As an estate and Medicaid planning law firm in Florida, our firm frequently assists clients who are concerned about the impact of long-term care costs on their financial well-being. Medicaid is a crucial lifeline for individuals needing nursing home care but lacking the means to cover the exorbitant costs. While Medicaid is a joint federal and state program designed to provide health coverage for seniors and people with disabilities, in the State of Florida, there are both income and asset thresholds for establishing Medicaid eligibility. In 2024, applicants must not exceed a gross monthly income of $2,829 to qualify for nursing home Medicaid. But for those surpassing this threshold, is there a solution? 

The Role of Medicaid Qualified Income Trusts (QITs)

Qualified Income Trusts (QITs), also known as Miller Trusts, are crucial in long-term care planning for individuals who exceed Medicaid income thresholds. Excess income exceeding Medicaid limits is directed to the trust monthly. Once established, a QIT is irrevocable, meaning that it cannot be modified or revoked.  Additionally, a QIT is extremely restrictive regarding the use of the funds in the Trust.  The income in the QIT is primarily used to pay for the Medicaid applicant’s medical expenses such as costs of care in a nursing home or room and board at an assisted living facility, health insurance premiums and medical expenses not covered by Medicaid.  Income in a QIT can also be used to pay the community spouse a spousal allowance or to distribute an applicant’s personal needs allowance of $160 a month.  

Setting up a Medicaid Qualified Income Trust

The QIT is drafted by an attorney and established by the Medicaid applicant.  The Medicaid applicant is the grantor and lifetime beneficiary of the Trust.  If the Medicaid applicant is incapacitated, the QIT may be signed by the applicant’s attorney-in-fact through a Durable Power of Attorney or if the applicant is under guardianship, authority to sign the income trust is often established by court order.  In a situation where a Medicaid applicant is married, their spouse, absent a Durable Power of Attorney or Guardianship, may establish the QIT for them.   

The Role of the Trustee

A QIT requires the appointment of a trustee, who is tasked with managing trust assets and ensuring compliance with Medicaid regulations. When the Medicaid applicant establishes the QIT, a Trustee is appointed to ensure that an appropriate amount of funds is transferred into and out of the Trust each month.  The Trustee is often the applicant’s Attorney-in-Fact, allowing for ease of transfer of income from the applicant’s personal bank account into the QIT every month.  The income transferred to the QIT is then transferred out of the QIT to pay the nursing home resident’s share of cost, also known as the Medicaid applicant’s monthly patient responsibility. 

It is important to note that proper monthly trust funding is essential to maintaining Medicaid eligibility.  Failure to properly fund the QIT can result in the loss of benefits.  

Durable Power of Attorney and Qualified Income Trusts

It is imperative that a Medicaid applicant in Florida have a Durable Power of Attorney that provides their Attorney-in-Fact with the authority to establish a QIT.  The authority in the Durable Power of Attorney can specifically state an Attorney-in-Fact can create a Medicaid Qualified Income Trust or the authority can be more general, such as authority to establish an inter vivos (living) trust.  It is important to review your Durable Power of Attorney to make sure your Attorney-in-Fact is not limited to creating only revocable trusts.  QITs are irrevocable and a Durable Power of Attorney with only limited authorities to create revocable trusts could create an expensive roadblock to establishing Medicaid eligibility.   

What is Medicaid Payback?

Medicaid payback refers to the process wherein Florida seeks reimbursement for Medicaid expenses incurred by individuals who utilized a Qualified Income Trust (QIT) during their lifetime. When a Medicaid recipient who established a QIT passes away, the state is entitled to recover the remaining funds in the trust, up to the total amount that Medicaid expended for the recipient’s long-term care.

Once the payback is satisfied, any remaining funds in the QIT are preserved and distributed to the decedent’s beneficiaries as outlined in their estate plan. Individuals and their families must understand this aspect of Medicaid planning and its implications for estate distribution.

Qualified Income Trusts and Banks

After a QIT is established and a Trustee appointed, you must take the QIT document, along with any other relevant documents (like a Durable Power of Attorney or Court Order) to a bank and open an account.  The account must be in the name of the Trust and should include the word Irrevocable.  For example, the account title may be, The John Doe Irrevocable Income Only Trust, Jane Doe, Trustee.  You will want to check with your bank to determine if there are minimum balance requirements for the account and advise the bank that no fees should be assessed against the Trust.  Fees related to the account should be paid out of the applicant’s personal account.  

It is advisable to maintain QIT bank statements somewhere easy to obtain.  The Department of Children and Families may require quarterly accounting to determine if the QIT is being properly funded.  

Finley Law LLC: Your Premier Elder Law Firm in DeLand, Florida

At Finley Law  LLC, we offer knowledgeable and personalized service for all your estate and Medicaid planning needs.  Whether you need assistance with pre-planning for Medicaid, or need Medicaid coverage immediately, Finley Law LLC is there to guide you ever step of the way. 

Contact Finley Law LLC at our DeLand, Florida, office at (386) 734-5959 to schedule a confidential consultation with our experienced and caring Medicaid and estate planning attorneys. We are dedicated to serving clients across Volusia and Flagler Counties in Florida and look forward to assisting you.

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