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Sunday, October 1, 2017

Is a Qualified Income Trust Right for Me?

Nursing home care is expensive, but if you need the level of care you can only receive at a long-term care facility, you have no option. You have to find a way to make it work. If you are a senior who is trying to figure out how to pay for nursing home care without going broke, you may be wondering, if an experienced estate-planning lawyer can help. The answer is, most likely: yes.

The High Cost of Aging

Nursing homes charge an average of $3,500 to $5,000 a month or more. If your income is less than $2,205 a month, you may qualify for Medicaid to pay your long-term care expenses. But what can you do if your income is over the Medicaid eligibility limit but not enough to pay for a nursing home out of pocket?

A Qualified Income Trust (QIT), also called a Miller trust, can be the solution. With a Qualified Income Trust, you transfer your income to the trust, which puts your income below the Medicaid limits for long-term care financial assistance. Medicaid will pay for your nursing home and give you a monthly allowance for your personal expenses. Your spouse will get to keep her own income as well as the maximum allowed amount from your income, through the trust. Any money left over from your income goes to the nursing home, to reduce the amount Medicaid has to pay for your care.

Qualified Income Trusts are complicated to set up, and since every state has its own Medicaid agency, the specifics can vary from state to state. Alabama requires copies of as many of these items as you can provide when requesting that the Alabama Medicaid Agency pay your nursing home expenses:

  • Your Medicare and Social Security cards
  • Verification of all your gross income, including wages, Social Security benefits, VA benefits, all retirement and pension income, annuities and other income.
  • The last five years of your bank statements
  • Verification of all your stocks, bonds, mutual funds, certificates of deposit, IRAs and savings bonds.
  • Deeds of all real property you own by yourself or with others.
  • Sales documents for all property you sold, gave away or otherwise transferred in the last five years.
  • Trusts, mortgages, loans and promissory notes in which you have a financial interest.
  • All insurance policies in which you have an interest.
  • Funeral or burial contracts.
  • Legal documents such as guardianship, curator, or power of attorney.

The Alabama Medicaid Agency recommends the use of a QIT if you have excess income. The agency will review your financial circumstances every year once you are approved, so be sure to follow the requirements of your QIT trust or you could lose Medicaid eligibility. The agency explains that, if you use a QIT correctly, they will disregard your income for purposes of long-term care Medicaid long-term care financial assistance.

In Alabama, you can only place your income, not any other assets, in the trust. The trust must be irrevocable, so be sure this is what you want to do before finalizing the trust. Alabama requires that your trust state: “Upon the death of the beneficiary, the trust assets shall be paid to the Medicaid authorities of the State of Alabama up to the total amount of the Medicaid payments made to or on behalf of the beneficiary,” or words that achieve the same effect.

Creating trusts is a specialized field of law. Be sure to talk with a local Alabama estate planning attorney to make sure your trust complies with Alabama’s legal requirements.


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