A qualified income trust (QIT) is a Medicaid planning technique used often by Medicaid recipients. A QIT allows one to still qualify for Medicaid if their monthly income exceeds the limit set by Medicaid. Not every state recognizes QITs, but Florida does. As of January 28, 2021, the current income limit for Medicaid in Florida is $2,382 per month for a single individual. If an individual’s income exceeds Medicaid’s set limit, they can set up a QIT to deposit their excess funds in so their income is low enough to qualify for Medicaid.
Who needs a qualified income trust?
Anyone receiving care who has assets that total less than $2,000 and a monthly income of more than $2,382 can benefit from a QIT. It is important to realize a QIT cannot be used to store one’s excess assets, it can only be used for excess monthly income.
A QIT is not like revocable trusts used in estate planning partly because it is only authorized to receive income, and partly because any assets remaining in the QIT must first be applied to repayment of benefits received by the beneficiary.
A qualified income trust is different than a special needs trust, which may be better suited for someone who expects to or has received one large sum of money. Qualified income trusts are most useful for someone who receives continuous monthly income that is higher than the Medicaid qualification limit.
How do you create a Qualified Income Trust?
The creator of the trust, also known as the settlor, will first need to assign a trustee to manage the trust. The settlor will then need to complete the necessary documents to establish and then fund the trust.
It is possible for someone other than the Medicaid applicant or recipient can establish a QIT. Federal law states this can be the individual’s spouse, a person (including a court or administrative body) with legal authority to act on behalf of the individual or individual’s spouse, or a person (Including a court or administrative body) acting at the direction or upon the request of the individual or individual’s spouse.
This is one reason, among many, to have a comprehensive power of attorney in effect.
The trust documents must state the purpose of the trust is to make the beneficiary eligible for Medicaid. The documents must also state the beneficiary is currently living in a nursing facility or receiving at-home care. The trustee is then in charge of administering the trust and disbursing the funds in the trust to satisfy the expenses of the Medicaid recipient’s care.
What are the rules of a Qualified Income Trust?
- Each month, the Medicaid recipient must place all excess income received that month into the QIT to qualify for Medicaid benefits for that specific month. It is advised to put more than the exact amount of exceeded income into the QIT to ensure your income will not be higher than the Medicaid qualification limit; this is important because if a Medicaid recipient’s income is even slightly higher than the limit, they will not receive Medicaid for that month.
- Almost all of the income that is placed in a QIT must be paid to the nursing facility or for expenses of at-home care as part of the “patient’s responsibility.” The beneficiary may be entitled to up to $130 each month for “personal needs.” The personal needs allowance can change from time to time. If the Medicaid recipient is married, some of the income may also be allowed to pass to the spouse.
- The QIT must be irrevocable. Once the trust is established, it cannot be altered or revoked until the Medicaid recipient’s death.
- In Florida, Medicaid is generally entitled to a repayment from the recipient’s estate up to the amount paid by Medicaid for their care. This repayment is known as Estate Recovery. Generally, all of the assets that remain in the QIT after the death of the Medicaid recipient must be used to satisfy Medicaid estate recovery. How to give notice, and to whom the Trustee shall make the final payment is available from the State of Florida.
If you have any questions or would like to set up a qualified income trust, please contact us today. We can help with this as well as preparing assets prior to making an application for Florida Medicaid, as well as submitting the application for Florida Medicaid.
Post written by Allison Koukoulis and edited by Patrick D. Quarles