12/7/2016. The Basics of a Qualified Income Trust. Income placed into a QIT is not considered a transfer of assets.

Transcription

1 The Basics of a Qualified Income Trust Vonne L. Karraker Manley, Karraker & Karraker, P.C. vonne@semoelderlaw.com Income placed into a QIT is not considered a transfer of assets. The income placed in the trust is not considered available income for determining Medicaid eligibility. See Attachment 4 42 U.S.C. Section 1396p(d).pdf (Section 1917 of the Social Security Act). Prevents a drastic reduction of income due to spenddown requirements. Excess income is placed in a purpose-built trust. Claimant still qualifies for benefits. 1

2 Approved for Medicaid Meets 21pt eligibility test for nursing home care. Gross income from all Approved for Medicaid Meets 21pt eligibility test for nursing home care. Gross income from all sources $1291 sources = $1279/mo sources = $1291 Joe Oldman Georgina Nevertells Joe applies for HCB services Joe is approved Joe begins receiving services Joe makes no adjustments to income Joe does not do spenddown Joe Oldman Georgina begins Medicaid spenddown Georgina s income falls to approximately $850/mo (varies by case) Georgina applies for HCB Georgina is approved for HCB services Georgina Nevertells As of now, the magic number is $1281 2

3 Georgina s attorney writes a Miller Trust Georgina s Trust is submitted to MO HealthNet for Approval, along with her application for the HCB Waiver Georgina s Trust is approved as per MO HealthNet Letter Georgina and her Trustee go to a willing bank and open a Miller Trust Account Emphasis on willing bank. Georgina deposits $11 into the QIT trust account. Georgina s Trustee sends proof to MO HealthNet that the QIT account exists. MO HealthNet switches Georgina from spenddown to HCB in their computer system. Georgina keeps depositing $11 into the QIT each month. Georgina s monthly income stays at $1280. Statutory and Regulatory Authority for Qualified Income Trusts 3

4 MO HealthNet has drafted a Proposed Rule Don t do the happy dance just yet; it s still a Proposed rule. Title 13 DEPARTMENT OF SOCIAL SERVICES Division 40 Family Support Division Chapter 8 MO HealthNet for the Aged, Blind, and Disabled PROPOSED RULE 13 CSR Qualifying Income Trusts PURPOSE: This rule sets forth the rules applicable to qualifying i income trusts, t and their effect on eligibility ibilit for income maintenance benefits and services. Scope. This rule establishes the policies that shall govern the effect of qualifying income trusts, also referred to as Miller Trusts, pursuant to 42 U.S.C. section 1396p(d)(4)(B), on a participant s eligibility for certain MO HealthNet benefits and services, as defined in this rule. Definitions. For the purposes of this rule: (A) Disabled child shall mean the biological or adoptive child of the participant or the participant s spouse, who has been determined to be disabled under 42 U.S.C. section 1382c, and who is living with the participant. (B) Participant shall mean the beneficiary of the trust, whose income is used to create the trust. (C) Representative shall mean 1. A Social Security representative payee, as defined in subpart U of 20 CFR part 404; 2. An authorized representative, pursuant to 13 CSR ; 3. An individual with a valid power of attorney to act on behalf of the participant; 4. The participant s legal guardian or conservator; or 5. A licensed attorney who has entered his or her appearance on behalf of the participant. (D) Self-settled trust shall be defined using the same requirements as used by 42 U.S.C. section 1396p(d). 4

5 Proposed Rule, Section (3) The income of an applicant or participant that is deposited into a qualifying income trust that meets the requirements of this rule shall be exempt e from consideration o as a resource, and shall not be considered a transfer of property under 42 U.S.C. section 1396p(c), when determining eligibility for MO HealthNet benefits. Home and Community-Based Waiver Services for in-home skilled nursing care, pursuant to section , RSMo 2015; In case you have to go to court to get permission to create a Miller Trust. Program of All-Inclusive Care for the Elderly, pursuant to 42 U.S.C. section 1396u-4; or MO HealthNet for Children with Developmental Disabilities. The corpus of the trust must only be composed of pension, Social Security income, and other income to the applicant or participant, including interest that accumulates in the trust; The trust must be irrevocable; The trust must include a Medicaid payback clause, as specified in section (6) of this rule; and If a participant is receiving coverage under MO HealthNet for Children with Developmental Disabilities (MOCDD), the trust must also include a termination clause which provides that the trust shall terminate when the participant reaches the age of eighteen (18) years old or is no longer eligible for MOCDD, whichever occurs sooner. 5

6 Income received by a participant and placed in the trust, or a participant s income paid to the trust by direct deposit, shall not be countable income for purposes of determining eligibility for QIT programs. To qualify for this exemption, income which h is received directly by an individual id shall be transferred to the trust in the month in which the income is received, or within ten (10) days after it is received if there are less than ten (10) days remaining in that month. Eligibility for the Home and Community- Based (HCB) Waiver begins on an identifiable date. If all of these factors (in Section 5) are met, eligibility is effective on the date of the first deposit. Problem: neither claimant nor spouse deemed suitable as trustee. Solution: Section (5)(G) of the Proposed Rule: If the trustee of a qualifying income trust is the participant s spouse, the spouse shall not receive a fee for serving as trustee. 6

