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Boca Raton Estate Planning Lawyer / Blog / Elder Law / What is a Qualified Income Trust?

What is a Qualified Income Trust?

Qualified Income Trust

Paying for long-term care can quickly deplete an individual’s assets due to how expensive long-term care services are. In Florida, the average price of a private nursing home room is $10,809 per month. However, additional expenses such as the cost of medications and medical supplies are likely to increase that average to $12,000 to $15,000/month. Although Medicaid will assist in partially covering the cost of long-term care services, there is a strict income cap that applicants must meet to qualify for long-term care benefits. To qualify for Florida Medicaid, an individual’s monthly gross income cannot exceed $2,742/month (as of 2023). However, individuals who receive monthly income that exceeds $2,742 may qualify for Medicaid by creating a Qualified Income Trust. A Qualified Income Trust (QIT) is a Medicaid planning technique used to artificially reduce an individual’s income below the applicable limit, qualifying them for long-term care benefits.

Each month, all gross income that exceeds $2,742 must be deposited into the QIT in order to receive Medicaid long-term care benefits for that specific month. Medicaid counts gross income, from all income sources, including social security, annuities, alimony, employment, and retirement plan distributions (such as the required minimum distribution from an IRA). To prevent a lapse in Medicaid coverage, it is important to ensure the QIT is properly funded and administered on a monthly basis. It is crucial that the QIT is managed carefully by ensuring enough funds are deposited each month so that the Medicaid applicant’s monthly income does not exceed the income cap.

Each month, the Medicaid applicant must place all excess income received that month, at minimum, into the QIT to receive their long-term care benefits. For nursing home residents, almost all of the applicant’s income that is placed in the QIT will be paid to the skilled nursing facility as part of their “patient responsibility”. The applicant will be able to keep $160 (as of July 2023) of their income per month as their Personal Needs Allowance. However, if the Medicaid applicant has a spouse that lives at home, a portion of their monthly income may be diverted to the spouse, depending on the spouse’s income and assets.  The funds from the QIT must only be used to pay for medical care and treatment for the applicant. The QIT funds may not be used for household expenses, such as keeping up with the mortgage, rent, utility bills, property taxes, or homeowners’ insurance fees.

It is also important to understand what a QIT cannot do.  A QIT is not a sheltering tool.  A properly administered QIT is used as a pass-through for funds so that an applicant can receive benefits even though their income is above the cap.  Should the applicant need the funds for living expenses outside their care needs, there is another income sheltering tool that can be used, and an experienced Medicaid planning attorney should be consulted to discuss additional options.  Additionally, in accordance with a 2014 Florida Supreme Court decision, an attorney must prepare and supervise the execution of a QIT. Otherwise, it is considered the unlicensed practice of law as a legal analysis is necessary to determine whether the use of a QIT is appropriate.

QITs may be created by the Medicaid applicant, his or her spouse, agent under a Durable Power of Attorney, or their Court appointed Guardian. A proper Durable Power of Attorney is required to create a QIT for the applicant. Effective October 2011, Florida law requires that a Durable Power of Attorney list “super powers”, or separately enumerated powers that must be initialed by the Principal, including one granting their agent the authority to create a QIT on their behalf.

Upon the death of the Medicaid applicant, any remaining funds in the QIT will be paid to the state of Florida to recover the expenses paid by Medicaid. Any funds remaining after reimbursing the state will be paid to the beneficiaries of the QIT.

If you or a loved one requires long-term care, it is crucial to hire an experienced Medicaid planning attorney. Whether you have already begun planning for Medicaid or are preparing for future planning, the process is difficult, but at SAMUELS WOOD PLLC, our experienced and compassionate attorneys can guide you through every step to ensure you receive the benefits you need. Contact our firm at 561-864-3371 today or fill out the consultation request form.

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