The Qualified Income Trust (QIT) is a specific type of trust designed to help individuals qualify for Medicaid when their income exceeds the allowable limits. In Tennessee, this trust allows the grantor, who is also the primary beneficiary, to manage their income effectively while ensuring they receive necessary long-term care assistance. Understanding the QIT is essential for trustees to navigate the Medicaid eligibility process smoothly.
The Qualified Income Trust (QIT) in Tennessee serves as a vital tool for individuals seeking Medicaid assistance for long-term care, especially when their income exceeds the state’s established income cap. With a monthly income limit set at $2,020, many individuals find themselves ineligible for Medicaid benefits. However, the QIT allows these individuals, known as grantors, to place their excess income into a trust, thereby enabling them to qualify for Medicaid support while still managing their long-term care costs. In this arrangement, the grantor also serves as the primary beneficiary, while the State of Tennessee acts as the secondary beneficiary. The trust is managed by a trustee, who has a fiduciary duty to protect the interests of the beneficiary. The QIT is specifically designed to hold only the income of the grantor, meaning that no other assets or income from different sources can be included. This unique structure ensures that the funds are used solely for approved expenses, such as nursing home payments and certain medical costs. Understanding the nuances of setting up and maintaining a QIT is essential for trustees, as it involves strict compliance with Medicaid regulations and careful financial management to ensure that the grantor can access the necessary care without losing their financial stability.
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When filling out the Tennessee Qualified Income Trust (QIT) form, there are important guidelines to follow. Here’s a list of things you should and shouldn’t do:
The Special Needs Trust (SNT) is similar to the Qualified Income Trust (QIT) in that both are designed to help individuals qualify for government benefits while managing their income and assets. An SNT allows a person with disabilities to receive funds without jeopardizing their eligibility for Medicaid or Supplemental Security Income (SSI). Like the QIT, the SNT must adhere to strict regulations about how the funds can be used, ensuring that they serve the beneficiary’s needs without exceeding income limits. Both trusts require a trustee to manage the funds responsibly, providing a safety net for the beneficiary.
A Pooled Trust shares similarities with the QIT, as it is also designed to help individuals maintain eligibility for government benefits. In a Pooled Trust, funds from multiple beneficiaries are combined and managed by a nonprofit organization. This arrangement allows for professional management while still protecting individual beneficiaries’ eligibility for Medicaid. Like the QIT, the funds in a Pooled Trust can only be used for specific expenses, ensuring compliance with Medicaid regulations.
The Revocable Living Trust is another document that shares characteristics with the QIT. Both trusts allow individuals to manage their assets while providing for their beneficiaries. However, unlike the QIT, a Revocable Living Trust can be altered or dissolved by the grantor at any time. This flexibility can be beneficial for individuals who may need to change their financial arrangements. Both types of trusts require careful management and record-keeping to ensure compliance with applicable laws.
The Irrevocable Trust is similar to the QIT in that it removes assets from the grantor’s control, which can help with Medicaid eligibility. Once assets are placed in an Irrevocable Trust, the grantor cannot alter the trust or reclaim the assets. This characteristic is crucial for individuals seeking to qualify for Medicaid, as it ensures that the assets are not counted when determining eligibility. Both trusts require a trustee to manage the assets and adhere to strict guidelines regarding distributions.
The Medicaid Asset Protection Trust (MAPT) is closely related to the QIT, as both serve to protect assets while allowing individuals to qualify for Medicaid. A MAPT is specifically designed to hold assets that would otherwise count against Medicaid eligibility. By transferring assets into a MAPT, individuals can preserve their wealth for future use while still receiving necessary medical assistance. Like the QIT, the MAPT has specific rules about how funds can be accessed and used.
The Charitable Remainder Trust (CRT) also bears similarities to the QIT in terms of its structure and purpose. Both trusts allow individuals to set aside funds for specific beneficiaries while also providing for charitable causes. A CRT provides income to the grantor or other beneficiaries for a specified period, after which the remaining assets go to a charity. While the primary focus of a CRT is charitable giving, it can also help in estate planning, similar to how a QIT assists with Medicaid eligibility.
The Testamentary Trust is another document that has parallels with the QIT. Created through a will, this type of trust comes into effect upon the grantor's death. Like the QIT, a Testamentary Trust can be used to manage assets for beneficiaries, ensuring that they are distributed according to the grantor’s wishes. Both trusts require a trustee to oversee the management of funds, although a Testamentary Trust is often subject to different tax implications and regulations.
