526           QUALIFYING INCOME TRUSTS

A Qualifying Income Trust ( QIT ) is a trust that allows the beneficiary to control the amount of income that is used to determine Medicaid eligibility.  A QITQualifying Income Trust is often referred to as a Miller Trust.  Income that flows directly into the trust is not considered for the purpose of determining Medicaid eligibility.  Only payments made from the trust to the beneficiary are countable income.  A QITQualifying Income Trust may be used to qualify for any category of Medicaid, although it is most often used to qualify for long-term care Medicaid.  

A QITQualifying Income Trust must meet the following requirements:

1. The trust must be composed of only the beneficiary’s income, including accumulated interest from the corpus of the trust; and

2. Upon the death of the beneficiary, the state receives all amounts remaining in the trust, up to an amount equal to the total Medicaid paid on behalf of the beneficiary.  

526 A.      CASH ASSISTANCE PROGRAMS

The SSISupplemental Security Income and APAAdult Public Assistance programs do not recognize a QITQualifying Income Trust .  Therefore, a beneficiary may be eligible for Medicaid but not SSISupplemental Security Income or APAAdult Public Assistance cash assistance.  

526 B.      RESOURCES

The principle (or corpus) of an irrevocable qualifying income trust is not a countable resource.  If the trust is revocable, the principle is available.  APAAdult Public Assistance policy is used to determine the amount of resources available to the beneficiary.

526 C.      INCOME PLACED INTO A QITQualifying Income Trust

Income placed into a QITQualifying Income Trust does not have to be irrevocably assigned to the trust and is not counted in determining the beneficiary’s eligibility for Medicaid.  Income, such as Social Security payments, certain federal pensions, and state PERSPublic Employees Retirement System and TRSTeacher Retirement System may go into the trust without being considered available to the beneficiary for Medicaid purposes.

Income generated by the trust that remains in the trust is not income to the beneficiary.

526 D.      PAYMENTS MADE FROM A QITQualifying Income Trust

Payments made from a QITQualifying Income Trust are counted as income according to the income rules of the eligibility category for which the beneficiary is applying.

• For APA-related and long-term care categories: APAAdult Public Assistance rules are used for counting income, except that a vendor payment made for any form of shelter (room rent, mortgage payments, real property taxes, heating fuel, gas, electricity, water garbage) is considered income. However, the amount of vendor payments that counts as income cannot exceed the sum of $20 plus one-third of the appropriate SSISupplemental Security Income eligibility standard. Do not count vendor payments in excess of this amount as income.  

• Payments made from the trust to a nursing facility for an individual’s cost-of-care are exempt as income.

526 E.      POST ELIGIBILITY (COST-OF-CARE)

For a beneficiary subject to post-eligibility rules, the cost-of-care liability is calculated using the beneficiary’s total gross income.  The amount of income going into a QITQualifying Income Trust is added to any other income the beneficiary received in the month to calculate cost-of-care liability. Since income received by the trust has already been subject to post eligibility rules, do not consider payments from the trust for post eligibility purposes.  See Section 570.

By applying post eligibility cost-of-care rules to income going into the trust, a typical QITQualifying Income Trust used by a recipient with a cost-of-care liability will not accumulate funds over time.  Amounts received by such a trust that are above what may be distributed to the client should go toward cost-of-care.  Some deductions allowed for post eligibility purposes may still count as income for eligibility purposes, such as money distributed to a client to maintain a home.  

526 F.      FUNDS HELD IN A QUALIFYING INCOME TRUST

For a beneficiary subject to Medicaid transfer of asset rules, when the income placed in an irrevocable QITQualifying Income Trust exceeds the amount of money paid out to or for the benefit of the beneficiary (e.g., cost-of-care) or the beneficiary’s spouse (e.g., community spouse allowance), the excess income retained by the trust is not subject to the transfer of asset provisions described in the Transfer of Assets Section 554.  The trustee may use these excess funds on behalf of the beneficiary. Any funds remaining in trust at the time the trust is terminated must be paid to the state, up to the amount the state paid in Medicaid benefits for the recipient while the trust existed.

Example:

Mr. Baker resides in a nursing facility and has an irrevocable Qualifying Income Trust.  On December 5th, he receives a CIRICook Inlet Region, Inc. dividend in the amount of $50,000.  This amount exceeds Mr. Baker’s $10,000 monthly cost-of-care.  The amount remaining in the trust after his monthly cost of care obligation is paid may be retained by the trust and used by the trustee on Mr. Baker's behalf.

526 G.      DISSOLVING A TRUST

A trustee cannot dissolve an irrevocable trust without first petitioning the court for legal or practical reasons.  For example, if the beneficiary initially relied on the trust to qualify as an APAAdult Public Assistance recipient, but the beneficiary later enters a nursing home or is approved for home and community-based waiver services, the trustee may petition the court to dissolve the trust because the beneficiary’s income is below the nursing home eligibility standard without the trust.  If the court dissolves a trust because it is no longer needed for eligibility purposes, the trust provision to repay the state for Medicaid expenditures should be honored by the court.