How to Set Up a Qualified Income Trust (QIT) Account

A Qualified Income Trust (QIT), also known as a Miller Trust, helps individuals qualify for Medicaid long-term care services when their income exceeds state-specific limits. These trusts divert a portion of monthly income to meet eligibility requirements. A QIT ensures income above a state’s Medicaid threshold does not disqualify an applicant from receiving long-term care benefits.

Understanding a Qualified Income Trust

A Qualified Income Trust is necessary for individuals whose monthly income surpasses the Medicaid income cap in their state, yet is insufficient to cover the costs of long-term care, such as nursing facility or home and community-based services. This mechanism places “excess” income into a special trust account. By doing so, this income is no longer counted towards the Medicaid eligibility determination, enabling the individual to qualify for benefits.

A QIT involves the regular deposit of an individual’s income into an irrevocable trust. This means the trust cannot be altered or terminated by the grantor once established, ensuring funds are dedicated to their purpose. Only the individual’s income flows into the trust, strictly excluding other assets like savings or proceeds from property sales.

Eligibility for a QIT is determined by an individual’s monthly income exceeding their state’s Medicaid income limit. These income limits vary annually and by state, often set at 300% of the Federal Benefit Rate. The trust reduces countable income, making the individual financially eligible for long-term care assistance.

QIT rules, income caps, and requirements are established at the state level and can differ widely. Consulting with the state’s Medicaid agency or an attorney specializing in elder law is advisable to understand the precise regulations applicable to one’s situation.

Creating the QIT Document

Creating a Qualified Income Trust begins with drafting a document that adheres to federal and state regulations. This document must state the trust is irrevocable, meaning it cannot be canceled or modified once established. It must also be solely for the benefit of the individual applying for Medicaid.

The QIT document must state it can only contain income, not assets like money from property sales or bank accounts. This distinction is crucial for Medicaid eligibility purposes. A “reversion clause” is a provision, mandating that upon the beneficiary’s death, any remaining funds must be paid to the state Medicaid agency. This repayment is limited to the total Medicaid benefits paid on behalf of the beneficiary.

The trust document must identify the Grantor (the individual whose income is placed in the trust or their legal representative), the Trustee (responsible for managing the trust), and the Beneficiary (the individual for whom the trust is established). The Trustee must be someone other than the Grantor, though a friend or relative can serve. Before drafting, gather information, including legal names, addresses, income sources and amounts, and the chosen trustee’s details.

Engaging an elder law attorney or a Medicaid planning attorney is recommended for drafting the QIT document. These legal professionals possess expertise in complex, state-specific Medicaid rules, ensuring the trust complies with requirements. Errors in drafting can lead to denial of Medicaid benefits or costly delays. While some states may provide templates or suggest that professional help is not legally required, the intricacies of the law make legal counsel invaluable. The process involves the attorney drafting the document, followed by review and formal signing by all parties, often requiring notarization.

Establishing and Funding the QIT Account

Once the Qualified Income Trust document is finalized and signed, establish a dedicated bank account for the trust. This account must be opened in the QIT’s name, typically titled to reflect the trustee’s role for the beneficiary (e.g., “John Doe, as Trustee for the Jane Smith Qualified Income Trust”). Banks usually require the signed and often notarized QIT document.

An Employer Identification Number (EIN) is frequently required for the trust bank account, even though the trust is not an employer. This unique nine-digit number, issued by the IRS, identifies the trust for tax purposes. Applying for an EIN is a free service provided by the IRS and can be done online, by fax, or by mail using Form SS-4. The online application often provides the EIN immediately, while faxing can take a few business days, and mail can take several weeks.

The primary funding for a QIT involves depositing the individual’s “excess” income directly into this dedicated account each month. This is typically the portion of income that exceeds the state’s Medicaid income cap. In some states, the entirety of an income stream, such as a Social Security check, must be deposited if any portion exceeds the cap, rather than just the excess amount.

Only income, not assets, must be deposited into this QIT account to maintain compliance with Medicaid rules. Consistent and timely deposits are crucial for maintaining Medicaid eligibility. If a deposit is missed or insufficient funds are placed in the trust for a given month, it could result in ineligibility for that month. Funds should be deposited in the same month they are received to be properly disregarded for eligibility purposes.

Administering Your QIT

Effective administration of a Qualified Income Trust is essential for maintaining Medicaid eligibility. The trustee holds responsibility for managing the account and ensuring adherence to all regulations. This involves meticulous record-keeping of all deposits and disbursements, as these records will be subject to review by the Medicaid agency.

Funds within the QIT are restricted to specific, approved disbursements that directly benefit the Medicaid applicant. Permitted expenses include the Medicaid patient liability, which is the individual’s share of the cost for nursing home care. A small personal needs allowance for the beneficiary is permitted, with amounts varying by state.

Other allowed uses include medically necessary expenses not covered by Medicaid or other insurance, such as health insurance premiums or dental care. When one spouse applies for Medicaid, a spousal allowance may be distributed from the QIT to the community spouse to prevent impoverishment. All distributions must be documented and directly relate to the beneficiary’s care or permitted allowances.

QIT funds cannot be used for general living expenses unrelated to the beneficiary’s direct care or personal needs allowance. Attorney fees for setting up the QIT or trustee fees may not always be payable from trust funds, depending on state-specific rules. Improper disbursements can lead to penalties or a period of ineligibility for Medicaid benefits.

Ongoing reporting to the state Medicaid agency is often a requirement for QITs. This may involve providing monthly bank statements or other documentation to demonstrate continued compliance with the trust’s terms and Medicaid guidelines. The trustee is responsible for ensuring income is deposited consistently and funds are disbursed only for approved purposes, safeguarding the beneficiary’s Medicaid eligibility.