Texas Medicaid Planning: The Income Test

Medicaid can be an important piece of the puzzle for seniors considering their financial options. Unfortunately, the strict eligibility requirements can make getting those benefits difficult without careful planning.

This is where certain tools—including Qualified Income Trusts—come in. By allowing individuals to redirect excess income, the trust enables them to meet the income test and qualify for Medicaid benefits while still using those funds in a way they can control. Understanding how the income test works and the best options for satisfying it are crucial for effective Medicaid planning.

Understanding the Income Test

To qualify for Medicaid in Texas, applicants must meet specific financial requirements, including an income test that sets a strict limit on how much income an individual can receive each month. These income limits are determined annually and are designed to ensure that Medicaid benefits are allocated to those who need them most. It is worth noting that there is no deduction for medical expenses, which can make it a challenge for anyone with income or assets to qualify.

Exceeding the income limit can pose a significant obstacle to accessing Medicaid benefits. Even if an individual’s income is only slightly above the threshold, they can be disqualified from receiving critical assistance, leaving them to face the financial burden of long-term care alone.

The income test does not account for all income equally, but it includes most sources, such as Social Security benefits, pensions, and other regular payments. If an individual’s monthly income surpasses the set limit, they are deemed ineligible for Medicaid, regardless of their actual medical or financial need.

Rely on a Qualified Income Trust

For individuals whose income exceeds the Medicaid eligibility limit, a Miller Trust—also known as a Qualified Income Trust—can be a solution. This trust allows excess income to be reallocated in a way that complies with Medicaid rules, ensuring that the applicant can qualify for benefits while still meeting the income test.

A Miller Trust functions as a sort of holding account for income that exceeds the Medicaid threshold. Instead of the applicant receiving all their income directly, the excess funds are deposited into the trust. These funds are then restricted in their use. The money in the trust can only be used for specific purposes that will not count toward the income threshold, such as paying for medical care, nursing home expenses, and other costs associated with the Medicaid recipient’s care. Any remaining balance in the trust after the individual’s death is typically required to be paid to the state as reimbursement for Medicaid services provided.

For those who find themselves just above the income threshold, a Miller Trust offers a pathway to essential Medicaid benefits without requiring the applicant to give up all their financial resources. It is a carefully designed legal tool that bridges the gap between income eligibility limits and the reality of medical and long-term care costs.

Let Our Firm Help With Your Miller Trust Needs

Establishing a Miller Trust requires thoughtful planning and consideration. If you are looking for guidance about preparing for Medicaid eligibility, call us today at 409-257-7878 or contact us online to schedule a consultation.