Qualified Income Trusts (A Medicaid Solution for Florida Residents)
Long-term care for seniors delivered in a nursing home setting can be prohibitively expensive for most people. Still, some 70% of those over 65 are expected to need long-term care with 20% of seniors likely to require it for five or more years. Medicaid provides financial assistance to those requiring long-term care and qualified income trusts (QITs) help those with middle income to become eligible for Medicaid.
How QITs Work
QITs, sometimes called Miller Trusts, are designed to make applicants eligible for Medicaid even if their income is greater than Medicaid’s restrictions allow. The portion of an individual’s income that exceeds the Medicaid eligibility threshold is deposited monthly into the QIT. QIT funds are not restricted and thus can be accessed by the individual paying into the trust. When the Medicaid recipient dies or otherwise no longer requires Medicaid, funds in the QIT are paid to the State of Florida up to the amount necessary to compensate the state for Medicaid payments made by the state to cover the recipient’s care.
Setting Up a QIT
To set up a QIT in Florida, individuals sign an agreement that meets the requirements of the Department of Children and Families and is approved by that agency’s legal office. To determine eligibility, Medicaid applicants must submit a copy of their QIT agreements to an eligibility specialist at the Department of Children and Families who will then forward it to the department’s legal offices for formal review. It is highly recommended that individuals seek the assistance of an experienced Medicaid attorney who can help draft the agreement for a QIT.
There are four requirements that must be in place for a QIT agreement to be approved in Florida. First, the QIT must be an irrevocable trust meaning that it cannot be canceled once it is created. Secondly, upon the death of the Medicaid recipient, the QIT must reimburse the State of Florida by paying all income in the trust to the state, up to the amount equivalent to all the Medicaid payments made by the state on the recipient’s behalf. Thirdly, the QIT must include only the Medicaid recipient’s income. Other assets cannot be added to the trust. Fourth, the QIT agreement must be signed by the recipient, their spouse or the recipient’s legal representative.
“QIT funds are not restricted and thus can be accessed by the individual paying into the trust.”
Depositing into a QIT
Payments into the QIT are made on a month-to-month basis and correspond to the current month of Medicaid expenses. Payments of income into a QIT cannot be made to cover past or future months. The amount of income deposited each month into a QIT must be such that the leftover amount of income the Medicaid recipient receives is low enough to remain qualified for Medicaid. If no income is deposited in a QIT one month, or less than the amount of required income is deposited, then the State of Florida will not make a Medicaid payment for that month. It is therefore essential that income is carefully measured each month and the correct amount is deposited. In fact, it is better to overpay into the QIT than end up underpaying one month and having to cover long-term care costs out of pocket for a month. Note that any amount taken out of a QIT counts as income for that month.
There may still be a responsibility for the Medicaid recipient to pay a portion of their remaining income (after making their monthly deposit of income into the QIT) to their long-term care facility. This payment is called the patient responsibility and is determined based on the amount of income deposited into a QIT and the remaining income remaining after the deposit on each given month. Patient responsibility is further calculated by deducting the Medicaid recipient’s patient needs allowance, deducting any health insurance premiums and deducting a set amount for spousal diversion (that is, money sent to a spouse at home for the spouse’s personal use).
Liquidating a QIT
As is the case with any irrevocable trust, a QIT needs to have a trustee. A trustee is either a person or a law firm that administers the QIT on behalf of the Medicaid recipient. Upon the Medicaid recipient’s death, the QIT trustee (or other individual acting on behalf of the Medicaid recipient’s estate) should contact the long-term
care facility to settle the account with them. There may be a prorated refund for the month of death. This amount of money will need to be paid back into the trust. The
balance of the QIT at the date of death, as well as the prorated refund from the nursing home facility, is to be paid to the State.
The trustee or administrator would need to create a cover letter and add documentation that proves the balance of the QIT at the date of death as well as any nursing home refund. This package is then sent to the Florida State Agency for Health Care Administration along with a check for the remaining balance in the QIT.
South Florida Law
South Florida Law is a full-service estate planning, business and real estate law firm that can assist families in employing a variety of strategies during Medicaid means-testing to become Medicaid eligible. We can also proactively work with families, couples and individuals to protect their homes from Medicaid’s Estate Recovery Program. The best time to begin planning for Medicaid is years before nursing home services are needed. That said, when long-term care services are needed urgently, Medicaid’s complexity and the potential savings that can come from expert advice make it essential that you consult with an expert before taking the first step. Contact us today for a consultation by calling (954) 900-8885 or via our contact form.