Coordinator Training Session #38 – Income Cap Trusts

6/22/16

What is an Income Cap Trust(ICT)

An ICT is a written irrevocable trust agreement, approved for use by Oregon law and DHS. The purpose of the ICT is to help individuals qualify for Medicaid benefits when their income exceeds the cap or limit established for Medicaid eligibility. Assets held in an ICT are not available to the client and therefore are not counted as a resource for Medicaid eligibility.

Example: if an individual’s monthly income is $3,000 per month, and his care costs are $6,000 per month, he does not qualify for Medicaid because his income is higher than Medicaid’s Income Cap. Through an ICT, the client does not have access to his income which results in his ability to receive Medicaid services.

Medicaid’s Income Cap is tied to the federal poverty level and adjusted annually.To determine what the income cap is for the current year contact your local Medicaid office.

In most cases a spouse, partner or adult child sets up an ICT for their family member. OMMP Regional Sponsors may establish ICTs for existing or new OMMP clients when there is not anyone able or appropriate to be named as the trustee.

ICT Terminology:

  • Trustee: OMMP regional sponsor
  • Grantor: OMMP client/individual or agency representing the client
  • Beneficiary: OMMP client
  • First Remainder/Residuary Beneficiary: Oregon DHS, Estate Administration Unit
  • Irrevocable: The terms of the trust may not be changed by the grantor nor may the grantor take the funds back

An OMMP ICT:

  • Is an irrevocable trust agreement
  • Is managed much like an OMMP Payee account where the consumer has no control over, or access to, the funds held in the ICT
  • Is managed by a Trustee (OMMP Regional Sponsor) according to the terms of the trust
  • Is effective during and after the lifetime of the grantor (client)
  • Has the same protections in place as other OMMP services
  • List Oregon DHS, Estate Administration Unit as the First Remainder Beneficiary. When a consumer with an ICT passes away, residual funds in the ICT are used to reimburse the State for the cost of Medicaid services received even if there is a surviving spouse
  • Requires that an ICT checking account be set up where the consumer’s monthly income is deposited
  • Does not include any other property
  • Has a limit to the amount of funds that can be held in it (Usually around $7,000. The limit is provided by the client’s Case Manager)
  • The ICT checking account uses the tax ID or SSA number of the grantor/client
  • Does not need a court order to be established

Responsibility of the Trustee

  • Provide at least a 30 day written notice of intent to resign as the trustee to DHS Estate Administration
  • Annually, provide an accounting of the ICT receipts and disbursements, a copy of the client’s tax returns, and a copy of the ICT’s most recent bank account statement to the client and his legal representative, if any
  • Make records of the trust available to the client, their personal representative and DHS Estate Administration Unit within 10 days of receiving a request
  • Apply to be the Payee for federal benefits that are deposited to the ICT

How to set up an OMMP ICT

An attorney is not required to set up an ICT. A trust agreement form is provided and approved by DHS.

OMMP Regional Sponsors establish ICTs listing their agency as the trustee and the client as the grantor.

  1. Complete an ICT agreement
  2. Open an ICT checking account:
  3. The title on the account is: (client’s name), Income Cap Trust (agency’s name) Trustee
  4. Provide a copy of the Trust Agreement to the Bank
  5. Authorized signers include (agency staff and optionally a volunteer)
  6. The trustee applies to be the Payee for federal benefits that will be deposited to the ICT checking account.
  7. All of the clients income (SSA, VA, Pension, Etc.) mustbe deposited into the ICT checking account
  8. The trustee uses trust funds as directed in the trust and approved by a Medicaid case manager

ICT Disbursements

A case manager or Medicaid eligibility specialist will help identify how the funds in the trust may be spent. Following is a list of generally acceptable expenses that may be paid through an ICT:

  • Personal needs allowance and applicable room and board
  • Reasonable administrative costs, not to exceed a total of $50 per month
  • Community spouse and family monthly maintenance needs allowance
  • Medical insurance premiums
  • Other incurred medical expenses
  • Child support, alimony, and income taxes
  • Irrevocable burial plan with a maximum value of $5,000
  • Home maintenance in some cases
  • Medical care costs

Upon the Death of an ICT client the trustee:

  • Insures the return of any overpayment of federal benefits
  • Pays outstanding bills
  • Prepares a final tax return

You may find ICT client’s that are not able to read and sign the trust agreement due to limited cognitive ability. If this is the case, the agency as the payee for the client’s federal benefits may sign the ICT as the grantor.

Applicable Oregon Laws

OAR 461-001-0000Trust funds

OAR 461-001-0030Trust effective date

OAR 461-135-0750Trust effective date

OAR 461-140-0020(2)(e)availability of resources

OAR 461-140-0210revocability

OAR 461-140-0296trust balance limits

OAR 461-140-0296(2)trust balance limits

OAR 461-110-0530financial group

OAR 461-145-0540trusts

OAR 461-145-0540(8)(b)irrevocable trusts

OAR 461-145-0540(9)(c)how ICT funds can be distributed

OAR 461-155-0660other reserves

OAR 461-160-0620income deductions and client liability

OAR 461-160-0630other reserves

OAR 461-180-0044Trust effective date

Applicable SSA Rules

SSA 1917 [42 USC 1396p] Medicaid Trusts

Applicable IRS Tax Code

Internal Revenue Code Section 677(a)