Will my father need an Income Cap Trust to qualify for Medicaid?

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If the applicant has gross income over the Medicaid limit, an Income Cap Trust is a device to enable the applicant to qualify for Medicaid with respect to the income requirement. This ‘income cap’ is based on 300% of the Supplemental Security Income (SSI) standard for monthly income, and is generally adjusted every January 1st, except in years when there is no cost of living adjustment.

If your father’s gross monthly income is above the income cap, he will need an Income Cap Trust.

When the Medicaid applicant becomes eligible for Medicaid, the applicant’s fixed income flows through a bank account owned by the income cap trust every month. The Trustee of the trust then distributes the income based on a schedule of approved expenses. These expenses include:

  • A small personal needs allowance for Medicaid recipient
  • Either $163/month if the recipient is in assisted living or adult care facility, or $60/month for a resident of a nursing home
  • Room and board rate standard if the Medicaid recipient is in a community-based care setting (waivered care), currently $570/month
  • Administrative costs of the trust, up to $50 per month
  • Community spouse and family monthly maintenance needs allowance
  • Medicare and other private medical insurance premiums
  • Other incurred medical costs
  • Contributions to reserves for child support, alimony, and income taxes
  • Contributions to reserves for payments to purchase an irrevocable burial plan up to a maximum value of $5,000
  • Contributions to a reserve for home maintenance

The balance of the Medicaid recipient’s income goes to the care facility as his/her ‘patient liability’ up to the cost of waivered service or nursing facility services. In rare cases, there can be excess income. This excess income remains in the income cap trust account and will not create a problem for continued Medicaid eligibility unless it exceeds $7,663.

At the Medicaid recipient’s death, if there is any money left in the income cap trust account it goes to the State.

The agent under a durable financial power of attorney may be able to set up an income cap trust for the Medicaid applicant if the applicant is not able to establish the trust.

An experienced Elder Law and Medicaid attorney can help you understand the requirements for Medicaid eligibility, including the need for an income cap trust. Contact the Elder Law attorneys with the Law Offices of Nay & Friedenberg in Portland, Oregon at (503) 245-0894 to set an appointment.

If you would like to learn more about Medicaid planning options, click here to receive our FREE Legal/Financial Planning Guide.