Income Only Trusts

March 25, 2021

Have you ever wondered why an Income Only Trust (aka Qualified Income Trust) is needed in some states and not others?

When qualifying for Long Term Care Medicaid, an applicant’s income must not be above the federally determined level. Many states allow individuals to spend down their excess income in the same month it is received on their care until they reach the state’s income standard.

But other states impose an “income cap,” which means no income spend-down is allowed. This cap sets the maximum limit of monthly gross income to be eligible.

Currently, the following states are income cap states:  Alabama, Alaska, Arizona, Arkansas, Colorado, Delaware, Florida, Georgia, Idaho, Indiana, Iowa, Kentucky, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Texas and Wyoming.

In these states, if the applicant is above the gross monthly income limit, the applicant must set up and fund an Income Only Trust/Qualified Income Trust to be eligible.

Proper income verification is especially important in a state that is considered Income Capped. If the application is over the gross amount by even one cent, the application will be denied UNLESS the proper steps are taken to set up and fund the trust.

This Income Only Trust is an account that holds the funds of the applicant that are over the income limit.  The income is deposited in this non-interest bearing, checking account allowing payment for care and the overage to remain in the account.

There are three important steps to creating this type of account.

  1. Creation and Execution of Trust document
  2. Setting up and Funding the bank account or Trust Account
  3. Management of Trust account

This process can be very overwhelming and misleading. Frequently, there is limited State guidance when setting up these types of trusts. Understanding when an applicant must set up a trust is crucial to the Medicaid referral process.  Keep in mind, the month in which eligibility is desired is the month the Income Only Trust must be set up. It is very important to get proper guidance regarding this eligibility step.

Benefit Results can help!  Give us a call to learn more about this process.

Some state Medicaid agencies assist more than others when it comes to setting up these types of trusts.  For your reference, we have included links below offering some state specific information on setting up these trusts.

Click HERE for Arizona Information

Click HERE for Ohio Information

Click HERE for Florida Information