The Spendthrift Trust is similar to the QIT in that it protects assets from creditors and ensures that beneficiaries cannot access funds irresponsibly. This type of trust restricts the beneficiary's ability to withdraw funds, which can be beneficial for individuals who may not be financially responsible. Like the QIT, a Spendthrift Trust requires a trustee to manage the assets and make distributions according to the trust's terms.
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The Family Trust shares similarities with the QIT as both serve to manage and protect family assets. A Family Trust can provide for the needs of family members while ensuring that assets are preserved for future generations. Like the QIT, this type of trust requires careful management and adherence to specific guidelines regarding distributions and income. Both trusts aim to support beneficiaries while navigating complex legal and financial landscapes.
Lastly, the Asset Protection Trust is akin to the QIT in its goal of shielding assets from creditors and ensuring eligibility for government benefits. This type of trust is often used by individuals seeking to protect their wealth from lawsuits or financial difficulties. Like the QIT, an Asset Protection Trust requires a trustee to manage the assets and follow strict regulations to maintain its protective status. Both trusts can provide peace of mind for individuals looking to secure their financial future.
Filling out the Tennessee Qualified Income Trust (QIT) form is a crucial step for those seeking Medicaid assistance. The process involves careful attention to detail to ensure compliance with state regulations. After completing the form, you will need to take it to a bank to open the QIT account, which will hold the income necessary for Medicaid eligibility.
Filling out the Tennessee Qualified Income Trust (QIT) form can be a complex process. Many individuals make mistakes that can delay or complicate Medicaid eligibility. One common error is failing to properly identify the grantor and beneficiary. The grantor and primary beneficiary must be the same person, and the form must reflect this accurately. If this relationship is not clearly stated, it could lead to confusion during the Medicaid application process.
Another frequent mistake involves the bank account setup. The QIT bank account must be titled correctly, reflecting the trust's name. For example, it should state “The Qualified Income Trust of [Grantor’s Name].” If the account is not set up with the correct title, it may not be recognized as a trust account by the bank or Medicaid, which can hinder the application process.
Some people neglect to open the QIT bank account promptly. The account should be established during the month the grantor is first eligible for Medicaid benefits. Delaying this step can result in a lapse in coverage or complications with the funding process, as Medicaid cannot be approved until the trust is properly established.
In addition, individuals often misinterpret the funding requirements. Only the grantor's income should be deposited into the QIT account. Mixing other assets or income from another person can lead to disqualification from Medicaid benefits. It’s crucial to ensure that the funds in the account strictly adhere to these guidelines.
Record-keeping is another area where mistakes commonly occur. Trustees must maintain detailed records of all transactions, including bank statements and receipts. Failure to keep accurate records can result in issues during Medicaid audits or inquiries from the Department of Human Services.
People sometimes overlook the importance of consulting with a legal or financial advisor. The QIT process involves specific regulations and requirements that can be difficult to navigate. Without proper guidance, mistakes may occur that could have been easily avoided with professional advice.
Some individuals also misunderstand the limits on payments from the QIT account. Only approved expenses can be paid, such as nursing home costs or medical expenses not covered by Medicaid. Making unauthorized payments can jeopardize the trust’s integrity and lead to penalties.
Lastly, individuals often forget to notify the Department of Human Services when the QIT ends. The trust must be closed properly, and any remaining funds must be handled according to state regulations. Not following these procedures can result in complications or delays in settling the trust’s final accounting.
QUALIFIED INCOME TRUST (QIT):
A GUIDE FOR THE TRUSTEE
You have agreed to serve as the Trustee for a Qualified Income Trust (QIT). This guide tells you more about the Qualified Income Trust.
Definitions:
Beneficiary – The person who benefits from a trust arrangement. With a QIT, the grantor and primary beneficiary is the same person. The State of Tennessee is the secondary beneficiary.
Department of Human Services (DHS) – This department is part of the State of Tennessee’s government. DHS workers handle Medicaid applications and determine if the applicant is eligible for Medicaid.
Grantor – A person who puts money in a trust. With a QIT, the grantor is a person who needs Medicaid to help pay the costs of long term care.
Medicaid – Medicaid is a government program that helps some people with medical costs. In Tennessee, Medicaid is also called “TennCare.”
Patient Liability – Patient liability is the amount of money that the grantor must pay the nursing home each month for care. Sometimes, persons in the Medicaid Home-and- community-based program must pay patient liability as well.
Qualified Income Trust (QIT) - This kind of trust is also called a “Miller trust.” This trust helps a person qualify for Medicaid even if his income is too high. The trust makes it possible for that person to get Medicaid help for long term care.
Trust document – This is the document that sets up the trust arrangement, gives the trust a name and gives the trustee the instructions that he or she must follow. The trust document must be signed by the grantor and the trustee in front of a notary.
