Kentucky Miller Trust / Qualified Income Trust (QIT)

KENTUCKY QUALIFIED INCOME TRUST (MILLER TRUST)

TRUST INSTRUMENT CAPTION

ARTICLE I — ESTABLISHMENT AND PURPOSE

1.1 Establishment

This Qualified Income Trust (the "Trust") is established this [__] day of [_______________], 20[__], by [SETTLOR FULL NAME], an individual residing at [________________________________], [CITY], Kentucky [_____] ("Settlor" or "Beneficiary"), acting individually or by and through [_______________________________________] as [ ☐ agent under durable power of attorney ☐ court-appointed guardian/conservator ☐ legal representative], with [TRUSTEE FULL NAME] of [________________________________], [CITY], Kentucky [_____] serving as initial Trustee.

1.2 Statutory Authority

This Trust is established pursuant to and is intended to qualify as a "qualified income trust" under Section 1917(d)(4)(B) of the Social Security Act, codified at 42 U.S.C. § 1396p(d)(4)(B), and is intended to satisfy the requirements of:

• 907 KAR 20:001 (Kentucky Medicaid definitions, including the "categorically needy" definition incorporating the 300% SSI standard);
• 907 KAR 20:030 (Kentucky Medicaid trust and transferred resource requirements);
• KRS Chapter 205 (Kentucky Medicaid statute);
• KRS Chapter 386B (Kentucky Uniform Trust Code), to the extent not inconsistent with the federal Medicaid trust safe harbor.

1.3 Purpose

The sole purpose of this Trust is to establish the Settlor's income eligibility for long-term care Medicaid benefits administered by the Kentucky Cabinet for Health and Family Services, Department for Medicaid Services ("CHFS" or "Department"), by receiving and disbursing the Settlor's monthly income in accordance with federal and Kentucky Medicaid law. This Trust holds only the income of the Settlor; no resource, asset, principal, savings, or property other than income shall be deposited into this Trust.

1.4 Irrevocability

This Trust is IRREVOCABLE. The Settlor expressly waives and relinquishes any and all rights to revoke, amend, modify, alter, or terminate this Trust, except as expressly permitted by 42 U.S.C. § 1396p(d)(4)(B), 907 KAR 20:030, and applicable Kentucky law.

ARTICLE II — FUNDING

2.1 Permitted Contributions

Only the following sources of the Settlor's monthly income shall be deposited into the Trust:

• ☐ Social Security retirement, survivors, or disability benefits
• ☐ Supplemental Security Income (SSI) — only if expressly permitted by CHFS policy
• ☐ Private pension and retirement annuity payments
• ☐ Veterans Administration benefits (subject to VA setoff rules)
• ☐ Railroad Retirement Board benefits
• ☐ Civil Service Retirement / FERS payments
• ☐ Annuity income
• ☐ Required minimum distributions (IRA / 401(k))
• ☐ Other income: [________________________________]

2.2 Prohibited Contributions

No principal, savings, accumulated assets, real property, personal property, gifts, inheritances, lump-sum settlements, or any other non-income resource shall ever be deposited into the Trust. Any such deposit shall be deemed void ab initio, shall not be considered a Trust asset, and shall be immediately returned to its source.

2.3 Funding Mechanism

The Trustee shall establish a dedicated, segregated bank account titled "[SETTLOR NAME] Qualified Income Trust, [TRUSTEE NAME], Trustee" at a federally insured Kentucky financial institution. The account shall use the Settlor's Social Security number as the taxpayer identification number, consistent with grantor trust treatment under Internal Revenue Code §§ 671–679.

ARTICLE III — DISTRIBUTIONS

3.1 Monthly Disbursements

The Trustee shall distribute the income held in the Trust each month in accordance with CHFS Medicaid post-eligibility income rules under 907 KAR 20:030, in substantially the following order of priority:

1. Personal Needs Allowance to the Settlor, in the amount established by Kentucky Medicaid (currently $[_____]/month);
2. Health insurance premiums, including Medicare Part B, Part D, and Medicare supplement (Medigap) premiums;
3. Community Spouse Monthly Income Allowance (if applicable), in the amount calculated under 42 U.S.C. § 1396r-5 and Kentucky CHFS spousal impoverishment rules;
4. Family Member Income Allowance (if applicable);
5. Court-ordered support obligations (if applicable);
6. Patient Liability / Co-payment to the nursing facility, intermediate care facility, or HCBS waiver provider;
7. Reasonable Trustee compensation and administrative expenses of the Trust.

