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Qualified Income Trusts for Florida Medicaid Planning

Using Qualified Income Trusts for Florida Medicaid Planning

This week’s topic is a highly technical one which continues to evolve in the fast moving climate of today’s Florida Medicaid world.  Florida Medicaid Programs evolved in 2014 with the onset of newly named “Managed Care Programs” and Home and Community Based Services (“HCBS” ) Programs, which replaced the earlier “Medicaid Waiver” programs. Florida, is one of a minority of states that imposes strict income limits for both traditional Medicaid (for a full skilled nursing facility) AND Managed Care programs.

However, in today’s planning world, a Qualified Income Trust (a/k/a Miller Trust) may be used to qualify with higher income for either program as further described in this article.

Income Limit for Qualified Income Trusts in Florida

As of the date of this updated posting in 2019 is $2,313 per applicant. It used to be that if this income limit were exceeded, Medicaid in Florida would not be approved. This income limit applies to traditional full skilled nursing programs as well as the MCP and HCBS programs. This income limit is based upon “gross income” and it is easy to get confused here.

The key is to understand what constitutes “income”‘ under the Medicaid rules.  For Medicaid qualification purposes, we are talking about “gross income” and not “net income”. Amounts such as health insurance premiums, other benefit programs, taxes and must be added back for this calculation.  Virtually every type of income is counted as such and this could range from annuity income, to social security, pensions, interest income and even other non-taxable income. Gross income includes both earned and unearned income. To fully understand what is or what is not countable income, one should carefully review Chapter 1800 of the ESS Manual.

By way of illustration, countable income includes, but is not limited to: Social Security; railroad retirement; pensions; dividends; rental income; oil & gas leases; royalties; trust distributions; annuity payments; periodic distributions from retirement accounts; alimony; DRA-compliant promissory note payments; child support; veteran’s and VA-related incomes (eg DFAS pension, service-connected benefits, and non-service connected disability pension not considered UME, housebound, or A&A); long term care insurance benefits (indemnity policies); interest income; and any other income which is received at regular intervals are included.

Countable income also includes deductions withheld from gross income, such as Part B premiums, federal income tax withholdings, optional deductions, garnished or seized payments, and IRS liens. On the other hand, a Medicaid applicant’s countable income does not include such payments as irregular or infrequent income, gross rental income.  

Qualified Income Trusts in Florida

Florida Requirements for Forming a Qualified Income Trust

The policy rationale for allowing the use of the QIT is that often folks do not have enough income to pay their cost of care each month even if they are technically over the Medicaid income limit.

Who Can Create a Qualified Income Trust in Florida?

In a nutshell, a QIT will not be valid if it isn’t created for the application under a proper authority. The applicant can create it (by directly obtaining an attorney to do so) as well as legal representatives such as a legal guardian in Florida or an individual operating with a valid durable power of attorney in Florida. It remains unclear whether a Florida court has the statutory authority to create a QIT because this ongoing legal discussion has not been resolved.

Requirements for Drafting a QIT in Florida

A Qualified Income Trust must be an Irrevocable Trust in Florida AND must say that the income may only be used for the Personal Needs Allowance (“PNA”) (which is currently $133 a month) and the Community Spouse Income Allowance (“CSIA”), if any, with the balance being paid to the skilled nursing facility. Another important requirement is that the balance of the QIT shall be used upon the death of the Medicaid recipient to repay the State of Florida for those benefits.

How to Administer a Qualified Income Trust in Florida?

So, based upon the above requirements, to avoid disqualification from benefits, income cannot be used for any other purposes than those stated above. The PNA may be paid to the Medicaid recipient and the CSIA will be deducted based upon both spouse’s total income in order to prevent leaving an “impoverished spouse”. The balance will be paid monthly to the skilled nursing facility (“nursing home”).

For example, if someone’s income is $3000.00 per month (over the limit) and the cost of care each month is $4,000.00.  Applying this example, the monthly income would go into the QIT, and that most less the PNA and CSIA would be paid to the care facility.  This would allow the applicant to get qualified for Florida Medicaid benefits. Upon the Medicaid recipient’s death, the amount in the QIT would be paid to reimburse the State of Florida for benefits paid. 

Qualified Income Trusts and Alternatives to Full Skilled Nursing Facilities

The Home and Community Based Settings (HCBS) Programs in Florida, may allow those who would otherwise be eligible for Florida Medicaid and placed in a full skilled nursing facility, to receive paid services such as skilled nursing care at home. Even better, the same approach that is applied for traditional Medicaid can be taken to obtain qualification for HCBS programs and this includes the use of qualified income trusts for Florida Medicaid planning.

Herein is a great opportunity to provide optimal care for aging loved ones without the burden of “footing the bill” every month. Applying the “qualified income trusts for Florida Medicaid planning” strategy to other alternatives, such as HCBS programs, may offer a terrific solution for those who have made the difficult decision to care of aging loved ones at home rather than sending them to a nursing home.   Also, folks who are in an assisted living facility and who are able and prefer to stay can often do so under these programs.

In a nutshell, the Managed Care and HCBS (Home and Community Based Settings) programs provide an alternative to folks who may be close to requiring full skilled nursing care, but still desire to remain at home or in an “assisted living” facility.  These programs are in place to foster ongoing community involvement and a home environment for seniors. However, these programs face serious budgetary limits and availability is limit. Recent estimates approximate the waiting list for these programs at about $42,000 for those rated “class 4” and below.

As always, all of this depends upon a full evaluation of the medical status of the applicant by an experienced elder law attorney in Florida to determine the level of care that is ultimately needed.  Also, remember that once someone passes the “income test”, it is time to pass the “asset test” this may involve taking a careful look at your overall Florida estate planning AND possibly downsizing your estate for Florida Medicaid planning purposes.

Steve Gibbs, Esq.

This article is an updated version of an original post dated June 6, 2o17.

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