When You’re Over the Income Limit by $80

Attorney Greg Robinson

Picture the letter. Your father draws Social Security, plus a small pension from a job he worked for decades. Together it comes to $3,072 a month. The Medicaid income cap in his state is $2,982. Denied. Ninety dollars. It feels like a clerical error. It isn't. And an appeal won't fix it, because a hearing officer has no power to change a number set by statute. What fixes it is a legal structure. I'm Attorney Greg Robinson, and I'll walk you through it in plain English.

Attorney Greg Robinson

Start with what Medicaid actually measures. It runs two separate tests, income and assets, and they don't talk to each other. Pass one, and you still have to pass the other. This episode is mostly about the income test, because that's where your father got stopped.

Attorney Greg Robinson

States handle income in one of two ways. In medically needy states, often called spend down states, an applicant over the limit can spend the excess each month on medical bills or nursing home costs until countable income reaches the limit. Then there are income cap states, roughly half the country, including Texas, Alabama, Florida, and Georgia. They don't allow that. The cap is set at 300 percent of the SSI Federal Benefit Rate, which is $2,982 a month for an individual in 2026, up from $2,829 in 2024. It's measured on gross income, before deductions. And if you're over it by even one dollar, you're categorically denied. Many states also follow a name on the check rule, meaning income counts by whose name is on the payment.

Attorney Greg Robinson

So here's the fix. It's called a qualified income trust, or QIT, and many people call it a Miller trust. The name comes from a 1992 federal case, Miller v. Ibarra. Congress then wrote it into law in 1993, and it now lives in the federal Medicaid statute, 42 U.S.C. Section 1396p(d)(4)(B). The idea is simple. It's an irrevocable trust that holds only income. Income routed into it is disregarded when Medicaid tests your monthly eligibility. Your father is no longer over the cap on paper, and he didn't give away a dime of wealth to get there.

Attorney Greg Robinson

Now the month by month mechanics, because this is where families get hurt. First, an attorney drafts the trust. It must be irrevocable, and it must name the state as the remainder beneficiary. Your father can't be the trustee, but you can be. Then you open a dedicated bank account in the name of the trust. Not his checking account. A separate one.

Attorney Greg Robinson

Then, every month he needs coverage, his income has to go into that account, and it has to land in the same month. A Texas elder law attorney, Michael Cohen, puts it this way: if Social Security arrives in July but you don't deposit it until August, there is no eligibility for July. And most states want the entire payment from a source deposited, not just the ninety dollars over. In Texas, for example, if the Social Security check is the source, the whole check goes in, not just the excess. Some states allow depositing only part of the income, so your state's rules matter. Which brings me to a caution. Deposit rules, caps, and allowances vary by state, so confirm yours with an attorney there.

Attorney Greg Robinson

Here's what people misunderstand. A QIT is not a shelter. The money flows through it, and it gets paid out in a strict priority order. First, a personal needs allowance for your father, which varies by state: $75 a month in Texas, $160 in Florida. Second, if there's a spouse at home, an allowance for that spouse. Third, health insurance premiums and medical costs Medicaid doesn't cover. Last, whatever remains goes to the nursing home as his patient share of the cost of care.

Attorney Greg Robinson

Because the money moves out every month, a properly run trust holds almost nothing when he passes. And whatever is left goes to the state, up to what Medicaid paid for his care. If a meaningful balance is sitting there, it usually means the trustee made an error. That's why this tool is about eligibility, not inheritance.

Attorney Greg Robinson

Now the spouse. If one spouse enters care and the other stays home, federal rules say the at home spouse can't be left impoverished. The community spouse monthly maintenance needs allowance lets income from the QIT be diverted to that spouse, up to $4,066.50 a month in 2026, before the nursing home's share is calculated. And on the asset side, the community spouse resource allowance generally lets the at home spouse keep half of the couple's countable assets as of the day care begins, within a federal floor and ceiling. In 2026, that ceiling is $162,660.

Attorney Greg Robinson

And that leads to the second test, because a QIT solves only the income problem. It can never hold assets. Put savings or investments in it and the trust is disqualified. In most states, an applicant can keep only $2,000 in countable assets: bank accounts, CDs, brokerage accounts, a second property. Exempt assets generally include the home, with state equity caps and conditions, one vehicle, personal belongings, and an irrevocable burial contract.

Attorney Greg Robinson

If countable assets are over $2,000, they have to be spent down before applying, and the spending has to be real, at fair market value. Paying off a mortgage or credit cards, building a ramp or a walk in shower, covering medical and dental bills, or buying an irrevocable funeral contract all hold up. What doesn't hold up is giving money away, or selling something to a relative for a fraction of what it's worth. That triggers the sixty month lookback and a penalty period of ineligibility. We covered the lookback, and the caregiver child exemption, when we asked whether Medicaid can take your house. And if you're wondering why a trust that saves the house doesn't solve monthly eligibility, our episode on Medicaid trusts explains that tradeoff.