Summary of Temporary Qualified Income Trust Rules
by Amy J.L. Mason

On September 30, 2005, the Tennessee Department of Human Services Medical Services Division adopted Public Necessity Rule 1240-3-3-.03, effective through March 14, 2006.  The new rule, which may be viewed in full at http://www.tennessee.gov/sos/rules/1240/1240-03/1240-03-03.pdf, now addresses Qualified Income Trusts ("QIT"), also known as “Miller Trusts”.  Below is a brief summary of the rules as they relate to QIT administration and eligibility for Medicaid benefits.

• Individuals receiving or who will receive nursing facility services or home and community based services whose income exceeds the Medicaid income cap may establish a QIT.
• A QIT may consist only of pension, Social Security, and other monthly income.
• Only individuals whose income is above the Medicaid income cap and below the statewide average Nursing Facility private pay rate for Level 1 care (as determined by the Comptroller's Office initially and then, beginning July 1, 2006, determined annually by the Medicare Economic Index) may establish a QIT.  However, there is an undue hardship exception if the individual has no other resources and income is below the cost of care at the private pay rate (and discharge would endanger the patient's life/health).
• The trust must be irrevocable and cannot be amended by the individual.  But, the Trustee or a Court may modify the trust to the extent necessary to maintain the eligibility of the individual for medical assistance.
• Trustee can make disbursements only for:
• Personal needs allowance (as of July 1, 2006 = $40)
• Up to $20 in necessary expenses for management of the trust (i.e. bank charges)
• A spousal income allocation permitted under TN Medicaid policies
• Expenses for health insurance premiums for health insurance coverage
• Expenses for qualifying medical or remedial care received by the individual, to the extent recognized under Tennessee law (as specified under Rule 1240-3-3-.04(2)(d)).
• The Trustee must distribute the entire amount of income remaining in the trust after the disbursement of funds for the items listed above each month to the to the Bureau of TennCare (or directly to the nursing facility or HCBS provider, as directed by the Bureau of TennCare).
• Any amounts remaining in the trust at the individual's death must be paid to the Bureau of TennCare within three (3) months after the individual’s death (or termination of the trust, whichever occurs first).

If you have any questions about this bulletin or need additional information, please contact Dana Perry at (423)757-0228 or by email at dperry@cbslawfirm.com or Amy Mason at (423)757-0213 or by email at amason@cbslawfirm.com.

Consistent with Internal Revenue Service Circular 230, we advise you that this legal update has not been written as a formal opinion of counsel. Accordingly, IRS regulations require us to advise you that any tax information contained herein was not intended or written to be used and cannot be used for the purpose of avoiding federal tax penalties.