What is a Medicaid Trust?
This is a trust set up specifically to help someone qualify for Medicaid and receive help paying for costs associated to Nursing Home Care or similar services, usually near the end of someone’s life. The cost of Nursing Home Care, in most cases, can be the most expensive thing a family will ever have to pay for outside of a mortgage. And, for those who do not have any money or assets to pay for this type of service, the government is able to cover the costs through the Medicaid Program. However, they have a rule about how much money or assets you can own in order to qualify for help. People will often desire to set up a Medicaid Trust in order to move their money or assets so they can qualify for this help. The most famous of all Medicaid Trusts is the “Miller Trust.” The Miller Trust is a written trust agreement that makes it possible for people to obtain Medicaid nursing home coverage even though they actually make too much money to qualify for Medicaid. Importantly, they are not actually called Miller Trusts anymore. Instead, we now call them Qualified Income Trusts. However, we do not create these types of trusts anymore for our clients, as we believe this type of trust has disadvantages and limitations that far outweigh the benefits of setting them up. There are much better options today than the Medicaid “Miller” Trust. However, because there is so much interest in getting Medicaid Trusts today, we are giving a summary of them and why people desire to set them up. In our home State of Texas, and in most States, you must have both limited resources and limited income in order to qualify for Medicaid coverage. These are two distinct tests that must be met, and if you don’t satisfy both of them, then Medicaid nursing home coverage will not be available.
The first of the two requirements–that you must have limited resources–has nothing to do with Qualified Income Trusts. Basically, if you have more than $2,000.00 worth of assets, you are too wealthy to qualify for Medicaid no matter how little money you earn. A person is allowed to own very little money or assets and still qualify for Medicaid. The government typically doesn’t look at your homestead property, burial plot, life insurance or vehicle. However, all cash, stocks, bonds, retirement accounts, non-homestead real estate, and other investments are included in the $2,000.00-limitation.
People with more than $2,000.00 can give away properties or convert them into properties that are not counted, including Trusts. This is what most prudent people will eventually do. However, depending on the date of the transfer, there may be a 36 month or 60-month look-back period, depending on the State in which you reside. The lookback period is a way to keep you from giving away all your property and then applying for Medicaid the next day. For transfers made prior to February 8, 2006, the 36-month look-back period continues to apply unless the transfer was made to a trust, in which case the longer 60-month look-back applies. For transfers on or after February 8, 2006, a 60-month look-back applies to all transfers.
Also, there are rules which generally allow the spouse of someone trying to qualify for Medicaid to retain about $3,022.50 worth of property. A spouse’s property is not counted when determining the total value of assets for the $2,000.00 resources test. The second of the two requirements–that you can earn no more than a certain dollar amount of income per month–is where Qualified Income Trusts enter the picture. Under current law, the monthly dollar limit is $2,205.00. People who earn more cannot qualify for Medicaid unless they have a Qualified Income Trust.
Next, you assign your income to the Qualified Income Trust, and the wording of the trust limits how much of the income can be distributed. This way, a person who makes more than the monthly limit will be treated as earning less than that amount, thereby satisfying the Medicaid income test. The trust can allow for certain payments, including insurance premium payments, other payments to support a spouse, and $60.00 each month for the beneficiary’s personal needs. The money remaining in the trust after those payments are made must be paid to the nursing home for the beneficiary’s care, with Medicaid picking up the balance. With Qualified Income Trusts, people can get the government to cover the portion of the nursing home costs that they can’t afford.
Even though this type of trust is the most common trust sold today for people needing Medicaid help, this trust is substantially insufficient to meet the total needs of the family. We have much better trust options available, and we recommend our clients to go through the planning process to discover the best path forward for them.
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