Appendix XXXVI, Qualified Income Trusts (QITs) and Medicaid for the Elderly and People with Disabilities (MEPD) Information

Revision 24-1; Effective March 1, 2024

The Texas Health and Human Services Commission (HHSC) offers this information. It is to help people applying for Medicaid and their attorneys and provides basic information on using a qualifying income trust (QIT), sometimes referred to as a Miller Trust, to meet MEPD eligibility requirements. At the end of the document is a link to a model instrument as an example of a QIT that meets MEPD requirements when properly completed. This form meets the basic MEPD requirements for a QIT, but it is not the only acceptable QIT form and may have consequences beyond Medicaid eligibility that a person should consider.

HHSC attorneys are prohibited from giving legal advice to the public. HHSC staff, supervisors and other HHSC non-attorneys are prohibited from recommending specific actions to become eligible for Medicaid. Doing so may constitute the unauthorized practice of law.

This information is not intended as legal advice. People seeking information on the legal consequences of these documents should consult an attorney of their choice. 

HHSC will only review trust documents in relation to the processing of a Medicaid application. The review by HHSC is limited to a determination that the trust meets the requirements for a Medicaid QIT.

People with low or limited income may be able to get legal counsel through their local legal aid office, local area agency on aging, local bar association, National Academy of Elder Law Attorneys, lawyer referral service, Advocacy Inc. or the State Bar of Texas.

Background

Eligibility for Medicaid institutional or home and community-based waiver services in Texas includes a requirement that the person’s countable income not exceed the special income limit. The special income limit for a person is equal to or less than 300 percent of the full individual Supplemental Security Income (SSI) benefit rate. The special income limit for a couple is twice the special income limit for an individual. Effective Jan. 1, 2024, the monthly special income limit is $2,829 for an individual and $5,658 for a couple.

The current estimate of the average daily cost of a private pay nursing home stay in Texas is $242.13. This amount is more than the individual special income limit.

Texas residents who need nursing home care and have monthly income above the special income limit but below the private pay cost of the care may have insufficient funds to pay for the needed care. In 1993, Congress addressed this problem by amending Section 1917 of the Social Security Act which provides for an income diversion trust or QIT. Refer to 42 USC Section 1396p(d)(4)(B)). The proper use of a QIT allows a person to legally divert income into a trust, after which the income is not counted to determine Medicaid eligibility for institutional or home and community-based waiver services.

Caution

Do not confuse a QIT with other types of trusts often used for the receipt of Medicaid or other public benefits. This information does not apply to other types of trusts, such as a special needs trust. A special needs trust may be created for a person with a disability under 65 who wants to shelter assets to become or stay eligible for Medicaid or other public benefits. HHSC does not count income that is properly diverted through a QIT to determine Medicaid eligibility for institutional or home and community-based waiver services. This income is counted when determining eligibility for other Medicaid benefits, such as:

  • non-institutional assistance other than home and community-based waiver services; or 
  • Medicare Savings Programs.  

The income may count in determining eligibility for non-Medicaid public benefits programs. 

Although the use of a QIT can overcome the special income limit for Medicaid eligibility, a QIT will not address other eligibility requirements for institutional and home and community-based waiver services, such as:

  • citizenship;
  • residency;
  • medical necessity; and 
  • the person’s countable resources.  

A person with more than $2,000 in countable resources is not eligible for benefits. The use of a QIT does not affect this resource eligibility requirement.

This information is based in part on informal guidance by the federal Centers for Medicare & Medicaid Services (CMS). CMS has not adopted any federal regulations relating to QITs. Therefore, CMS' guidance and interpretations could change without advance public notice or opportunity for advance public comment.

Necessity

The special income limit applies only to a person’s countable income. To determine the need for a QIT, determine if the income is countable for the purposes of Medicaid eligibility if the person's income will stay the same after approval for Medicaid. For example, certain types of Veterans Affairs (VA) benefits do not count toward eligibility for Medicaid. Also, some types of income, such as VA pensions, are subject to an automatic reduction when a person living in a Medicaid-certified nursing facility becomes eligible for Medicaid. In addition, when retirement income has been legally divided between spouses through a Qualified Domestic Relations Order and each spouse gets a check in their own name, the income of one spouse is not counted for the eligibility determination of the other spouse. HHSC follows a name on the check rule to determine the countable income of a person applying for nursing home Medicaid.

Characteristics of the Trust

Only the person’s pension, Social Security and other income may be placed in a QIT. The person’s resources may not be deposited into a QIT account. Since the QIT has no corpus as that term is generally understood in the trust field, the need for much of the standard trust language about management of the trust principal is eliminated, and the language of the written trust instrument may be shortened accordingly. A person applying for Medicaid may divert all their income into a QIT, or if they have income from multiple sources, divert only the income from certain sources. All income received from the source must go into the QIT.

VA aid and attendance benefits, housebound allowances, and reimbursements for unusual or continuing medical expenses are exempt from both eligibility and co-payment. If a person deposits these types of payments into a QIT account, the income is countable for the co-payment budget. If a person receives a VA pension that includes aid and attendance benefits, housebound allowances, or reimbursements for unusual or continuing medical expenses, the person may separate the aid and attendance benefits, housebound allowances, or reimbursements for unusual or continuing medical expenses from the VA pension before depositing the VA pension into the QIT account. Aid and attendance benefits, housebound allowances, or reimbursements for unusual or continuing medical expenses are not income for Medicaid eligibility determinations.

