Houston Estate Planning and Elder Law Attorney Blog
Texas applies a hard income cap to Medicaid long-term care benefits, which separates it from most states. An applicant whose gross monthly income sits above the state’s special income limit is denied, even when that income covers a fraction of a Houston nursing home bill and nothing is left over. Families across Harris County usually learn this after a parent has already moved into a facility, and the denial notice rarely explains what comes next.
Federal law supplies the answer. Income routed each month into a trust that satisfies 42 U.S.C. § 1396p(d)(4)(B) is disregarded when Texas measures an applicant against the income limit, so the same person denied last month can qualify with the trust in place. The trust does not shelter savings or reduce what the facility is owed. It removes one specific barrier, the one that stops most applicants. Texas Medicaid crisis planning often begins and ends with getting this document right.
Why Texas Denies Medicaid on Income Alone
Most states run a spend-down system, where an applicant with high income can still qualify by applying it to medical costs. Texas is instead an income-cap state, where eligibility turns on a threshold, and gross monthly income either falls below the line or it does not. Social Security, a pension, an annuity payment, and rental income all count toward the total before any deduction for the cost of care.
The special income limit is set by the Texas Health and Human Services Commission and adjusted at the start of each calendar year. Effective January 1, 2026 it is $2,982 per month for an individual and $5,964 for a couple, a figure the state sets at 300 percent of the Supplemental Security Income federal benefit rate. Texas Health and Human Services publishes the current amount, and its qualified income trust policy at Section F-6800 governs the state-level detail.
The result is a cliff rather than a slope. A retired teacher drawing a modest pension alongside Social Security can land a few dollars over the limit and be denied, while a neighbor with less income and identical care needs is approved. Nothing in that outcome reflects an ability to pay.
What Federal Law Requires of a Qualified Income Trust
A qualified income trust is a written, irrevocable trust funded only with the applicant’s own income, which holds each month’s excess so that income no longer counts against the Texas Medicaid limit. It is also called a Miller trust, after the case that produced the concept.
The governing provision is 42 U.S.C. § 1396p(d)(4)(B), codified as Section 1917(d)(4)(B) of the Social Security Act. The trust must be “composed only of pension, Social Security, and other income to the individual (and accumulated income in the trust).” Nothing else may go in. A single deposit of savings, a gift from an adult child, or the proceeds of a sold vehicle can disqualify the trust.
The statute attaches a second condition. The State receives the amounts remaining in the trust when the beneficiary dies, up to the total medical assistance paid on that person’s behalf. Families sometimes read this as a penalty, though the balance left in a properly administered account is small, because the point is to move money through the trust each month rather than accumulate it.
How the Trust Works Month to Month
Administration is where these trusts most often fail, and the mechanics are less forgiving than the drafting. The sequence repeats for as long as benefits continue.
- Establish and fund: the trust is signed and a dedicated bank account is opened in the trust’s name, with its own tax identification arrangement.
- Deposit the excess: enough income is deposited each month to bring countable income below the special income limit, deposited in the month it is received.
- Distribute in the correct order: the trustee pays the personal needs allowance, then any spousal allowance, then the applicant’s share of the cost of care.
- Keep the balance near zero: funds are disbursed in the same month they arrive rather than allowed to build up.
- Document everything: statements and ledgers are retained for the annual redetermination, when the state reviews whether the trust was operated as written.
A trust that is signed and then ignored can cost a family the eligibility it was created to obtain. McCulloch & Miller, PLLC handles qualified income trusts for families throughout Houston and the surrounding counties, and much of that work is the ongoing administration rather than the drafting. Thomas W. McCulloch, a NAELA member licensed as both an attorney and a CPA, handles the tax and benefits questions these arrangements raise.
Where a QIT Fits Among the Other Medicaid Trusts
The same subsection of federal law authorizes two other trusts, and confusing them is common. Each solves a different problem.
A first-party special needs trust under 42 U.S.C. § 1396p(d)(4)(A) holds assets rather than income. It is available to a disabled individual under age 65, may be established by the individual, a parent, a grandparent, a legal guardian, or a court, and carries the same State payback requirement. A pooled trust under § 1396p(d)(4)(C) is established and managed by a nonprofit association, which maintains separate accounts for each beneficiary while pooling the funds for investment. Neither addresses an income-cap denial, and a qualified income trust does nothing for excess resources. Families weighing all three should look at Texas special needs planning alongside broader public benefits planning.
Questions Houston Families Ask About Qualified Income Trusts
Does a Qualified Income Trust Protect a Parent’s Savings?
No. A qualified income trust addresses income only, and the statute permits nothing but the applicant’s income to be deposited. Countable resources are governed by separate rules, and depositing savings into the trust could invalidate it. If your parent has excess resources as well as excess income, a second strategy may be needed alongside the trust.
Who Can Serve as Trustee of a Texas Qualified Income Trust?
An adult child, a spouse, or another trusted individual commonly serves, and a professional trustee is an option where no family member can take on the recordkeeping. The trustee handles the monthly deposits and disbursements and keeps the documentation the state reviews at redetermination. An applicant in a nursing facility often cannot manage the account, so the trustee selection should favor whoever can reliably do the work every month.
What Happens to the Trust Account When the Applicant Dies?
Under 42 U.S.C. § 1396p(d)(4)(B), the State receives what remains in the trust up to the total medical assistance it paid on the beneficiary’s behalf. Where the trust has been administered correctly, with each month’s income disbursed rather than accumulated, the remaining balance is typically minimal. Anything above the State’s claim passes under the trust’s terms.
Contact McCulloch & Miller About a Texas Qualified Income Trust
A denial based on income is not the end of a Medicaid application, and in many cases it can be resolved with a properly drafted and properly administered qualified income trust. McCulloch & Miller, PLLC represents families throughout Houston, Harris County, and the surrounding area in Medicaid crisis planning, with flat fees available for much of this work. To discuss your parent’s denial or an application still in progress, call (713) 333-8900 or contact the firm’s Houston office.