What Is a Qualified Income Trust (QIT) for Medicaid?

A Qualified Income Trust (QIT) is a specialized financial instrument that helps individuals qualify for certain public benefits. It is a distinct type of trust designed to address unique financial planning needs. This arrangement helps manage income when an individual’s financial situation might otherwise prevent access to essential support programs.

Understanding Qualified Income Trusts

A Qualified Income Trust, often referred to as a Miller Trust, provides a pathway for individuals whose income exceeds certain limits to become eligible for long-term care Medicaid benefits. This trust addresses the “income cap” problem in many states, where an applicant’s gross monthly income is too high for direct Medicaid qualification, even if insufficient for care costs. The core objective of a QIT is to divert an individual’s excess income into the trust, thereby reducing their countable income below the Medicaid threshold. This mechanism is particularly relevant for seniors requiring nursing home care or extensive home and community-based services, where the cost of care can easily surpass their monthly income.

A portion of the individual’s income, specifically the amount over Medicaid’s limit, is placed into a dedicated trust account. Once deposited into the QIT, this income is no longer considered when determining Medicaid income eligibility. It is important to understand that a QIT exclusively deals with income, such as Social Security benefits or pension payments, and cannot be used to manage or shelter assets. The trust does not assist individuals who are over the Medicaid asset limit in meeting that particular requirement. Its sole purpose is to address the income component of Medicaid eligibility.

How a QIT Operates

Establishing a Qualified Income Trust involves setting up a formal trust document and a dedicated bank account. The individual is typically the grantor and beneficiary, while a separate person, such as a family member or trusted friend, serves as the trustee to manage the account. Income, such as Social Security or pension checks, is deposited into this trust account each month. For the income to be disregarded for Medicaid purposes, the entire amount from a single income source must be deposited into the QIT, even if only a portion of the total income exceeds the cap.

Funds in a QIT can only be used for specific, permissible purposes. These include the Medicaid recipient’s “patient share” or “share of cost” for nursing home care. Other allowable distributions may include a small monthly personal needs allowance, which varies by state, and payments for health insurance premiums or certain medical expenses not covered by Medicaid.

Any income deposited into the QIT account must be transferred promptly, ideally in the same month it is received, to ensure continuous Medicaid eligibility. The trust is irrevocable, meaning its terms generally cannot be changed or canceled once established. Upon the death of the Medicaid recipient, any funds remaining in the QIT are typically paid to the state Medicaid agency, up to the total amount of benefits paid on behalf of the individual.

Key Requirements and Considerations for QITs

A Qualified Income Trust must adhere to specific legal and structural requirements to be considered valid for Medicaid purposes. The trust must be irrevocable, meaning it cannot be altered or terminated by the grantor after its creation. This irrevocability ensures the funds placed into the trust are genuinely outside the individual’s direct control for eligibility calculations. The trust must also be established for the sole benefit of the individual applying for Medicaid.

The trust document must contain specific language mandated by federal and state Medicaid agencies, often designating the state as the primary beneficiary upon the individual’s death, allowing for recovery of Medicaid benefits paid. Furthermore, QITs are strictly limited to holding income; they cannot be funded with assets like savings accounts, real estate, or other resources. While a nominal amount may be permitted to open the trust bank account, subsequent deposits must consist solely of the individual’s regular income. Given the complexity of these requirements and the variations in state-specific rules, seeking professional legal assistance, such as from an elder law attorney, is highly recommended to ensure compliance and avoid potential disqualification from benefits.

Impact on Medicaid Eligibility

A Qualified Income Trust directly impacts Medicaid eligibility by reclassifying income that would otherwise exceed state limits. By depositing income above the state’s Medicaid income cap into the trust, that portion of the income is effectively disregarded for eligibility calculations. This mechanism allows individuals who have too much income to qualify for Medicaid directly, but not enough to afford the substantial costs of long-term care, to meet the program’s income criteria. For example, if a state’s income cap is $2,901 per month in 2025, and an individual receives $3,500 in monthly income, placing the excess $599 into a QIT can make them income-eligible.

It is important to differentiate between the income test and the asset test for Medicaid eligibility. A QIT addresses only the income component, making countable income fall within acceptable limits. However, individuals must still meet Medicaid’s separate asset limits, which are typically lower than income caps. The QIT is therefore a specialized tool for income planning, not asset planning. Its proper establishment and administration are vital for individuals to secure access to long-term care services through Medicaid, which they would otherwise be denied due to their gross monthly income.