What is a Qualified Income Trust?

A qualified income trust, also known as a “Miller trust” or “qualifying income trust” is a legal arrangement that allows adults to qualify for Medicaid funds to pay for care. If you have researched the costs of long-term care, you know that it is expensive: a private room in a skilled nursing facility can cost over $100,000 per year. Not many families can afford such an expense for long, particularly if the spouse of the nursing home resident continues to reside in the community and has their own living expenses.

Medicare does not cover nursing home costs, except for a brief time in very limited circumstances. The good news is that Medicaid does—If your income and assets are below a certain level. For 2022, an individual must have a monthly income of $2,523 or less to be eligible for Ohio Medicaid assistance to pay for either nursing home care or home or community-based services. (If both spouses are applying, the monthly income limit is $5,046.)

What happens if your monthly income exceeds the allowable monthly limit? You may be able to use a qualified income trust to help you qualify for Medicaid assistance. This type of trust is authorized by federal law, specifically 42 U.S.C. §1396p(d)(4)(B), and can form an important part of your Medicaid planning.

Qualified Income Trust in Ohio

A qualified income trust helps you become eligible for Medicaid benefits by making income placed in the trust non-countable for Medicaid purposes. Monthly income in excess of the allowable amount is deposited into the trust. Excess income must be placed in the trust during the same month that you receive it.

As you might imagine, the Ohio Department of Medicaid has strict rules in place to avoid abuse of the system. These rules extend to requirements for the establishment and use of qualified income trusts in Ohio.

For example, an Ohio qualified income trust must be irrevocable. Once the trust is created and funds are placed in it, allowing the trustmaker to qualify for Medicaid, the trustmaker cannot then remove the funds and terminate the trust. That would make it possible to circumvent Medicaid income limits.

Creating and Funding

A qualified income trust may be funded only with the income of the person who is using the trust to qualify for Medicaid benefits for care. The trust may not contain other assets belonging to the care recipient who is the beneficiary of the trust, nor may it be funded with income of the beneficiary’s spouse.

Funds in an Ohio qualified income trust may only be used for limited purposes. They may be used for medical expenses and for bank fees or attorney fees associated with the trust; in addition, a small amount may be used for the beneficiary’s personal or maintenance needs. The remainder must be used to contribute toward the beneficiary’s share of the cost of their care.

While qualified income trusts in Ohio are usually used to help pay for nursing home care, they can also be used for assisted living and home- or community-based care services. These include Ohio Home Care and the PASSPORT Medicaid waiver program. The PASSPORT program connects seniors with services and support that allows them to remain in their homes rather than going to a long-term care facility. Qualified income trusts in Ohio may also be used to pay for intermediate care facilities for adults with intellectual disabilities.

If there are funds left in an Ohio qualified income trust at the beneficiary’s death, those funds must be used to reimburse the Department of Medicaid for at least a portion of the cost of the beneficiary’s care.

Gudorf Law Group: Medicaid Planning Law FIrm

Because the rules surrounding qualified income trusts are so stringent, it is important to work with an experienced Ohio Medicaid planning attorney to create one. If not properly drafted, funded, and managed, a qualified income trust will fail in its intended purposes, risking eligibility for needed benefits. An attorney who regularly drafts these trusts can help to ensure that the trust protects the benefits you need.

It is also important to be aware that Medicaid has limits not only for a beneficiary’s income, but their assets. Since assets cannot be placed in a qualified income trust, you must find another way to protect assets from the nursing home. A qualified income trust is only one component of your overall Medicaid planning strategy.

To learn more about how to protect your income and assets while becoming eligible for benefits that you need, contact Gudorf Law Group to schedule a consultation.