high-quality Medicare supplement plan that you want to maintain. Many people worry that once they qualify for Medicaid, they’ll lose access to their preferred doctors or face limitations in their health care choices. By using qualified income trust funds to pay for your existing health insurance,

You can maintain that coverage and continue seeing the providers you trust. Dental expenses are another major category where these funds can be used effectively. This includes routine dental care, major dental work, and even enhanced dental insurance plans that provide better coverage than what Medicaid typically offers. Many people don’t realize that Medicaid’s dental coverage for adults is often quite limited.

So being able to pay for comprehensive dental care from your trust funds can significantly improve your quality of life. Medical supplies also represent another important spending category. This includes incontinence supplies, diabetic testing supplies, ostomy products, and other medical necessities that you use regularly. These expenses can add up quickly.

Ted (05:09.92)

especially for someone requiring long-term care and being able to pay for them from trust funds rather than your limited personal allowance is a significant benefit. Prescription medications and enhanced prescription plans are also allowable expenses. While Medicaid does provide prescription coverage, you might prefer a more comprehensive plan that offers better formulary options or lower co-pays.

trust funds can be used to maintain these enhanced prescription benefits. Alternative therapies and treatments present another opportunity for trust fund spending. This category includes therapies that aren’t covered by Medicare or Medicaid, such as certain types of physical therapy, occupational therapy, or alternative medicine approaches. If these treatments improve your health and well-being, they qualify as appropriate uses.

of trust funds.

Ted (06:14.974)

One particularly valuable use of qualified income trust funds is hiring additional home care assistants. Even if you’re receiving some care through Medicaid programs, you might want supplemental care to maintain your independence or receive more personalized attention. Trust funds can pay for private home care aides or geriatric care managers who can serve as your advocate and coordinate your care.

Mobility aids and durable medical equipment represent another significant category. While Medicare and Medicaid do provide basic equipment, you might prefer higher quality options. For example, if you need a wheelchair, walker, or hospital bed, trust funds can pay for premium models that offer better comfort, durability, or features than the standard options covered by government programs.

Hearing aids are a perfect example of how trust fund spending can improve quality of life. Medicare and Medicaid typically provide basic hearing aids. But if you want the latest technology with advanced features like Bluetooth connectivity, noise cancellation, or superior sound quality, trust funds can cover these premium options. Vision care is another area where trust funds can be used effectively.

This includes eye exams, glasses, contact lenses, and even vision correction procedures that aren’t fully covered by your other insurance. Maintaining good vision is crucial for safety and independence, especially for older adults. Now, let’s talk about what you cannot spend trust funds on, because understanding these restrictions is just as important. Trust funds cannot be used for general living expenses.

like property taxes, homeowner association fees, utilities or entertainment expenses. These don’t qualify as health, wellness or medical expenses under the Medicaid rules. You also can’t use trust funds to pay for gifts to family members or vacations that aren’t medically necessary or general household items that don’t have a medical purpose. The key principle to remember.

Ted (08:41.996)

is that every expense must have a clear connection to your health, wellness, or medical needs. When in doubt, it’s always best to consult with your elder law attorney before making questionable purchases from trust funds. Here’s a practical tip for managing your qualified income trust effectively. Keep detailed records of all expenditures. Medicaid may review how trust funds are being spent, and you want to be able to demonstrate that every expense

was appropriate and necessary for your health and well-being. Save receipts, maintain a spending log, and document the medical necessity of any purchases that might not be obviously health-related. It’s also important to understand that trust funds should be spent down regularly, then allowed to accumulate. The purpose of a qualified income trust is to remove excess income from your financial picture for Medicaid eligibility purposes.

not to build up savings. Most states require that trust funds be spent within a reasonable time frame, typically within the same month they receive or shortly thereafter. One strategy many families use is to prepay for certain medical expenses when possible. For example, if you know you’ll need dental work in the coming months, you might prepay for those services

using current trust funds. This ensures the money is spent appropriately while securing necessary care for the future. Another consideration is coordinating trust fund spending with your overall care plan. Work with your health care team to identify upcoming medical needs, equipment requirements, or service gaps that could be addressed using trust funds. This proactive approach ensures you’re maximizing the benefit of these funds

while staying within Medicaid guidelines. For families dealing with a loved one in a nursing home, qualified income trusts can significantly improve the residents’ comfort and care quality. These funds might pay for a private pediatric care manager who visits regularly. Let me strike that and go back to that paragraph.

Ted (11:16.056)

For families dealing with a loved one in a nursing home, qualified income trust funds can significantly improve the residents’ comfort and care quality. These funds might pay for a private geriatric care manager who visits regularly and advocates for better care, premium incontinence products that provide better comfort and dignity, or alternative therapies that aren’t available through the facility standard programs. The bottom line.

is that qualified income trust funds provide a valuable opportunity to maintain and even enhance your health care and quality of life while qualifying for Medicaid benefits. The key is understanding the rules, planning your spending strategically, and working with experienced professionals who can guide you through the process. Remember, Medicaid planning is complex, and the rules can vary state by state.

What’s allowed in one state might not be permitted in another, and regulations can and do change over time. That’s why it’s crucial to work with an elder law attorney who specializes in Medicaid planning in states current with the latest rules and requirements. If you’re considering a qualified income trust or already have one in place, don’t try to navigate the spending rules alone. The stakes are too high.

and the consequences of making mistakes can be severe. Professional guidance ensures you’re maximizing the benefits of this planning strategy while protecting your Medicaid eligibility. Understanding how qualified income trust funds can be spent opens up possibilities you might not even have considered for maintaining your health and independence while qualifying for essential Medicaid benefits. But there’s another crucial aspect.

of Medicaid planning that many families overlook until it’s too late. If you want to learn about protecting your assets before you need long-term care, you should understand the five-year look-back period and how it affects your planning options. For that, click right here.

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