7 Problem: claimants frequently requested that their Home Health Aides (often independent contractors) be named as Trustee. Solution: Section (5)(H): A trustee who is not the spouse of the participant shall be bonded to protect against loss, and to secure the performance of the trustee s duties. A qualifying income trust shall include a provision to this effect, subject to the powers reserved for the court by section (6), RSMo Problem: Bond amount required might be so small as to be unbondable or otherwise unneeded. Solution: The division may waive a bondthis requirement if it determines that the amount of income that is funding the trust is not sufficient to warrant a bond. Problem: Money deposited into a QIT could not be used for the benefit of any person other than the claimant. Solution: Section (7): Funds in a qualifying i income trust shall only be used for the medical benefit of the participant or the participant s spouse or disabled child who is living with the participant, including but not limited to payments for the participant s noncovered qualified medical expenses, pursuant to section , RSMo

8 expenses for remedial care received by the participant, payment of health insurance premiums for health insurance coverage of the beneficiary other than Medicaid, expenses for necessary dental care, auditory care, psychological l services, supplemental l nursing or physical therapy care, and rehabilitation services, expenses for medically necessary improvements and/or alterations on real estate, transportation expenses for travel to and from medical/care appointments Problem: Clients get salty when told they cannot use their spenddown funds to pay for an attorney to create their QIT, resulting in UPL. Solution: Reasonable legal fees incurred to create and maintain the trust can be paid out of the QIT under the Proposed Rule. See Section (7) Also bank fees and Trustee bonds can be paid from the QIT. Problem: Claimant wants to pay a relative to provide the HCB Waivered services. Solution: Get a Personal Care Services Contract in place immediately. Section (7) section , RSMo

9 Problem: Home Health agencies attempting to make high-interest loans to claimants to pay their attorney fees to create a Qualified Income Trust. Solution: As per Section 10 of the Proposed Rule, any provider who tries pay the claimant s legal fees will cause the claimant s Miller Trust to be rejected. Problem: The QIT becomes a factor in an eligibility determination for another MO HealthNet Program. Solution: As per Section (10) of the Proposed Rule, all the rules and exceptions of 1396p, Missouri Revised Statutes, and any other state or federal law pertaining to trusts now come into play. A Miller Trust may not be amended or dissolved without written permission of the Division of Social Services. Section (8) A QIT account of claimant who thereafter enters a nursing home shall be considered a surplus (posteligibility contribution) for Medicaid eligibility determination. Section (5)(F). The QIT can be allocated to the community spouse after a fair hearing. Section (5)(J), 42 U.S.C. section 1396r-5(e)(2). 9

10 You have one; what s next? Spouse (who cannot be paid for the work) Third party NOT the home health aide Not the agency providing the service Child Not the one who can t get a bank account on his/her own. Not the one who owes money everywhere. Not the one who won t meet with you. Open the bank account with the benefits claimant. Make sure claimant makes the monthly deposit. Make appropriate p reimbursements to claimant for Medicaid-approved expenses. Pay Medicaid-approved expenses from the Miller Trust. Account to MO HealthNet for expenditures, etc. Close the account when the time comes. 10

11 Find a bank that will accept the QIT account. Don t be that guy. Sign the bank card. Let the claimant make the first deposit. Send proof to MO HealthNet that the account exists. Say no to debit cards. Avoid cash transactions like they re a panel van with dark windows. Always made by claimant. Always from the claimant s income alone. Always made each month. Always adjusted for income increases. Electronic deposit works well. Claimant has NO authority to access the funds in the QIT account. Examples: Out-of-pocket expenses for medical provider visits Monthly Medicare Part B premiums Prescription co-pays Any other Medicaid-approved expense incurred by claimant Document, document, document! 11

12 If Trustee incurs a Medicaid-approved expense of the claimant on claimant s behalf, then Trustee is entitled to reimbursement from the QIT account. Document, document, document! Trustee may charge a reasonable fee for his/her services. EXCEPT for Spouse What is reasonable? Consult with an accountant for tax issues. MO HealthNet sends an inquiry letter. Trustee responds within 10 days. Trustee provides all requested documentation. ti MO HealthNet not obligated to extend the time for response. Failure to respond results in loss of eligibility for HCB waiver services. 12

13 If Claimant loses eligibility due to failure of Trustee: Trustee is immediately fired. Next Trustee steps up to the plate. Claimant appeals Determination. Status quo is maintained during appeal. Claimant continues to make deposits into QIT account. Loss of Eligibility Death Trustee screwup is not fixable. Claimant screwup is not fixable. Claimant wins the lottery. Fraud by Claimant or Trustee. Claimant decides not to appeal Notice of Determination letter. 13

14 Claimant stops depositing funds into QIT account. Trustee or Claimant notifies MO HealthNet of reason for termination. MO HealthNet tells Trustee if State debt exists. Trustee writes check out of QIT to MO HealthNet Cover letter identifying claimant by name, SSN, and MO HealthNet number. Remaining balance is returned to the applicant. Balance returned to applicant is counted as a resource. QIT account is closed. No more deposits. Notify MO HealthNet of claimant s death. MO HealthNet notifies Trustee of State debt. Trustee writes check to MO HealthNet for amount of state t debt. Balance of QIT is distributed to claimant s heirs as per the language of the Trust. QIT account is closed. 14

15 Include it in the body of the Trust Include it in any instructions to the Trustee Department of Social Services MO HealthNet Division ATTN: Cost Recovery Unit P.O. Box 6500 Jefferson City, MO FAX: (573) Alternative: MO HealthNet s Estate Notice Form version (1-16), which is available as a fillable pdf from the internet. Manley, Karraker & Karraker, P.C. P.O. Box 454 Farmington, MO vonne@semoelderlaw.com