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What is the Process with a Qualified Income Trust

Dear Mr. Premack: I have seen similar related questions in your archives, but not specifically answering this one. My Uncle applied for Medicaid, and was denied as his income was too high. We need to establish QIT. Once that is done, do we need to re-apply to Medicaid or does the QIT get filed anywhere? What is the process following creation of the QIT by the lawyer? Thank you! – RS

For anyone to qualify for Medicaid’s long-term care assistance, the applicant must meet a variety of conditions. One of those conditions is that the applicant’s monthly income cannot exceed an amount set by law, which (for 2014) is set at $2,163 per month. Anyone who is not certain whether they need a QIT can use the free online calculator to assess their situation.

If the applicant qualifies in every way except for the income amount, the applicant can legally bypass the limit by using a Qualified Income Trust (QIT). The idea is somewhat convoluted, and grows out of a federal court case from many years ago. First, the applicant must hire an attorney to draft a legal trust agreement which meets the standards established by Medicaid. (If you do not have legal counsel, you can check with the Virtual Online Law Office at to read more about establishing a QIT.) Second, the trust must be presented to Medicaid along with the application for benefits. Medicaid will review the trust and approve or reject it.

In your Uncle’s case, you will need to reapply for Medicaid (or, if his case has not yet been closed, talk to the caseworker to see if it is possible to reverse his denial when you submit the QIT and it is approved). You will submit the signed QIT to the caseworker along with the application for benefits.

While the QIT is under review it is wise for the Trustee to establish a bank account for the trust. Go to the Trustee’s bank of choice. Open a standard checking account which is owned by the QIT. The only signer on the account will be the Trustee, but the bank will use the applicant’s social security number as the tax ID for the account. Deposit to the account about $30 as a buffer. Then, when you’re the applicant is approved for Medicaid, you will deposit to the account the retirement income check that caused him to exceed the monthly income cap.

What happens to the money in that you deposit to the trust’s account? It must be spent each month according to Medicaid’s rules. Depending on the amounts involved, some of it might be paid to his spouse (if he has one). Federal law sets out four priorities for spending the money in a Qualified Income Trust. They are:

  1. Paying the $60 “personal needs allowance” for the patient. This is paid to the nursing home, which keeps it in a separate trust account for the patient’s incidental expenses (like haircuts);

  2. Paying the spousal allowance, if there is a spouse. The current (2014) spousal income allowance is $2,931 per month;

  3. Paying for the resident’s nursing home and other medical care; and,

  4. Paying other expenses, like bank fees, taxes or legal costs. In fact, all the money in a Qualified Income Trust will be consumed for the first three priorities and none will be left for this category.

Due to the above requirements, the QIT bank account spends every dollar it receives each month. The account will almost always have a balance equal to the buffer you deposited at the start. Eventually when your Uncle dies, Medicaid can claim the balance in the QIT bank account. The QIT does not act as a savings account or an asset shelter; its only function is to allow him to qualify for Medicaid assistance even though his monthly income exceeds the limit.

The Olympic Mountains from Canada (c) 2014 Paul Premack

Sometimes trying to qualify for Medicaid feels like you have to swim a deep ocean and climb mountains that soar above the clouds. A QIT prepared by your certified elder law attorney can help you clear the large “income cap” obstacle. (c) 2014 Paul Premack


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