Negotiating the eligibility requirements for Medicaid in Texas can be difficult and risky. You feel you need the long-term health care benefits provided by Medicaid, but you may be ineligible for Medicaid if you have assets or much of an income.  There are ways to negotiate the system and still qualify for Medicaid, but they are complex. A good Texas estate planning attorney can explain how you can protect your assets yet still remain eligible for Medicaid through a special needs trust (SNT) or a supplemental benefit trust (SBT).  If your income exceeds Texas statutory restrictions, you may still qualify for Medicaid via a qualified income trust.

Federal and Texas State Law Medicaid Eligibility Requirements

Medicaid is administered by Texas and other states, but it is still a federal program subject to both state and federal laws. Let’s take a look at some of the key eligibility requirements for Medicaid.

Medicaid is meant to help disabled low income people get care particularly long-term care. Countable assets are the assets that must be counted to determine your eligibility for Medicaid under federal law. If you are single, the limitation is $2,000. Couples that both require Medicaid for long term care in Texas can keep $3,000 in assets.Some assets to do not “count” in figuring up this eligibility.  

What assets don’t count? They include

• Your home (the one you are living in)
• Household goods
• One vehicle
• Tools you use for work

In fact, these are the same qualifications as those for Social Security Income (SSI).

If you are applying for Medicaid in Texas

• You must be a resident of Texas
• You must be a U.S. national, citizen, permanent resident, or legal alien
• You must also be either pregnant, a parent or relative caretaker of a dependent child(ren) under age 19, blind, have a disability or a family member in your household with a disability, or be 65 years of age or older
• You must have an annual household income (before taxes) that is less than or equal to the following amounts (at this date of this post):
  • One person household:  $24,731
  • Two person household:  $33,482
  • Three person household:  $42,234
  • Four person household:  $50,985
  • Five person household:  $59,737
  • Six person household:  $68,489
  • Seven person household:  $77,240
  • Eight person household:  $85,992

For households with more than eight people, add $8,752 per additional person for households that have over eight people. These figures are subject to change.

Now here’s the clincher. In 13 states including Texas, although there is an income cap on Medicaid eligibility, there is no allowance for medical expenses. In 2020, the income cap is $2,349 per month if you are single and applying for institutional or nursing home Medicaid or Medicaid waivers for home and community-based services.  We are sure it comes as no surprise that the costs of being in a nursing home is usually a lot more than $2,313 per month. So that may put you between a rock and a hard place.  If you have an income over $2,349, you are ineligible even if you cannot afford to pay the nursing home. Fortunately, there is an answer, and that answer is a qualified income trust. But before we discuss your income, let’s take a step back and look at how to protect your assets.

Protect Your Asses: Special Needs Trusts and a Supplemental Benefits Trusts

Special needs trusts and supplemental benefits trusts are used to protect assets and still be eligible for Medicaid. They fill various needs. For example, using a supplemental benefits trust, a parent or grandparent can will assets to a disabled child without fear of the child losing Medicaid benefits. Disabled people might want to set up their own special needs trust if they come by an inheritance, if they own property or if they get money damages in a civil lawsuit. If they don’t, they will usually lose their Medicaid benefits.

• A special needs trust is funded by the beneficiary. It’s only recently that disabled people were allowed by law to fund their own trusts. In 2016, the Special Needs Trust Fairness Act was signed into law giving disabled people the right to create their own trusts. 
• A supplemental benefits trust, on the other hand, is funded by someone else such as a parent or grandparent. 
• In reality, people often just use one term or the other to refer to both types of trusts.  

But here is the key difference between a self-funded trust and one funded by another. When the beneficiary dies, the trustee of a self-funded special needs trust must pay the state out of what remains of the trust’s assets for the Medicaid benefits the beneficiary used. But the third-party grantor of a supplemental benefits trust may designate other beneficiaries. They are not required to reimburse the state for the Medicaid services the original beneficiary used. 

H2: Protect Your Income: Qualified Income Trust

We have already seen the seemingly impossible monthly income limits that Texas imposes to remain eligible for Medicaid. Fortunately, qualified income trusts enable a disabled person to get care when their income exceeds the Medicaid requirements but is not enough to pay for long term care. 

Here’s how it works. The beneficiary’s extra income is deposited every month into a restricted funds account. The only thing that money may be used for is to pay for medical costs and for care. The money that is deposed into this account does not count toward the Medicaid income limit. 

Yes, of Course There are Requirements

You need an experienced Texas estate law attorney to construct the trusts we have just discussed, because there are complex requirements that must be met if you are to remain eligible for Medicaid. We have just skimmed the service in this post. 

Here are a few of the requirements: 

• The trust must be irrevocable.
• The trust must be a “spendthrift trust” that limits how the money may be used. 
• The beneficiary must be significantly disabled.
• We have seen that only those who self-fund trusts must pay Medicaid back, but both special needs trusts (SNTs) and supplemental benefit trusts (SBTs). Must still contain payback language. 
• The trust must be created before the beneficiary turns 65 years of age.

Be Sure Your Trust Fills All Requirements

Though on their face, Texas Medicaid eligibility requirements seem quite stringent, a good Texas estate law lawyer can often help you retain your assets and your income. There are many different long-term care programs available through Texas Medicaid. Their eligibility requirements as well as their benefits vary. If you are concerned about Medicaid eligibility for yourself or a family member, call the San Antonio law offices of Shann M. Chaudhry Esq., attorney at law, for an affordable consultation. Our experienced Texas estate planning attorneys can guide you through the Medicaid morass. Contact us at (210) 646-9400 to schedule an appointment.