Trustee – A trustee is a person who handles money for another person, based upon the duties outlined in trust document. As a trustee, you are a fiduciary. A fiduciary is a person who has a special duty to protect the beneficiary, the person who benefits from the trust. That duty is a strict duty, similar to the duty of a conservator or guardian.
The Qualified Income Trust (QIT) is part of the Medicaid eligibility process.
January 2009
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Tennessee is now one of the states using an “income cap” for Medicaid eligibility. That cap limits Medicaid assistance for long term care to adults with monthly incomes below $2020.00. Any one who has monthly income above that amount cannot qualify for Medicaid benefits to pay for nursing home care. This rule also applies to the home-and- community-based “waiver” services.
However, the law allows income to be placed in a Qualified Income Trust (QIT). This kind of trust is also called a “Miller trust.” The trust arrangement helps a person qualify for Medicaid even if his income is too high. This trust allows that person, when he is otherwise qualified for Medicaid, to meet the income limit and get Medicaid help.
The Qualified Income Trust (QIT) deals only with income.
The QIT bank account will hold only the income of the grantor. The grantor is the person who needs Medicaid. Savings or other assets cannot be held in this trust account. Income for another person, even a spouse, cannot be put in the trust account.
You cannot open the QIT bank account until the QIT document has been prepared and properly signed. If the grantor still has assets to “spend down,” you can use those assets to pay an attorney to prepare this document for you and give you individual advice. Once the document is signed, you must take it to the bank in order to open the QIT account.
A QIT bank account is opened when the Grantor is ready to get Medicaid coverage.
You should open the QIT bank account during the month in which the grantor would first become eligible for Medicaid benefits. A certain amount of money must be placed in the QIT before Medicaid eligibility can begin. Your advisor or the Medicaid eligibility worker will tell you how much money goes into the trust account. You should wait to fund the QIT until the grantor’s assets are below the Medicaid asset limit. Then, be prompt about setting up the arrangement. Medicaid cannot be approved until the trust is set up and has the right amount of income in it.
The QIT Bank Account is not like other bank accounts.
These types of trusts are fairly new in Tennessee. (Tennessee began using them in May 2005, and the regulations came out in October 2005.) So, your bank may not have handled one of these trusts before. Give the bank a copy of this handout if the bank needs more information.
The QIT bank account should be titled as a trust account. For example, “The Qualified Income Trust of John Doe.” In this example, John Doe is the person who is about to apply for Medicaid. He is also called the grantor and primary beneficiary of the trust. The State of Tennessee is the secondary beneficiary.
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The QIT bank account operates more like a “representative account,” set up for the payment of a disabled person’s expenses, rather than as a typical trust fund. There are none of the usual trust management issues because there are no significant assets kept in the QIT account.
A QIT is a “grantor trust” which means that, for tax purposes, the trust finances are the same as the grantor’s finances. Therefore, the bank should use the Social Security Number of the grantor (John Doe) for this account.
As Trustee, you are the only person authorized to sign checks on the account. No other person can write checks on the trust account, not even the grantor. Checks are imprinted with the account title. As trustee, you will receive the monthly statements. You must keep these statements, along with an itemized account of how John Doe’s money is spent, for Medicaid to review.
The State of Tennessee allows you to pay bank service charges, of no more than $20.00 per month, to cover the costs of keeping the account at the bank. If the charges are more than $20 per month, you will need to get advance approval from the Department of Human Services to pay the charges out of the trust account.
Do not get a bank cash card or credit card for the QIT account.
You must save all records about the QIT account and transfer the records to any successor trustee. These records are needed to prepare accountings and to respond to inquiries from the county Department of Human or the Bureau of TennCare.
The grantor or you will want to consult with an attorney or Certified Public Accountant at the end of the calendar year to be certain that all IRS reporting requirements are met. If the grantor cashed out IRAs, pension plans or other tax-deferred savings instruments, a tax return may need to be filed. Make sure that the tax preparer is aware of the trust and all other accounts.
The Grantor may need to have both a regular bank account and the QIT account.
There are good reasons for having two bank accounts for the grantor (John Doe). John Doe’s income is deposited into a general account first. Then some or all of the income is transferred to the QIT account. Your adviser can tell John Doe or you how much to transfer. The right amount of money should be transferred to the QIT account early in the month. The bills should be paid from the account before the end of the month.
Remember, the QIT deposits must consist of the grantor’s income and only that income.
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Qualified Income Trust funds may be used for approved payments only.
