Editor's Note: The information in this column is not intended as legal advice but to provide a general understanding of the law. Any readers with a legal problem, including those whose questions are addressed here, should consult an attorney for advice on their particular circumstances.
One of the greatest fears of older Americans is that they may end up in a nursing home. This not only means a great loss of personal autonomy, but also a tremendous financial price. Many seniors are watching their retirement funds or “nest eggs” shrink as the financial crisis affecting our country deepens. Over 4 million people are enrolled in Medicaid and the Children’s Health Insurance Program in Texas. I receive many inquiries about Medicaid and what many people call a “Miller Trust,” so I thought a column on this topic might be of interest to the readers.
Medicaid is a joint federal-state program that provides health insurance coverage to low income children, seniors and people with disabilities. In addition, it covers care in a nursing home for those who qualify. However, Medicaid will probably not provide a level or quality of care you would hope for. For example, Medicaid will not pay for a private room.
Eligibility for Medicaid institutional or home and community based waiver services in Texas includes a requirement that the applicant’s countable income not exceed the special income limit. As of January 1, 2020, the special income limit for an individual is $2,349 per month and $4,698 per month for a couple.
Note that there is a home based program, the Star Plus Waiver Program. This program offers a modest amount of help in the individual’s home. This program is not available in all parts of the state, but is managed by the Health and Human Services Commission. While it does not provide 24 hour care, it does typically provide 20-30 hours of assistance. So, it might work if your loved one is not in need of around the clock supervision and provide you a much needed break to run errands and perform house hold task.
Texas residents who require nursing home care and who have monthly income above the special income limit may not be able to qualify for Medicaid. To address this problem, Congress in 1993 amended Section 1917 of the Social Security Act to provide for an income diversion trust, or Qualified Income Trust (QIT). The proper use of a QIT allows an individual to legally divert the individual’s income into a trust, after which the income is not counted.
A QIT is a trust through which a Medicaid beneficiary’s income passes in order to meet the income limitations for Medicaid qualification. QIT are also known by the following names:
- Miller Trust
- d4B Trust
Please note that a QIT only deals with INCOME and not assets of the beneficiary. One should note the use of a QIT will not address other eligibility requirements such as citizenship, residency, medical necessity and the applicant’s countable resources. A person with more than $2,000 in countable resources is not eligible for benefits, and the use of a QIT does not affect this resource eligibility requirement.
All assets are included in these limits of countable resources unless the assets fall within a short list of “noncountable” assets. Noncountable assets are limited to the following:
- Personal possessions, such as clothing, furniture and jewelry;
- One motor vehicle, valued up to $4,500.00 for unmarried recipients and of any value for the healthy community spouse;
- The applicant’s principal residence up to $500,000.00;
- Prepaid funeral plans and a small amount of life insurance;
- Assets that are considered “inaccessible” for one reason or another.
The second major rule of Medicaid eligibility is the penalty for transferring assets. Medicaid does not want you to move into a nursing home on Monday, transfer your assets on Tuesday and apply for Medicaid on Wednesday. Congress has imposed penalties on the transfer of assets without receiving fair value in return. The Deficit Reduction Act of 2005 (DRA) has made these restrictions very severe.
A penalty period is placed on the person transferring the assets, thus making them ineligible for Medicaid until the penalty period has expired. The penalty is determined by dividing the amount transferred by what Medicaid determines to be the average private pay cost of nursing home care in Texas. Medicaid has determined the average monthly cost of nursing care in Texas to be $3,549.00.
So, for example, if you give away property worth $100,000.00, you will be ineligible for benefits for 28 months ($100,000.00 ÷ $3,549.00 = 28).
For a brief period it was against the law to help someone transfer assets improperly. This is no longer the case, although it may be again in the future. If you intend on transferring assets, you should seek the assistance of an attorney familiar with this process. Their expertise can help avoid the pitfalls in a legal manner and retain the assets for the healthy spouse.
Keep in mind, Medicaid is subject to being paid back, like a loan. To help pay for these long-term services, every state must have a Medicaid Estate Recovery Program (MERP). If you received Medicaid long-term services and supports, the state of Texas has the right to ask for money back from your estate after you die. The program is administered by Texas Health and Human Services (HHS).
I hope this column highlights the need for expert assistance when dealing with Medicaid or dealing with an exempt trust. All situations are not the same and if you are considering qualifying for Medicaid or a “Miller Trust” for such purposes, you should consult an attorney with experience and training in this area of the law.
Sam A. Moak is an attorney with the Huntsville law firm of Moak & Moak, P.C. He is licensed to practice in all fields of law by the Supreme Court of Texas, is a Member of the State Bar College, and is a member of the Real Estate, Probate and Trust Law Section of the State Bar of Texas. www.moakandmoak.com.