What Can Qualified Income Trust (QIT) Funds Be Used For?

A Qualified Income Trust (QIT), often referred to as a Miller Trust, serves a specific purpose in the context of Medicaid eligibility for long-term care. This type of irrevocable trust is designed for individuals whose monthly income exceeds the income limit established by their state’s Medicaid program, yet is insufficient to cover the high costs of nursing home care or home and community-based services. By placing excess income into a QIT, individuals can reduce their countable income to meet the financial criteria for Medicaid assistance. This mechanism allows many people to access necessary long-term care benefits that would otherwise be financially out of reach.

Purpose of a Qualified Income Trust

The primary reason for establishing a Qualified Income Trust is to manage income that would otherwise disqualify an individual from receiving Medicaid long-term care benefits. Federal Medicaid law permits states to create these trusts, which act as a legal receptacle for an applicant’s “excess income.” Without a QIT, an individual whose income surpasses the state-specific cap, typically set at 300% of the Supplemental Security Income (SSI) federal benefit rate, would be ineligible for Medicaid. By directing income into the trust, the funds are no longer considered available to the individual for Medicaid eligibility purposes. This allows the applicant to meet the income thresholds required for long-term care support.

Mandatory Distributions from the Trust

The mandatory use of funds held within a Qualified Income Trust is to cover the Medicaid beneficiary’s “patient share of cost,” also known as “patient liability.” This is the portion of the individual’s income, after specific allowable deductions, that they are legally required to contribute directly towards their long-term care expenses. Federal and state Medicaid regulations stipulate that this payment must be made from the QIT before Medicaid begins to cover the remaining costs of care.

The patient share calculation accounts for the beneficiary’s total income, subtracting specific allowances. These deductions typically include a personal needs allowance, health insurance premiums, and, in some cases, a spousal allowance for a spouse living at home. Once these deductions are applied, the remaining income constitutes the mandatory patient share that must be paid to the long-term care facility or service provider. This direct payment from the QIT reduces the amount Medicaid is obligated to pay, ensuring the beneficiary contributes their financially determined portion.

Failure to make the required patient share payment from the QIT can lead to consequences, including the potential termination of Medicaid eligibility for long-term care. The trust document itself will outline the specific payment schedule and recipients for this mandatory distribution.

Permissible Secondary Uses of Trust Funds

Beyond the mandatory patient share, Qualified Income Trust funds have a few other limited and specific permissible uses, always occurring after the patient share has been accounted for. One such use is the Personal Needs Allowance (PNA). This small, federally mandated amount, typically ranging from $30 to $90 per month depending on the state, is intended for the beneficiary’s personal expenses, such as toiletries, clothing, or recreational activities.

Another authorized use of QIT funds involves the payment of health insurance premiums. This often includes premiums for Medicare Parts B and D, as well as any supplemental health insurance policies. Paying these premiums from the trust helps ensure the beneficiary maintains necessary health coverage, which can reduce the overall burden on Medicaid for other medical services.

In some situations, QIT funds may also be used for medically necessary services or items not covered by Medicaid or other insurance. This category is narrowly defined and requires documentation and approval. Such expenses must be directly related to the beneficiary’s medical needs and health, and are not for general comfort or convenience.

Prohibited Uses and Trust Termination

Qualified Income Trust funds are subject to specific limitations and generally cannot be used for general living expenses, gifts, or non-medical purchases. Using QIT funds for prohibited purposes, such as paying a family member’s bills or purchasing non-approved consumer goods, would violate the trust’s terms and Medicaid regulations. Such misuse could result in the beneficiary losing their Medicaid eligibility or facing penalties.

Upon the death of the Medicaid beneficiary, any funds remaining in a Qualified Income Trust are typically subject to a “Medicaid payback” provision. This means the state Medicaid agency, which has provided financial assistance for the individual’s long-term care, becomes the primary beneficiary of the remaining trust assets. The state can recover an amount up to the total Medicaid payments made on behalf of the deceased individual. Any funds remaining after the state’s Medicaid claim has been satisfied would then be distributed according to the terms outlined in the trust document, often to designated remainder beneficiaries.