The QIT must be irrevocable. Per CMS, a trust instrument that indicates the trust is irrevocable but allows the trust to be revoked through court action does not meet the irrevocability requirement.

The QIT instrument may provide for successor or co-trustees, waive bond, and incorporate the Texas Trust Act provisions regarding the powers of the trustees. The statutory authority for a QIT is silent on who may serve as the trustee, but HHSC recommends that the beneficiary not also be a trustee. If all of the trust requirements are not met, the beneficiary may lose Medicaid eligibility.

The QIT instrument must have a reversion clause providing that at the death of the trust beneficiary, the remaining funds in the trust account must be paid to the state of Texas, up to the full amount of Medicaid assistance provided to the beneficiary and not otherwise repaid. Payments made to HHSC as the residuary beneficiary should be in whole dollar amounts and by cashier's check, money order or personal check. These payments are receipted on Form 4100, Money Receipt.

A QIT instrument must require that the trustee pay:

  • a monthly personal needs allowance to the beneficiary;
  • court ordered guardianship fees;
  • a sum sufficient to give a minimum monthly maintenance needs allowance to the spouse, if any, of the beneficiary; and
  • the cost of medical assistance given to the beneficiary, from the funds remaining after the death of the beneficiary.

The income must be deposited into the QIT account the same month it is received, and the trustee must make distributions from the QIT account by the last day of the following month.

HHSC does not allow deductions for trust administration costs when determining the amount of the beneficiary's income that must be applied to the cost of the beneficiary's medical assistance. The amount that must be applied to the cost of the beneficiary's medical assistance is based on the beneficiary's total income, including any income that is not diverted to the QIT. If there are funds in the QIT account after the above distributions are made, the funds may be applied to the cost of trust administration.

Income paid from the QIT account to purchase institutional services, home and community-based waiver services, or other medical services for the beneficiary is not countable income for eligibility purposes. Income paid from the QIT account directly to the beneficiary or otherwise spent for their benefit is countable income for eligibility purposes.

Establishing a Bank or Other Financial Account as the QIT Account

In addition to a completed, signed and dated trust instrument that meets the QIT requirements as determined by HHSC, there must be a trust account set up. A trust account is a bank account or an account at another financial institution such as a credit union used to deposit the income from the sources listed in the QIT instrument. As noted above, the QIT account must only contain income and cannot contain resources. The bank account must only be used to deposit the income from the sources listed in the QIT instrument.

A person may use an existing account if only the specified QIT income is deposited into the account. A new account may be necessary if the existing account includes money from sources other than the QIT income. A new account is also necessary if the existing account is a joint account and other account holders make deposits and withdrawals from the joint account using the joint account holders' income and resources. If a joint account holder is on the account for convenience and does not use the account for the joint account holder's personal use, the account may be used for the QIT.

Some banks may require small deposits, such as $10 to $20, to open a new account. HHSC allows a small amount of the beneficiary's money or money from another person for this initial deposit. The money that a bank requires as a deposit to open a new account is not counted as a resource or income to the beneficiary.

After the trust account is opened, only the beneficiary's income may be directed to the trust account. If sources of income other than those identified in the QIT instrument are deposited into the QIT account, but the entire source is deposited and the countable income remains within the special income limit, eligibility is not affected. Any deposits made to the QIT account from the person’s resources will result in the QIT account becoming a countable resource. Any deposits to the QIT account from another person may be countable income and result in all deposits to the account being countable income and the bank account becoming a countable resource.

Effective Date

HHSC disregards income for Medicaid eligibility purposes the first month that:

  • a valid written QIT trust instrument is signed and properly executed;
  • a QIT account with the beneficiary's Social Security number is set up; and
  • enough of the beneficiary's income is placed into the QIT account to reduce any remaining income below the special income limit. 

The QIT may be set up with any or all sources of a beneficiary's income, but an entire income source must be deposited. In some cases, the entire source(s) may not be available to open the QIT account because part of the person’s monthly income may have been used to pay expenses before the date the QIT is established. For the initial month, a partial deposit of the income the QIT is established for will not invalidate the QIT and the entire amount of the income source(s) will be disregarded from countable income for that month. The entire amount of the income source(s) for the established QIT must be deposited into the QIT account in all subsequent months or the QIT is considered invalidated.

These actions may occur before the beneficiary applies for Medicaid. If the person has set up a qualifying QIT, the effective date of the income disregard may be up to three months before the application file date if all other program eligibility requirements are met.

Transfer of Assets

Transfer of assets refers to the general prohibition against a person applying for or receiving Medicaid from transferring assets without compensation. A transfer of assets may result in a penalty period for Medicaid payment for institutional care or ineligibility for Medicaid.

Income that is diverted to a QIT is not a transfer of assets when used for payment of institutional services or home and community-based waiver services for the beneficiary. Any distributions to the recipient's spouse and allowable payments for trust administration as described above are not considered a transfer of assets. Distributions from the QIT that are not made to or for the benefit of the beneficiary or their community-based spouse are considered a transfer of assets.

In addition, if the trustee fails to make distributions from income deposited into the trust account in the month of receipt by the end of the following month, such failure to timely distribute the income is considered a transfer of assets.

Sample QIT