Qualified Income Trusts (QITs)- Why Income Shouldn't Disqualify You From Medicaid Eligibility (2026)

Medicaid has two hurdles: Asset limits (e.g., $2,000 for individuals in Ohio) and Income limits (e.g., $2,829/month in 2026 for Ohio). Assets in a proper MAPT aren't countable after the lookback, but high income (from pensions, Social Security, or trust distributions) could still disqualify you in "income-cap" states like Ohio (about half the U.S.).

There is an inexpensive (less than $1000.00) solution in that case. Enter the Qualified Income Trust (QIT), aka Miller Trust: It's a simple, irrevocable "bucket" where you deposit excess monthly income. Here is how it works:

• Income Segregation: The deposited amount isn't "counted" toward your Medicaid income limit; it's like setting it aside. Your "official" income drops below the cap, qualifying you.

• Allowed Uses: QIT funds can pay for your care (e.g., nursing home co-pays), medical bills, or other needs. It's not "hidden"; it's used for you, but structured to comply.

• Payback Rule: After your death, remaining funds reimburse the state for Medicaid costs (like a lien).

• Example: The income limit is $2,829/month; you get $3,829. Deposit $1,001 or more into QIT. Your "countable income" is now $2,828, so you qualify. The trustee of the QIT pays some bills such as your Personal Needs Allowance (PNA) (a small monthly amount to pay personal expenses), health insurance premiums (e.g., Medicare Part B or supplemental insurance), a spousal allowance if a spouse is living at home), and your share of the nursing home or care costs; Medicaid covers the rest.  At death, the Trustee pays any funds toward your burial expenses, and the surplus, if any, is paid to the state.  

Even "significant" income (e.g., $10,000/month) won't disqualify an applicant if funneled through a QIT; it's a federal requirement in income-cap states. In non-cap states (e.g., New York), excess income just means higher co-pays, no QIT needed.  

Important Reminder About Your General Durable Power of Attorney (GDPOA)

Don't overlook this: If you become incapacitated, your agent (under your GDPOA) must handle Medicaid planning. A generic "power to settle trusts" isn't enough—it could be too vague for courts or banks. Explicitly include:

• Specific Authority to create/fund a QIT for income management.
• Power to establish an irrevocable trust (like a MAPT) specifically for Medicaid/asset protection.

Without this language, your agent might be blocked, forcing court intervention  (expensive and slow). Review/update your GDPOA with an elder law attorney; it's crucial for seamless planning. Remember, state laws differ, so get local advice!

Medicaid Asset Protection Trusts: The Irrevocable Trade-Offs and Hidden Downsides You Need to Know (2026)

A Medicaid Asset Protection Trust (MAPT) is a specialized irrevocable trust designed to shelter assets from Medicaid eligibility calculations for long-term care, while adhering to strict rules to avoid Medicaid penalties.  Typically, you, as the potentially vulnerable senior, are the settlor, and adult family members are appointed as trustees.  Once assets are in the MAPT, they're generally "sheltered" after a 5-year "lookback" period, meaning Medicaid won't make you spend them down before qualifying. 

Generally, MAPTs have several requirements, best understood as limitations upon your rights as the settlor:

• Irrevocability: The trust must be irrevocable. Once funded, you cannot revoke, amend, or terminate the trust.  If you can control the assets, directly or indirectly, they may be available for your support and, therefore, countable for Medicaid.

• No Right of Reversion: The settlor cannot have any right, direct or indirect, to get the assets back.  There can be no reversionary interest (the assets do not revert to the settlor or the settlor’s estate based upon some condition). Even a contingent or remote possibility of reversion (e.g., “if all beneficiaries die first”) can make the assets countable in some states.

• No Retained Control: The settlor cannot be the trustee or have any power to direct distributions. The settlor cannot have any power of appointment (general or limited) over the trust assets.  There can be no reserved powers that allow the settlor to remove or replace the trustee, veto distributions, or control trust investments.  Obviously, the settlor cannot serve as an investment advisor, a trust protector, or a special trustee, since the settlor cannot exercise de facto control.

