Qualified Income Trusts
Health Insurance Medicaid & Medicare
Here, learn about Qualified Income Trusts (QITs). QITs help Texas residents qualify for public benefits—for example, Medicaid coverage for long-term care—by putting part or all of their income into an irrevocable trust. This way, their income is not counted when deciding Medicaid eligibility. This article explains when a QIT starts and ends, and what happens with the leftover resources when the beneficiary dies.
What is a Qualified Income Trust?
A Qualified Income Trust, or QIT, is a trust established in order to qualify someone for long-term care Medicaid. A QIT “is an irrevocable trust established for the benefit of a person or the person's spouse, or both.” Texas Administative Code Title I, section 358.339(c).
If you need long-term care in Texas (such as living in a nursing home), you can apply for long-term care Medicaid.
There are three elements you must meet in order to receive coverage for long-term care:
resource limits, and
A Qualified Income Trust assists those who meet medical and resource requirements, but are over income. It does not assist with the other two requirements.
How does a Qualified Income Trust work?
A Qualified Income Trust assists in reducing “countable” income for long-term-care Medicaid purposes. The current income limit for 2022 is $2,523 ($2,742 in 2023) per month per applicant. If you are over this income cap, you would not generally qualify for long-term care Medicaid.
However, a QIT allows part or all of the applicant's income to be placed into an irrevocable trust so that it is not counted against the applicant.
Once the trust is established, the money is to be used for the following because the trust must require that the trustee:
- Pay a monthly personal needs allowance to the beneficiary,
- Pay to the spouse (if any) of the beneficiary a sum sufficient to provide a minimum monthly maintenance needs allowance, and
- Pay from the remaining funds the cost of medical assistance provided to the beneficiary.
If I need a Qualified Income Trust, where do I start?
First, if your gross income is over the income cap, you must decide what income to put into the trust. Only income like pension, Social Security, etc., may be diverted or placed in the trust. No joint income streams or automatic deductions for domestic support obligations can be diverted.
You can divert all your income to the trust or some of it. However, the entirety of the income stream must be put into the trust. You can put in all of your pension, for example, but not part of it.
What cannot go into the trust are: VA aid and attendance benefits, VA housebound allowances, reimbursements for unusual or continuing medical expenses, and assets. That’s because once you become Medicaid eligible, you will no longer receive these sources of income.
When does a qualified income trust become effective?
Income is disregarded for Medicaid eligibility purposes the first month that a valid written trust instrument is signed and properly executed, a trust bank account with the beneficiary's Social Security number is established, and enough of the beneficiary's income is placed into the account to reduce any remaining income to below the special income limit.
When does a qualified income trust end?
The QIT terminates when the beneficiary dies.
Any money left in the QIT after the beneficiary's death is paid to the State of Texas, up to the total amount of benefits paid on behalf of the beneficiary for medical care.
Any remaining funds are paid to the beneficiaries as specified in the QIT document.
How do I set up a Qualified Income Trust?
A lawyer creates the trust documents, which are then signed and notarized by both the settlor (beneficiary) or the settlor’s (beneficiary’s) agent under a power of attorney, and the trustee. The lawyer will need to discuss the proposed settlor’s (beneficiary’s) competency, the presence of a power of attorney or guardian, and types of income streams.
The settlor’s (beneficiary’s) Social Security Number is sufficient for QIT accounts established at financial institutions. It is recommended to establish a new account at a financial institution.
Seek help from a lawyer to set up a Qualified Income Trust. Use TexasLawHelp’s Legal Help Directory tool to find one near you. TLSC’s Legal Hotline for Texans attorneys can draft Qualified Income Trusts free of charge for qualifying individuals.
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