How to Create a Qualified Income Trust

How a Qualified Income Trust Works

Paying for expensive nursing home or in-home care, especially on a long-term basis, can quickly drain a senior’s bank account. In the Atlanta, Georgia area in 2020, the average cost for a year of care in a nursing home totals $83,403, while the average cost of in-home care can amount to $49,674.

Creating an irrevocable Qualified Income Trust (QIT) can allow Georgia’s seniors to tap into financial assistance from Medicaid even when their monthly income exceeds the threshold of Medicaid eligibility. The QIT (also known as a Miller Trust) impacts only the senior’s income; it has no effect on the senior’s savings or other assets.

Georgia is an “income cap” state, meaning that individuals whose income is greater than the state’s monthly income cap ($2,382 in 2021) are ineligible for Nursing Home Medicaid and will find themselves personally responsible for their long-term care expenses. By properly funding a QIT, Medicaid allows an individual to become eligible for Medicaid even though that individual’s income exceeds the income cap.

Before you begin, please note that you only need a QIT if you are applying for Nursing Home Medicaid or a Medicaid waiver benefit. A QIT is not to be used as part of anyone’s estate planning and is not necessary for Medicare eligibility, only Medicaid.

Creating a Qualified Income Trust

To create the QIT, the senior, the senior’s guardian or conservator, or the senior’s agent under a power of attorney can complete the QIT Agreement. In the QIT Agreement, you will need to name a Trustee. The Trustee can be any person except the senior. The senior needs to select someone who is reliable, trustworthy, and who can balance a checkbook to serve as the trustee.

Once the QIT Agreement has been completed and signed, then the Trustee takes the QIT Agreement to a bank to open a bank account in the name of the Trustee. The account would be titled “John Doe, as Trustee for the Jane Smith Qualified Income Trust.”

Managing a Qualified Income Trust

Most people are reluctant to serve as trustee of a QIT because they become intimidated when they hear the term “trust.” I typically advise clients to think of a QIT as a funky bank account with a handful of specific rules. The first couple of months of managing the trust can be confusing, but usually the trustee has the pattern down by month three.

1. Only the senior’s income can be deposited into the trust. The trustee needs to look at how much money the senior gets each month and can deposit either some or all of the senior’s monthly income into the QIT. At a minimum, the trustee must deposit senior’s monthly income plus one dollar over and above the monthly state cap. So, if the senior receives income of $2,500 each month and the income cap is $2,382, the trustee would deposit $119 into the QIT. Often, it is easier for the trustee to simply deposit all the senior’s income into the QIT and to pay the permissible expenses from there.

   We have included a link to a QIT Worksheet that will help the trustee determine the minimum amount that the trustee must deposit into the QIT each before the end of each month.

2. All of the senior’s income must be deposited in the month in which it is received. If a senior receives a Social Security payment on the 30th of each month, it must be deposited before the end of the month, and all appropriate expenses must be paid from that payment before the end of the month. The trustee may need to make arrangements for payments to the Senior to be received earlier in the month.
3. The trustee can only pay certain types of expenses from the QIT, most of which are related to the senior’s medical care. Only the trustee named on the QIT account can write checks from the account. Page 2 of the QIT Agreement outlines the expenses that can be paid from the QIT. These expenses are primarily medical in nature and include nursing home bills, monthly health insurance payments and co-pays, spousal allowances and incurred medical expenses not covered by insurance, Medicare, Medicaid or another third party. Bank fees are also permissible expenses. Please note that a QIT cannot be an interest-bearing account.
4. If properly managed, the balance should be zero or close to zero at the end of every month. Because the account has such a low monthly balance, the account will likely generate a monthly service fee, which can be treated as an allowed deduction.
5. The trustee needs to keep track of the expenses coming out of the trust and to report to DCH annually on what has been spent. The trustee should retain all bank statements, canceled checks, receipts and tax returns for the QIT account over its lifetime.

Terminating a QIT
The QIT terminates when the beneficiary or senior dies. At that point, the Trustee forwards any remaining funds in the QIT to the Department of Community Health (DCH) to repay any expenses DCH made on behalf of the senior during the senior’s lifetime. In the unlikely event that there is money remaining after DCH is repaid, the QIT account’s remaining balance is distributed to the senior’s named beneficiaries.

If you want to establish a QIT, fill out the first form (The Irrevocable Medically Needed/Qualified Trust Agreement). Refer to the Georgia Senior Legal Hotline – 404-657-9915 for any questions. Any senior in the state may utilize the hotline, regardless of income.

A few reminders:

• A QIT is only needed for a Medicaid waiver or nursing home benefits.
• A senior should not create or fund a QIT until the senior is ready to file your application.
• The trustee must ensure that all spending is for the senior’s medical care and nursing home care.
• When the senior dies, Medicaid gets paid back first.

At Weinberg Elder Law, we receive a number of phone calls from people who want to hire us to create a QIT to help a senior or other individual with a disability qualify for Medicaid. The good news is that, in Georgia, establishing and maintaining a QIT is a simple, straightforward process. You do not need to hire an attorney to help you create a QIT. The DCH, the entity that oversees Medicaid, has created a trust form for you to use and a guide to explain how to fund and manage the QIT. On this page, we have included links to the trust document form, called The Irrevocable Medically Needed/Qualified Income Trust Agreement (the QIT Agreement), and to DCH’s guide, called The Qualified Income Trust: A Guide for Trustees (the QIT Guide).