• No Distributions of Principal to the Settlor: The trustee is prohibited from distributing principal (the original assets or their growth) to the settlor for any purpose—whether for health, education, maintenance, support (HEMS), comfort, best interests, or any other standard.  This is the single most important restriction. Even a discretionary power to distribute principal for the settlor’s benefit will usually make the entire trust countable.  A simple way to understand this is that if you have any interest in an asset or property for your support, the state can compel you, directly or indirectly, to utilize those assets to support you in a nursing home before giving you benefits.  

• Independent Trustee Required:  The trustee must be an independent third party (usually an adult child, trusted friend, professional trustee, or bank).  A child's spouse or relative who is also a beneficiary can sometimes serve, but the settlor and the settlor’s spouse generally cannot be trustees.

The foregoing means that you, as the Settlor, are giving irrevocably and completely, forever, any and all rights, privileges, and interests in and to the assets and properties of the trust, including control, management, and disposition (where the assets ultimately go).  

Why These Restrictions Exist 

Medicaid (under federal law 42 U.S.C. § 1396p(d) and state regulations) looks at whether the settlor can access the trust assets to pay for their own care. If the settlor has any meaningful control over or benefit from the principal, the state can argue that the assets are “available” and must be spent down before Medicaid will pay. The restrictions above eliminate that argument, making the assets non-countable after the lookback period.

A properly drafted MAPT is intentionally very restrictive for the settlor.  The settlor gives up ownership and control in exchange for asset protection for heirs and eventual Medicaid eligibility. If even one of these protections is weakened (e.g., allowing discretionary distributions of principal to the settlor), many states will treat the entire trust as a resource, thereby defeating the purpose.

Disadvantages of MAPTs

MAPTs are legitimate estate planning techniques. A properly drafted MAPT prepared by a competent estate planning lawyer, and administered by a competent trustee can be a powerful tool in a comprehensive estate plan.  Unfortunately, sales practices that "pitch" them as a universal "need," without exploring your specific circumstances, goals, and needs, are common.  Some seminars market these trusts as having no disadvantages.  Others assure you that regardless of the transfer, everything in the trust remains under your control.  Beware of these tactics; MAPTs have several important possible drawbacks and disadvantages.  The most important of these is the risk of losing the family home: 

• You Lose or Compromise the Spousal Asset Exemption for the Community Spouse: This is often the biggest hidden disadvantage, especially for married couples.

• Normal spousal rules: When one spouse (the "institutionalized spouse") needs nursing home care, the other spouse (the "community spouse") is allowed to keep a large amount of assets under the Community Spouse Resource Allowance (CSRA), up to $154,140 in 2026 (adjusted annually). The home is usually fully exempt if the community spouse lives there (regardless of value in most states).

• What happens when the home is in a MAPT:  Once the home is transferred to an irrevocable MAPT, it is no longer considered the community spouse’s exempt residence asset.  If the institutionalized spouse applies for Medicaid before the 5-year lookback period ends, the home becomes a countable asset of the institutionalized spouse (because the transfer is penalized). Even after the lookback period passes, many states treat the home as no longer exempt for the community spouse because legal title is in the trust, not in the spouse’s name. The community spouse loses the ability to keep the full value of the home as an exempt resource.  The result is that the community spouse may have to sell the home or face a lien/estate recovery claim, or the institutionalized spouse may be denied coverage until the home is liquidated or otherwise handled.

• Summary: Putting the marital home into a MAPT can destroy one of the most valuable spousal protections, the right of the at-home spouse to keep the house indefinitely without it counting against eligibility.

• You Lose or Compromise the Exemption to Transfer to a Disabled Child: You can transfer any amount of assets (including the home) to a child who is permanently disabled (SSI/SSDI level) at any time without penalty. This is a lifetime exemption. Once the home or other assets are already in the MAPT, you can no longer make a direct exempt transfer of those same assets to the disabled child. The MAPT transfer is already "spent," so you lose that powerful exemption.

• You Lose or Compromise the Child Caregiver Exemption:  You can transfer the home (and sometimes other assets) to a child who lived with you and provided care for at least 2 years, delaying the need for nursing home placement. This is the "caregiver child exemption." If the home is already in the MAPT, you cannot later make a direct exempt transfer to that child. The home is held in the trust, and the caregiver-child exemption is unavailable for those assets. This exemption is common in situations where a senior is aging in place, and is often included in a family caregiver agreement to ensure application and proper distribution of the home. In the worst cases, the loss of this exemption may impair a child's incentive to endure the burdens of caregiving, leaving a senior more vulnerable to institutional care and its attendant costs and risks. 

