Eligibility for Long-Term Care Medicaid generally has an income test and an asset test. If the income or the assets exceed the applicable limits, then the Medicaid applicant will not be eligible for Medicaid. The specific numbers for eligibility change every year - we post the applicable numbers on our Florida Medicaid page. When a Medicaid applicant's gross income exceeds the applicable income cap ($2,250/month in 2018), the applicant will need a Qualified Income Trust in order to reduce the income levels to below the applicable limit.
How is income calculated for Medicaid purposes?
Income for Medicaid purposes includes the applicant's gross income. This mostly includes the gross amount of the applicant's pension and Social Security. It is important to review the gross amount because the pension may have a deduction for taxes or for health insurance. Social Security's gross amount usually includes a deduction for the Medicare Part A premium of $134/month, or more depending on income level (2018). If the Medicaid applicant's gross income exceeds the cap by only $1.00, for instance, the applicant will not be eligible for Medicaid unless a QIT is established and properly funded.
Why is a Qualified Income Trust (QIT) needed?
Long story short, it's the law. The reality is that needing a QIT does not make sense. A nursing home in Pinellas County generally costs between $8,000 to $10,000 per month, but if the applicant's income is only $2,500 per month and their assets are below $2,000, how can they now afford Medicaid? But regardless of whether the law makes sense, Florida is one of the 18 states that have an income cap for long-term care purposes.
Who can set one up?
First, a Medicaid applicant is likely to need an attorney to help set up a QIT. There are a lot of ways that income can create problems, so going to a good elder law attorney is important.
Next, the law provides that these are the following people who can established a QIT:
- The applicant themselves
- The applicant's spouse
- A court or guardian
- The applicant's attorney-in-fact (with a valid durable power of attorney)
Are there any potential pitfalls?
One of the largest pitfalls for QITs (and with almost all Medicaid planning, asset protection planning and estate planning) is that your durable power attorney should have the power to create a QIT. If a durable power of attorney is created after Oct. 1, 2011, then the document must be initialed in the right place. This is very important, to say the least. Almost every day we see poorly created created powers of attorney that do not have the power to create a QIT!
How is a QIT administered?
Very, very carefully. Every month Medicaid is needed, then the QIT must be correctly funded. Money placed into the QIT is a dollar for dollar set-off. The following example illustrates how a QIT is funded:
Mary, a single person, needs nursing home Medicaid for January. Her countable assets are below $2,000. Mary's gross income is $2,300 per month (i.e., over the income cap). In order to create Medicaid for January, Mary (or her attorney-in-fact) needs to deposit at least $96 into the QIT's bank account in January. Because the $96 was placed into the QIT, Mary's income is now (somewhat magically) below $2,250/month. (We would always advise placing more than enough income into the QIT, not just this bare minimum).
If Medicaid is needed for February, Mary must, once again, deposit the applicable amount into the QIT, each and every month.
What happens to the funds place into the QIT?
Generally, the income placed into the QIT is paid out in a number of different ways:
- For a single applicant, all of his or her income goes to the facility as part of his or her's patient responsibility.
- For a married person with a spouse at home, some of the income from the QIT may be diverted to the community spouse, depending upon the community spouse's income. Another webpage has a long explanation of Florida spousal income diversion rules.
Wait, you mean that the money placed into the QIT may still go to the nursing home?
Yes. The QIT may, especially for a single person, still go to the nursing home, so the reality is that the QIT is likely just a necessary annoyance for the entire family.
What happens to QIT assets upon the applicant's death?
Any remaining assets in the QIT are paid to the state of Florida. A QIT is a "payback" trust for Medicaid purposes. There is likely, however, very few assets in the QIT as most assets flow out during the month, regardless.
Is there any way around needing a QIT?
Not really. If an applicant wants Medicaid and the income exceeds the cap, a QIT will be necessary. If the applicant has a pooled trust, however, the income may be placed into it, but this must be done on a monthly basis.
Applying for and getting Medicaid in Florida is not easy, and keeping Medicaid is not always easy either. That is why you should consult with a good elder law attorney as part of your estate and incapacity planning.