Income Trusts

Income Trusts A. The purpose of an Income Trust is to allow an individual with excess income who has exhausted all available resources to become eligible for Medicaid. The trust may be used only for income belonging to the individual. No resources (assets) may be used to establish or augment the trust. Inclusion of resources voids the trust exception. It is intended to assist individuals with excess recurring monthly income who have income that exceeds the Medicaid institutional limit in effect at the time eligibility is requested but have insufficient income to pay the private cost of institutional care. Individuals with income above the private pay rate for the facility in which the individual resides will not be eligible for Medicaid under the Income Trust provision. B. This type of trust established for the benefit of the individual is limited to institutionalized individuals, not those in an acute care hospital setting. Persons participating in the home and community-based services (HCBS) waiver may also utilize an Income Trust for eligibility purposes. C. An Income Trust must meet all the following requirements: 1. The trust is composed only of the pension(s), Social Security, and other income due the individual from all sources, including accumulated interest in the trust. Total income does not include income that is not countable under Medicaid rules, such as payments from the Veterans’ Administration for Aid and Attendance (A&A) and payments for unreimbursed medical expenses. 2. Income Trusts, once accepted by the Division of Medicaid, cannot be modified without the Division of Medicaid’s approval. An Income Trust must specify that the trust will terminate at the individual’s death, when Medicaid eligibility is terminated, when the trust is no longer necessary or in the event the trust is otherwise terminated. Trusts may need to be terminated prior to an individual’s death due to changes in the individual’s income or changes in Medicaid policy regarding how certain income must be counted or in the event the individual is discharged from the nursing facility. 3. A portion of the individual’s income may be protected in the month of entry into a nursing facility. When income protection is applicable, there is no cost of care payable to the nursing facility for beneficiaries whose income is less than the institutional income limit. However, income above the amount that is one dollar ($1.00) less than the Medicaid institutional limit is payable to the Division of Medicaid for beneficiaries eligible under an Income Trust within thirty (30) days after receipt of the notice approving eligibility issued by the Division of Medicaid. The approval notice informs the Trustee of the amount payable for the month of entry. 4. For all subsequent month(s), if income of the individual is less than the individual’s cost of care at the nursing facility, all income of the individual, less authorized deductions, must be paid directly to the nursing facility. In that case no funds will be retained in the trust. If the income of the individual exceeds the cost of care at the nursing facility in any month the individual is eligible under an Income Trust, the trust must retain the income in excess of the cost of care until such time that payment of the accumulated Income Trust fund is requested by the Division of Medicaid. 5. Income Trusts for HCBS Waiver enrollees require that the trust must distribute to the individual, or for his/her benefit, an amount equal to not more than one dollar ($1.00) less than the then current Medicaid income limit as approved by the Division of Medicaid. The trust should not specify the amount of the individual’s income as this amount may change each year and the amount to be released from the trust will change to an amount equal to one dollar ($1.00) less than the current Medicaid income limit. 6. At the dissolution or termination of an Income Trust, the death of the individual, loss of the individual's Medicaid eligibility or in the event that the individual's income no longer exceeds the current Medicaid income limits, the trust agreement must provide that all amounts remaining in the trust up to an amount equal to the total medical assistance paid by the Division of Medicaid on behalf of the individual that has not previously been repaid will be paid to the Division of Medicaid. 7. The trust agreement must provide that at the time of each review of the individual's Medicaid eligibility (at least annually) while this trust is in existence, when notified by the Division of Medicaid, the Trustee must pay to the Division of Medicaid the amount that should be accumulated in the trust up to the amount expended by the Division of Medicaid on behalf of the individual that has not previously been repaid. Failure to make the requested payments will result in the loss of Medicaid eligibility for the individual. 8. The trust agreement must provide for an accounting of all receipts and disbursements of the trust during the prior calendar year when requested by the Division of Medicaid. 9. No fees are allowed to be paid to the Trustee for their service. In the event funds are retained in the trust, administrative fees are limited to ten dollars ($10.00) per month and are intended to cover any bank charges required to maintain the trust account. 10. Any disbursements not approved by the Division of Medicaid or provided for by the trust agreement will result in a loss of the trust exemption. 11. The trust agreement must specify an effective date. Unless the applicant is requesting retroactive eligibility of up to ninety (90) days, which will require that the applicant have the funds necessary to fund the trust for that period, the effective date will be the date of execution. If a retroactive date is being sought, the effective date will be determined through consultation with the Division of Medicaid's Regional Office. In that case the Regional Office should be consulted to determine the effective date prior to execution of the agreement. D. An Income Trust will not be allowed on a temporary or intermittent basis except in instances when monthly excess income will be reduced at a future date. In such a case, an Income Trust will be allowed until such time as the excess monthly income no longer requires an Income Trust to allow eligibility. Income received less than monthly does not qualify as recurring excess monthly income that allows the use of an Income Trust. Income received irregularly or infrequently must be converted to monthly income before evaluating the need for an Income Trust. E. The Division of Medicaid will provide model Income Trust agreements for individuals in need of an Income Trust. Model agreements are provided for individuals in institutional care and for individuals enrolled in an HCBS waiver that need an Income Trust in order to qualify for Medicaid based on income. The only changes to these legally binding documents that the Division of Medicaid will accept are to add language regarding a successor trustee or co- trustee. Changes must be approved by the Division of Medicaid prior to execution of the trust. In completing the Income Trust document, the individual cannot be the Trustee of the Income Trust. F. It is possible to have an Income Trust during the time a transfer of assets penalty is in effect. Although the Division of Medicaid will not pay for an individual’s room and board during a transfer penalty period, the Income Trust will allow an individual with excess income who otherwise requires an Income Trust in order to be eligible to qualify for all Medicaid covered services other than payment of room and board and will allow the penalty period to be implemented. G. An applicant or beneficiary requiring an Income Trust who has a court appointed conservator must furnish a copy of the Chancery Court Order authorizing the conservator to establish the Income Trust. The court must be made aware of the Income Trust requirement to pay the Division of Medicaid any accumulated trust funds up to an amount expended by the Division of Medicaid under the terms of the trust.