• You Lose or Compromise the Sibling Exemption:  You can transfer your home (penalty-free) to a sibling who has an equity interest in the home and has lived there for at least one year immediately before you become institutionalized (enter a nursing home or start HCBS waiver services).  If the home is already in the irrevocable MAPT, you lose the ability to make this direct exempt transfer. The sibling can't receive the home penalty-free from you personally, as you no longer own it. This exemption is lost for that asset. 

• You Lose or Compromise Transfers for Undue Hardship or Fair Market Value (FMV):   In admittedly rare cases, Medicaid may waive penalties if denying eligibility would cause "undue hardship" (e.g., extreme deprivation) or transfers for fair market value (e.g., selling the home to a third party) are exempt.  These aren't "transfers" you control post-funding; placing assets in the MAPT can limit your flexibility to sell or adjust them later without penalty. For example, you can't easily "undo" the transfer to claim hardship or resell for FMV without complications.

• You Lose or Compromise Transfers to Certain Annuities or Promissory Notes:  In some states, you can convert assets into an immediate annuity or promissory note for the spouse or others, which may be exempt or partially protected.  Assets in the MAPT can't be pulled out to fund these financial solutions. You lose the option to use exempt annuity strategies or promissory notes on those assets.

The foregoing are statutory exemptions and protections provided by federal and/or state law.  It is easy to dismiss these as wholly unnecessary and therefore irrelevant when considering a MAPT; if the MAPT is successful in its purpose, the exceptions and protections are unnecessary. There is, however, a distinct risk associated with a MAPT.  A MAPT may be contested by the state for a variety of reasons, legitimate or illegitimate (sometimes the state makes arguments or takes positions that are not grounded in good law).  The state may contest the trust terms and/or any actions taken by you or the trustee regarding trust assets.  These contests are expensive to defend.  Statutory exemptions and protections, with the possible exception of the child caregiver exemption, are generally straightforward and generally accepted by the state without dispute.      

Regardless, there are other possible disadvantages about which you should be aware: 

• Irrevocability: You give up control forever!  Once assets are placed in the MAPT, you can never take them back, change the terms, or revoke the trust. If your circumstances change (e.g., you recover unexpectedly, need cash for an emergency, or your children have financial problems), you’re stuck. The trustee (usually an adult child or professional) controls the assets, not you.

• 5-Year Lookback Penalty Risk: Transfers into the MAPT start a 5-year clock (2.5 years in California for home transfers). If you need Medicaid care within that window, the transferred assets are treated as gifts, triggering a penalty period of ineligibility. During that time, you’re responsible for paying privately, potentially depleting other savings or forcing the family to cover costs.  Also note that the date the trust was set up is irrelevant; the lookback looks for transfers of assets to the trust.  If you delay funding the trust, i.e., transferring assets to the trust for a year, your plan is delayed a full year before it is effective. 

• Loss of Direct Access to Principal:  In a properly drafted MAPT, you cannot touch the principal for your own needs, even for health, emergencies, or comfort. You may get income (interest/dividends), but the main assets are locked for beneficiaries. If you need large sums (e.g., unexpected medical bills not covered by insurance), you have no recourse from the trust.

• Increased Risk of Unnecessary Institutional Care:  This is one of the most serious and under-discussed downsides. Indigency (having no countable assets) is the most common cause of unnecessary or otherwise avoidable institutional (nursing home) placement. When people have no significant assets left outside the trust, families often feel they have “no choice” but to place the loved one in a facility to qualify for Medicaid coverage, even when in-home care, assisted living, or adult day programs might have been preferable and/or less expensive.  With a MAPT, the protected assets are unavailable to pay privately for alternatives to nursing home care. This can push people into institutional settings sooner or longer than necessary, reducing quality of life, autonomy, and family involvement. The risks of institutional care go far beyond just the financial cost. 

