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I recently received this question from a reader of my articles:

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My wife is in a nursing home and I have applied for Medicaid.  Luckily I was able to find a knowledgeable person to help me so I did not have to pay for assistance in applying.  We own our home and  I have about $30,000 in joint accounts with my wife.  My wife has about $60,000 in an IRA which I know does not count and she has $20,000 in an annuity which pays us $4,000 per month.  I receive $1820 in Social Security and $55 in a pension per month.  My wife receives $1123 in Social Security and $678 in pension per month.  I am a Veteran and have applied for VA benefits but I have not yet received any money from that.  I am disabled and have home health care coming for four hours per day.  The Department of Children and Families has now told me that I need a Qualified Income Trust.  What is that and why do I need it?

Dear Davey:
While I cannot give you individual legal advice, there are several issues that you raise.

When applying for benefits, one must be concerned about the structure of the assets and whether an optimal structure is used; otherwise limited resources may be wasted.

An Income Trust is needed when the applicant’s income exceeds the income cap (currently $2094).  It appears in the situation at hand that the wife’s income is $5,801, which is clearly over the cap.  However, it is actually higher than this number because the IRA will also have mandatory withdrawals.  Her total income, probably over $6,000 per month will be paid to the facility even while your wife is on Medicaid.  The only amount that will be deducted from the wife’s income will be her personal needs allowance of $105 and the amount that will be diverted to the husband as the spouse living in the community.  The amount that is diverted to the husband will be based upon his shelter costs and if he does not have a mortgage, it does not appear that he will receive diversion.  Based upon the information provided he will pay an exceedingly high patient responsibility to the nursing home which will deplete the annuity and IRA over his wife’s lifetime.  These resources will not be available to pay for his needs in the community and he can expect his care needs to deplete his limited resources within the year.

This application can be restructured easily to reduce patient responsibility to approximately $1766 per month.  Under this scenario, no Qualified Income Trust will be necessary.  It is also possible to petition for court ordered support which potentially would allow this $1766 to be retained by the husband to help pay for your home health care.   The net benefit of this restructuring would be almost $6,000 per month.

It appears that Davey has applied for Veteran’s benefits when his assets exceed the VA limits.  In our experience this has always led to a denial of benefits.  If his assets had been restructured prior to application it is likely that he could have received the benefits.  As is, if a denial is issued it is doubtful that he will be able to reapply and receive a favorable determination for 6-12 months.  After waiting this period of time, he may be able to receive almost $2000 per month from the VA.

Many well meaning friends attempt to provide assistance with applying for benefits.  Unfortunately this type of “help” sometimes ends up costing more than the legal services which are available.