Tennessee has an "income cap" that can prevent applicants who have gross incomes above $1,869.00 per month (2007) from qualifying for Medicaid. Fortunately, federal law does allow the Medicaid applicant’s income to be placed into a qualified income trust ("QIT," sometimes called a "Miller Trust"). The income placed in the qualified income trust’s bank account will permit the applicant to qualify for Medicaid for nursing home care. Each month, at least enough of the applicant’s regular monthly income must be deposited into the trust account so that the amount of income that remains outside the QIT is no more than the $1,869 income cap.
A QIT is an irrevocable trust that can receive only the regular monthly income of the individual. The monthly income must be deposited into the trust each month. The amount that has been put into the trust is then deducted from the applicant’s "countable income" for Medicaid qualification purposes. (these trusts were approved in a federal court case, Miller v. Ibarra, which is why a QIT is sometimes called a "Miller" trust.) Qualified income trusts are a type of "special needs trust," and their use was incorporated into federal law (at 42 U.S.C. Sec. 1396p(d)(4)(B)) in the 1993 revisions to the Social Security Act.
The trust must be signed by two people: the trustee and the grantor, or the grantor’s legal representative. The grantor is the nursing home resident who is applying for Medicaid and whose monthly income is funding the trust. The trustee is responsible for paying the grantor’s nursing home related expenses by writing trust checks to the nursing home and other recipients as instructed by the Tennessee Department of Human Services ("DHS"). If the grantor is not mentally competent to sign the document, his conservator or his attorney-in-fact under a valid power of attorney (P.O.A.) can sign for him. If there is no P.O.A., the probate or chancery court must appoint a conservator for the grantor. The court must authorize the conservator to sign the trust for the incompetent grantor. The trustee can also be the attorney-in-fact or the conservator.
After the trust agreement is signed, the trustee must open a new trust bank account and income of the grantor must be deposited into this new bank account for each month the grantor needs Medicaid assistance DHS will not approve Medicaid for any month before the QIT is funded. The Tax Identification Number on the bank account will be the Social Security Number of the grantor.
The trustee may write checks from the QIT only for the purposes specifically authorized by the trust agreement and DHS. If most of the expenses that the trust authorizes are paid directly rather than being paid from the QIT account, often the only check written by the trustee will be the "patient responsibility" amount that is paid to the nursing home. In those situations, private health insurance premiums, the personal needs allowance (usually $40/month), and a spousal support allowance may all be paid outside the QIT. At the end of each month there should be left in the trust bank account only about $20 from that month’s income (to pay bank service charges), plus any accumulation from prior months.
The trustee is required to file an annual accounting to the DHS. The accounting will show all income deposited into the trust account, the checks written, and the remaining balance of the account. The trustee should save all bank statements for this purpose. The trustee holds the remaining balance of the trust account until the grantor dies.
Upon the death of the grantor, the trustee must notify the State of Tennessee, which should then inform the trustee of the amount of Medicaid benefits the state had paid for the grantor’s care during his lifetime. The trustee then must pay the remaining trust balance to the state as part payment for the nursing home expenses that were paid by Medicaid. Upon death, the trustee can not spend any money from the trust without permission.