• Family Tension and Trustee Conflicts:  The trustee (often a child) has legal control over assets that will eventually go to heirs. These trusts sometimes last for decades, with one or two siblings in control (how long might you live?). This can create pressure, resentment, or disputes, especially if the trustee is also a beneficiary. What if the trustee needs to say “no” to a sibling’s request? Or if the settlor feels the trustee is too stingy with income? These dynamics can strain family relationships. Add institutional care, differences in opinions regarding what is in your best interest, and grief upon your chronic disability or passing, and you have a prescription for family conflict. 

• Potential Medicaid Challenges/Audits: Even a well-drafted MAPT can be challenged. Some states aggressively scrutinize trusts for “hidden access” (e.g., broad trustee discretion, use privileges, or indirect benefits). If the state wins, the trust assets become countable, and you may face backdated penalties or repayment demands. Legal fees to defend can be substantial.  Trusts can also be challenged on a variety of grounds, including drafting and use/misuse of assets.  

• Loss of Flexibility for Changing Needs: Life changes, such as divorce, remarriage, new grandchildren, or health improvements, might alter your goals or objectives, but the MAPT is locked. You can’t easily adjust beneficiaries or respond to unforeseen events.

• Upfront Costs and Complexity:  Setting up a MAPT requires an experienced elder law attorney, proper funding (deeding property, retitling accounts), and ongoing administration. Legal fees often run $5,000–$10,000, plus potential appraisal, recording, and trustee fees. Mistakes are expensive to fix. Terminating and irrevocable may be legally impossible, and cost-prohibitive.  Worse, some trusts make it impossible or impractical to transfer the assets.   

• Opportunity Cost:  Assets in the MAPT can’t be easily used for other goals (e.g., helping an adopted grandchild buy a house, starting a business, or funding education). You’re trading liquidity and flexibility for protection that may never be needed.

In short, the deployment of an MAPT must be carefully considered and properly implemented.

Marketing Matters!

How the MAPT is marketed to you or your children matters.  First, if the marketing has created a high expectation that there are no risks and that you retain significant flexibility, that marketing encourages drafters to utilize "comfort clauses" to make you comfortable that the trust will work as you expect, even if they compromise the integrity of the trust and the plan.  I have written a series of articles explaining the real-world consequences of comfort clauses.  Second, your trustees may rely more upon their "understanding" of the trust terms as explained by you, or by your representative or attorney, than they rely upon either the law or the precise drafting of the trust.  Even innocent or mistaken misuse of the trust for your benefit can compromise the entire plan, putting all assets at risk.  In addition to compromising your plan, misuse or mismanagement is another cause of family disputes: beneficiaries who learn of it might sue the trustee for lost inheritance.  

In reviewing MAPTs drafted by other attorneys, I often see these clauses, followed by a savings clause, for example, stating that "notwithstanding the foregoing, the trustee may not transfer assets directly or indirectly to the settlor." This type of provision actually highlights possible inconsistency with the trust's legal purpose.  

A somewhat common mistake is to retain control of the disposition of the assets (change beneficiaries), with a "savings" provision stating that "notwithstanding" the provision, you cannot direct or appoint the assets to yourself.  This drafting is a comfort clause that may seem appropriate for someone worried that their trustee might misuse the assets or fail to take care of property you want or need, such as your home.  When challenged, though, these often fail; the obvious purpose of retention of disposition is to influence a trustee/beneficiary to follow your directions with the threat of disinheritance as a consequence. A trustee must be independent, and you must have no control over the trustee.  

Drafting Alternatives

MAPTs come with a variety of possible drafting alternatives, but there are two common broad categories of MAPTs, from "your" standpoint as a senior settling such a trust:

• Traditional MAPT:  A traditional MAPT typically prohibits both income and principal distributions directly to you (the settlor) for your needs. Income (e.g., interest from investments or rent from a property) might accumulate in the trust or go to beneficiaries, but not to you in a way that could be seen as "support." Principal is strictly off-limits to you.

• Privileges or Non-Economic Benefits:  Instead of cash distributions, it often includes non-distribution "privileges" like the right to live in the home (if your house is in the trust), or use other assets without owning them. This is like a "life estate" or "use and occupancy" clause, you get the benefit without it counting as a distribution.

