7 Things to Know Before Creating a Qualified Income Trust
An estimated 58% of men and 79% of women aged 65 and older will need long-term care at some point in their lives. Long-term care is costly. The average cost of a private nursing home room is $7,698 per month nationwide (and over $9,500.00 per month in Florida). Many people assume that Medicaid will cover this cost, but if your income and assets exceed the state's threshold, you may need to set up a qualified income trust.
In order to qualify for Medicaid long-term care, you cannot exceed the state's income and asset limits. A qualified income trust will reduce your income levels to below the applicable limit, allowing you to use Medicaid to cover your long-term care costs.
Not everyone will benefit from a qualified income trust (which is also commonly referred to as a “Miller Trust”). Here are seven things to know before creating one.
1. A Qualified Income Trust (QIT) Must be Managed Carefully
A QIT must be managed very carefully. Every month that Medicaid long-term care is required (whether it is for those receiving care at home, in an ALF, or in a nursing home), the income trust must be properly funded.
If your monthly income exceeds the state's limit, funds must be deposited into the QIT every month that long-term care is required. Enough funds must be deposited to ensure your income is below the threshold, and this amount should be more than just the bare minimum needed to qualify for Medicaid.
To prevent a lapse in coverage and care, it is crucial to ensure that your QIT is funded and administered properly.
2. If Your Income Does Not Exceed the State's Levels, a QIT May Not Be Required
If your income does not exceed the state's limits, then a QIT may not be necessary. However, if there is a chance that your income may exceed the threshold on any given month, a QIT will help ensure that you don't lose your Medicaid benefits.
As an example, for those who have gross incomes that are close to Florida’s Medicaid income cap, we will suggest a QIT to prepare for the possibility of increased income (annual nationwide raise in social security retirement income). To find out what is the Florida Medicaid Income Cap, click this link for Important Medicaid Numbers for Florida.
3. QIT Income May Still Go to the Nursing Home
If you are a single applicant, the funds in your QIT will be dispersed to the facility that's administering your care. If you are married and your spouse is living at home, the income may be dispersed to him or her, depending on your spouse's income.
In short, yes, your QIT income will still go to the nursing home if you are a single applicant.
If you are not in a nursing home, you may still need a QIT and you will not lose any of your income (funds deposited into the QIT can be withdrawn to pay for needed health and care expenses at home or in an assisted living facility).
4. A QIT May Require a Proper Durable Power of Attorney
A QIT is an important part of the Medicaid planning and estate planning process.
A proper durable power of attorney is required in order to create a QIT should the Florida Medicaid applicant become incapacitated (a little known fact is that a spouse can also create a QIT without a Durable POA). But if there is no spouse and the Medicaid applicant is incapacitated, their durable power of attorney must have the power to create the trust, and all documents must be signed properly. The ability for your agent, under a Florida POA, to create a Miller Trust is referred to as a “super power” that must be initialed. Otherwise, the power of attorney will not have the power to create the trust.
5. Income Must be Deposited Properly
Medicaid applicants can choose to deposit at least the minimum amount of income required (i.e. whatever exceeds the Florida income cap). Some choose to deposit more than what is strictly necessary (or even all of their income to a QIT).
However, it’s important to count gross income. The amount of social security that is deposited into your bank account is NOT the full income amount, because Medicare premiums are automatically deducted. Some pensions also deduct amounts for fees, paying for life insurance, and other expenses. All of this must be added back to calculate gross income (not net).
Only income should go into a QIT, no assets.
6. Upon Death, Assets in a QIT Will be Given to the State
Upon the Medicaid applicant's death, any remaining income in the QIT will likely be returned to the state. The state may take the income to recover the expenses paid by Medicaid for the beneficiary's care. Any funds that remain after the state has been reimbursed will be paid to other trust beneficiaries.
Normally, all deposited income is spent each month, so most QITs are usually empty at the time of the applicant's death. If there is some small amount left over, it will likely not wind up in the hands of heirs.
7. QITs Should be Established by an Experienced Elder Care Attorney
Anyone who may be eligible for Medicaid can establish a QIT, but the trust can only be used when long-term care is required.
With that said, the process of setting up, and properly funding/managing a QIT can be complex, and you do not want to take the risk of compromising critical long-term care. The establishment of a QIT is best handled by an experienced elder care attorney, who focuses on Medicaid planning. This legal specialist will know how to navigate the process of establishing the income trust and ensuring that it is administered properly.
While it is possible to establish a Florida income trust on your own, one misstep or error can result in you being ineligible for Medicaid and losing valuable long-term care coverage.
If you or a loved one require long-term care or want to plan for long-term care, it is crucial to hire a Medicaid planning attorney. A qualified attorney will help you navigate the complex process of establishing a QIT to ensure you are eligible for Medicaid long-term care.