WHAT IS AN INCOME CAP TRUST?
An Income Cap Trust is a special type of trust designed to meet the income
limit for Medicaid eligibility.
If an applicant has more than 300% of the SSI standard in monthly income, he
or she does not automatically qualify for Medicaid benefits for long-term care.
The income limit is currently $2,022 per month (since January 2009.) An applicant with
gross monthly income above that amount needs an Income Cap Trust in order to
receive Medicaid for long-term care.
Once an applicant qualifies for Medicaid, thus becoming a Medicaid recipient,
all of the recipient’s income is deposited monthly into a new account
and disbursed according to a Medicaid approved budget. At the recipient’s
death, the remaining money in the account is paid to the State of Oregon.
DO I NEED AN INCOME CAP TRUST?
An Income Cap Trust is needed if the applicant’s gross monthly income
exceeds $2,022 per month. Because certain deductions, such as taxes and health
insurance, are withheld from the recipient’s gross monthly income before
the income check is written or directly deposited, the recipient may not actually
receive $2,022 per month. Keep in mind, therefore, that it is the amount of
gross monthly income, the income before deductions, that must be below
$2,022 in order to avoid the need for an Income Cap Trust.
WHAT CAN BE PAID FROM THE INCOME CAP TRUST?
The trustee may make the following types of payments from the Income Cap Trust:
1. Personal Needs Allowance/Maintenance Standard:
a. For residents in nursing homes, the allowance is $30 per month.
b. For residents in an assisted living facility, foster home, or in their
own home, the allowance is $152 per month. In addition, recipients in these
types of living situations must pay a minimum room and board amount for
their care, which is currently $523.70 per month. This amount is raised
each year, in the summer.
2. Administrative Costs: The amount of $50 per month is available to
pay for costs associated with administering the Income Cap Trust. These costs
can include bank fees, check charges, postage, mileage, etc. The trustee may
pay himself or herself the balance of the $50 as a fee for working on the trust.
Therefore, a total of $50 per month is available for all of the monthly expenses
of the Income Cap Trust, including the trustee fee.
3. Community Spouse Allowance:
a. A special formula is calculated to determine how much of the Medicaid recipient’s
income may be paid as a monthly allowance to the spouse who is not on Medicaid
(the “Community Spouse”).
b. In some limited circumstances, a court
order may
be obtained to increase the monthly allowance to the Community Spouse
4. Health Insurance Premiums:
a. Deductions for health insurance for the Medicaid recipient and his or her
spouse may be paid from the Income Cap Trust.
b. These premiums may be deducted from a pension, but they may also be paid
by check – each situation is different, but all premiums are payable
from the Income Cap Trust.
5. Burial Plan:
The cost of a pre-paid burial plan may be paid from the Income Cap Trust,
up to a mazimum cost of $5,000.
6. Other Incurred Medical Expenses:
a. If the Medicaid recipient has medical bills that were incurred in the three
months prior to the approval of the application, the portion of the bill
not covered by insurance can be paid from the Income Cap Trust.
b. Also, any medical cost or medical equipment costs that become necessary
and recommended by a doctor when the recipient is on Medicaid may be paid
from the Income Cap Trust, provided the Medicaid caseworker approves the
expense.
7. Other Reserves:
a. There may be other appropriate deductions, depending on the case. A lawyer
well trained in Income Cap Trusts will be able to identify those deductions.
8. Patient Liability:
a. The money left after making the payments set forth in items 1 through 7
above is the amount to be paid to the care facility. Any remaining amounts
owed to the care facility for charges relating to recipient’s care
are paid by Medicaid.
HOW DOES AN INCOME CAP TRUST WORK?
The Income Cap Trust is created and managed by a trustee who deposits the
Medicaid recipient’s income into a new bank account established in the
name of the Income Cap Trust. The trustee also writes checks on the Income
Cap Trust account each month, which checks are written according to a budget
prepared by an attorney and approved by the Medicaid caseworker. The budget
must meet the requirements listed in the previous section. All distributions
from the Income Cap Trust must be verified in writing in order to be allowed.
Once the budget is approved, the trustee is given a copy, generally with instructions
from the attorney.
WHAT HAPPENS WHEN THE MEDICAID RECIPIENT PASSES AWAY?
Usually, the trustee will pay the last bills owing from the Income Cap Trust.
Soon after the recipient’s death, the State will contact the trustee
and request repayment of the balance the Income Cap Trust account, if any.
If there is any money left in the Income Cap Trust account at recipient’s
death, that money is owed to the State. Once the Income Cap Trust account is
empty, the trustee should close the account.
DISCLAIMER: The information contained in this website is based on Oregon law
and is subject to change. It should be used for general purposes only and should
not be construed as specific legal advice by Fitzwater Meyer, LLP, or its attorneys.
Neither this website nor use of its information creates an attorney-client relationship.
If you have specific legal questions, consult with your own attorney or call
us for an appointment.
(c) Fitzwater Meyer, LLP, 2003-2010