• Income Considerations: Because income is not distributed to you, the trust must direct to whom and how the income is distributed or retained in the trust.  These decisions will have income tax consequences. Generally, the trust should be designed to minimize income taxes, and its ultimate design may depend on your specific circumstances and opportunities.   

•  Purpose: This trust design maximizes protection by ensuring no assets are "available" for your support, and protects income that you may earn from those assets.

• Income Only Trusts. This trust permits distribution of "income only" to you or a spouse, but prohibits principal distributions. Principal can, however, be distributed to beneficiaries (e.g., children) for their HEMS needs if you desire. You can also build in non-economic privileges, like residence in a home or on a farm, but income is either distributed to you or can be.

• Purpose: This trust design provides you with ongoing cash flow while still protecting the core assets.  This income can be used to maintain a quality of life, defer long-term care by paying for aging in place, and help ensure that you can satisfy the 5-year lookback by making income available to pay for care. This design can also be tax advantageous if your beneficiaries are high-income earners paying a higher marginal tax rate.

• Downside: Income is countable, meaning that it will need to be paid to a nursing home to satisfy part of the monthly expenses.  But, as explained in the accompanying article, "Qualified Income Trusts (QITs)- Why Income Shouldn't Disqualify You From Medicaid Eligibility (2026)", income, even if it is significant, should not disqualify you from receiving Medicaid.  

The Elephant in the Room: Can Beneficiaries Pay Directly for the Settlors' Needs From Monies Received from the Trust?

The most common pacifying explanation of MAPT trust administration goes something like this:  "If you have needs or wants, your children (beneficiaries of the trust) will meet them from money distributed to them."  Several important caveats must be added to this explanation for it to be complete and accurate: First, it is possible, but such distributions risk trust invalidation; Second, you have no power to compel such distributions; and Third, the natural incentive in such cases is for institutional care paid for by Medicaid and preservation of all assets for the benefit of beneficiaries. 

• Direct Payments by Beneficiaries: If beneficiaries receive legitimate distributions for their own needs (HEMS), and then use their personal funds to pay directly for settlors' needs (e.g., paying a nursing home bill or buying groceries), this might not trigger a lookback or risk trust invalidation, since no transfer occurs from settlors. It's treated as the beneficiary's voluntary expenditure. 
• Risks: However, if Medicaid views this as an indirect way for settlors to access trust principal (e.g., via a pattern of distributions followed by payments), it could be recharacterized as a countable transfer. The key is ensuring distributions to beneficiaries are genuinely for their needs, not pretextual. Direct payments must not violate the trust's terms or create an implied right for settlors to demand support. Courts and Medicaid agencies have ruled against similar arrangements if they appear contrived (e.g., distributions timed suspiciously close to settlors' needs). If challenged, it could lead to the trust being disregarded, exposing all assets to spend-down requirements. This strategy is often discouraged as it invites audits and legal challenges.
• Safer Alternatives: Some MAPTs include limited "sprinkling" provisions allowing trustees discretion to benefit settlors indirectly (e.g., paying for family vacations where settlors benefit collaterally), b. Always document distributions meticulously to show independence.

Misuse can have escalating consequences:

• If Gifts Are Deemed Countable: At a minimum, improper gifting back (or direct payments seen as transfers) could result in the gifted amounts being treated as uncompensated transfers, leading to a penalty period (e.g., ineligibility for months based on the value). This doesn't necessarily invalidate the entire trust but delays benefits.
• Trust at Risk: More severely, if Medicaid determines the arrangement was designed to evade rules (e.g., through fraud or abuse), the whole MAPT could be disregarded as a "sham trust." Assets would then become fully countable, forcing spend-down before eligibility. In extreme cases, this could lead to civil penalties, clawbacks, or even criminal fraud charges if intent to defraud is proven. 

Conclusion

In summary, while creative workarounds such as beneficiary distributions followed by gifts or payments might seem viable, they carry significant risks of penalties, trust invalidation, and eligibility denial. MAPTs work best when adhered to strictly, with planning done well before the 5-year lookback. In your situation, a professional review is essential to ensure compliance and to explore alternatives such as spousal annuities or exempt transfers.  
Medicaid laws change, and their application can vary from state to state and even within counties.   Get advice!  More,  read the disclosures and documents provided carefully. Oral representations made at a seminar or in an office may not be accurate or complete.