After John Doe’s income is moved into the QIT account, you may write checks out of the QIT account. The funds in the trust may be used only for the expenses allowed by the Medicaid rules. One or more of these expenses may be paid out of the trust:
•Medicare premium (if not paid automatically);
•Medicare Supplemental insurance premium;
•A dependent or spousal allowance (only if approved by the Medicaid eligibility worker);
•The money that is owed each month to the nursing home (called patient liability);
•The grantor’s personal needs allowance. It is usually a good idea to deposit this money in the grantor’s Patient Trust Account at the nursing facility. You can also deposit the Personal Needs Allowance in his regular checking account.
•Medical costs, which are not covered by Medicaid, Medicare or insurance, can be paid from the trust account, only if approved by the Medicaid eligibility worker;
•The costs to administer the trust and bank account, up to a maximum of $20 per month.
There are some other expenses that can be paid from the trust, but only if the Medicaid eligibility worker approves them. You should never make payments from the trust unless either the grantor’s attorney advises payment, or the Medicaid eligibility worker (at the Department of Human Services) has expressly approved the payment.
Co-Mingling is prohibited.
Never put any money -- other than grantor’s countable income -- into the QIT bank account. None of the trustee’s other funds should be placed into the QIT account. Never place any savings or other assets owned by John Doe in the account.
Check with the attorney if John Doe’s patient liability is expected to change substantially. For example, you should check with your advisor if the Grantor (John Doe) spends some time in the hospital, in a rehabilitation setting that is funded by Medicare. This may change the amount of money that is paid to the nursing facility. You will want to check with the attorney or the Medicaid eligibility worker about how the money should be handled during that time.
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You cannot charge for your services as Trustee.
You should never pay QIT money to yourself for services rendered. However, if you are both the trustee of the QIT and the grantor’s spouse, you may receive a community spouse allowance payment. Your Medicaid eligibility worker will tell you if you are to receive a community spouse allowance. In that case, it is appropriate for you to write a check to yourself. The attorney advising you will help you with this.
You must account for the trust receipts and disbursements.
You must keep records (cancelled checks, receipts, tax returns, bank statements) and do regular accountings to the grantor (if the grantor is interested and able to understand the information). More importantly, you must account to the county Department of Human Services and the Bureau of TennCare. If the grantor is under a conservatorship, the accounting requirements for the conservatorship must be followed as well. The accounting must provide verification of adequate monthly deposits to the QIT, bank statements, and cancelled checks. In Tennessee, conservators are required to produce all cancelled checks written for the ward. You will want to talk to the bank about the best, and most economical, way to get those copies.
When to close the QIT bank account
The QIT ends when one of these things happens:
1.The grantor (John Doe) passes away; or
2.Medicaid is no longer needed; or
3.The Department of Human Services gives you express written authorization and approval to end the Trust. This usually happens when the grantor’s income is no longer above the Medicaid Income Cap.
Any money left in the QIT is paid to the State of Tennessee up to the total amount of Medicaid benefits paid on behalf of the grantor for medical care. Any remaining funds are paid to the remainder beneficiaries as specified in the QIT document. Funds cannot be paid to the remainder beneficiaries until the State of Tennessee gives you a written statement that their payment amount satisfies the debt owed to the state.
When the time comes to end the QIT, you must:
1.Stop the deposit of funds into the QIT.
2.Notify the county Department of Human Services, and the Bureau of TennCare of the reason the trust should end.
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3.Wait until all expected expenses have cleared the account before you close it. Also, return any checks that may have been sent in error after the grantor’s death.
4.You will receive instructions from your Medicaid eligibility worker about sending the money left in the account to the state. The money is sent to:
TennCare Third Party Liability Unit 310 Great Circle Road
Fourth Floor, West Nashville, TN 37243
Phone: 615-507-6344
If you call the Third Party Liability Unit, expect to leave a message.
5.Generally, the state will allow three months for you to end the trust, but you can request more time if it is needed. Write a check for the balance of the trust fund as instructed by the state. A copy of the bank statement should be enclosed to confirm that balance. Send a cover letter or memo and include a brief explanation that the enclosed check is from a QIT. The cover letter and check should clearly identify the grantor by name, Social Security number and Medicaid number.
No other checks should be written from the QIT account after the grantor’s death, unless the state tells you that the Medicaid debt is satisfied and there is still money left in the account.
Legal authorities: 42 U.S.C.§ 1396p(d)(4)(B); See, Miller v. Ibarra, 746 F.Supp. 19 (D. Colo. 1990); Tennessee Rule 1240-3-3-. 03-(7); DHS Policy Bulletin MA-06-15, issued July 28, 2006; Bulletin 44 MA-05-10, issued November 30, 2005; IRS Opinion Letter (Austin, TX) to Texas Department of Human Services re: Taxpayer Identification Number, Dec. 2, 1996.
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