Articles
Qualified Income Trusts (“Miller” Trusts)
Tennessee and Mississippi have an “income cap” that can disqualify from Medicaid applicants who have gross incomes above $2,022.00 per month (2009). Fortunately, federal law does allow the Medicaid applicant’s income to be placed into an irrevocable qualified income trust (QIT). The monthly income that is placed in the qualified income trust’s bank account will not be counted for purposes of the income cap limit, and will permit the applicant to qualify for Medicaid for nursing home care for that month.
A qualified income trust is an irrevocable trust that contains only the regular monthly income of the individual. Elder lawyers developed these trusts, which were finally approved in a federal court case, Miller v. Ibarra. (The QIT is sometimes called a “Miller” trust for that reason.) Their use was incorporated into federal law (at 42 U.S.C. Sec. 1396p(d)(4)(B)) in the 1993 revisions to the Social Security Act.
These trusts should be prepared by an experienced elder law attorney licensed in the state where the trust is to be used. The attorney the client selects should be one who understands these trusts and can explain to the trustee how they are used. This general explanation is written for Tennessee, but the rules are similar for Mississippi. This article is not intended to act as a substitute for competent legal advice about the client’s particular situation and trust needs.
The trust must be signed by two people: the Trustee and the Grantor. The grantor is the Medicaid applicant whose monthly income is to be paid into the trust. The trustee is responsible for paying the grantor’s nursing home related expenses by writing checks from the trust bank account to the nursing home and other recipients as instructed by the Tennessee Department of Human Services (DHS). The trustee will be required to see that the grantor’s income is placed into the trust bank account every month, and then paid out to the nursing home and for other qualified expenses.
If the Medicaid applicant is not mentally competent to sign the trust, his attorney-in-fact under a valid durable power of attorney (POA) can sign the trust for him. If the Medicaid applicant is incompetent to sign the trust and there is no POA, it will be necessary to have a conservator appointed by the probate or chancery court and authorized to sign for the incompetent grantor. The trustee can also be the attorney-in-fact or the conservator.
After the trust agreement is signed, the trustee must open a new bank account in the name of the trust. The trust is a “grantor trust” for tax purposes, and the Tax Identification Number on the account should be the Social Security Number of the grantor.
A copy of the executed trust and proof of deposit of income into the new trust bank account must be presented to DHS before the Medicaid application is complete. DHS will not approve Medicaid for any month before the QIT is funded.
Each month thereafter, the grantor’s income must be transferred from the grantor’s account and deposited into the trust bank account. The trustee then is required to pay the money out of the trust to the approved payees.
The trustee is required to file an annual accounting to the DHS. The accounting will show all income received, checks written, and balance of the account. The trustee should save all bank statements for this purpose. The trustee holds the remaining balance of the trust account until the grantor dies.
Upon the death of the grantor, the trustee must notify DHS, which should send the trustee a letter stating the amount that was paid for the grantor’s care. The remaining trust balance is paid to the state to help re-pay the nursing home expenses that were paid by Medicaid. The trustee must pay the trust account balance as ordered by Tennessee Medicaid (TennCare) after the final monthly checks have cleared.
Prepared by:
William King Self, Jr.
Certified Elder Law Attorney
Apperson, Crump and Maxwell, PLC
6000 Poplar Avenue, Suite 400
Memphis, TN 38119
(901) 756-6300
www.elderlawmemphis.com
Updated January, 2009