3.2 No Accumulation

The Trustee shall not accumulate income in the Trust beyond a de minimis balance reasonably necessary for account maintenance. Substantially all income deposited each month shall be disbursed within the same calendar month.

3.3 No Discretionary Distributions

The Trustee has no discretion to withhold distributions for any purpose inconsistent with this Article III or applicable Kentucky Medicaid policy.

ARTICLE IV — RESIDUAL BENEFICIARY (STATE REIMBURSEMENT)

4.1 Mandatory Payback to CHFS

Upon the death of the Settlor, the Trustee shall, prior to any other distribution and as required by 42 U.S.C. § 1396p(d)(4)(B)(iii) and 907 KAR 20:030, pay to the Commonwealth of Kentucky, Cabinet for Health and Family Services, Department for Medicaid Services, from any funds remaining in the Trust, an amount equal to the total medical assistance paid on behalf of the Settlor under the Kentucky Medicaid State Plan.

4.2 Notice to CHFS

Within thirty (30) days of the Settlor's death, the Trustee shall provide written notice to CHFS at the address designated by the Department's Estate Recovery program, together with a final accounting of all Trust receipts and disbursements.

4.3 Contingent Remainder

After full satisfaction of the CHFS claim under Section 4.1, any remaining Trust property shall be distributed to:

[____________________________________________________________]

ARTICLE V — TRUSTEE PROVISIONS

5.1 Trustee Powers

The Trustee shall have only those powers reasonably necessary to administer this Trust consistent with its limited purpose, including the power to:

• Receive and deposit Settlor's income;
• Maintain the Trust bank account;
• Make distributions in accordance with Article III;
• File tax returns and reports;
• Communicate with CHFS, the Social Security Administration, and other payors.

The Trustee shall not have the power to invest principal, lend Trust funds, purchase assets, or take any action inconsistent with the Trust's status as a QIT under 42 U.S.C. § 1396p(d)(4)(B).

5.2 Trustee Independence

The Settlor shall not serve as Trustee. The Trustee shall be a person other than the Settlor, consistent with CHFS policy.

5.3 Successor Trustee

If the initial Trustee resigns, becomes incapacitated, or is removed, [SUCCESSOR TRUSTEE FULL NAME] shall serve as successor Trustee. Further successors may be appointed by [________________________________________].

5.4 Trustee Bond

The Trustee shall ☐ serve without bond / ☐ serve with bond in the amount of $[_______], as required by KRS Chapter 386B or by [court / CHFS].

5.5 Accounting

The Trustee shall maintain complete records of all Trust receipts and disbursements and shall provide an accounting to the Settlor, to CHFS upon request, and to any court of competent jurisdiction.

ARTICLE VI — TAX TREATMENT

The Trust is intended to be treated as a grantor trust for federal income tax purposes under Internal Revenue Code §§ 671–679, with all income reportable on the Settlor's individual income tax return. The Trust shall use the Settlor's Social Security number as its taxpayer identification number.

ARTICLE VII — GENERAL PROVISIONS

7.1 Governing Law

This Trust shall be governed by the laws of the Commonwealth of Kentucky, including KRS Chapter 386B (Kentucky Uniform Trust Code), to the extent not preempted by or inconsistent with 42 U.S.C. § 1396p and federal Medicaid law.

7.2 Compliance Override

In the event of any conflict between the terms of this Trust and the requirements of 42 U.S.C. § 1396p(d)(4)(B), 907 KAR 20:001, 907 KAR 20:030, or CHFS policy, the federal and Kentucky Medicaid requirements shall control, and this Trust shall be construed and reformed to comply.

7.3 Severability

If any provision of this Trust is held invalid, the remaining provisions shall remain in full force and effect.

7.4 Spendthrift

To the maximum extent permitted by 42 U.S.C. § 1396p(d)(4)(B), the interest of any beneficiary in income or principal shall not be subject to assignment, anticipation, attachment, or claims of creditors (other than CHFS pursuant to Article IV).

EXECUTION

IN WITNESS WHEREOF, the Settlor and Trustee have executed this Qualified Income Trust on the date first written above.

Settlor

Trustee Acceptance

The undersigned accepts the office of Trustee and agrees to administer this Trust in accordance with its terms, 42 U.S.C. § 1396p(d)(4)(B), and applicable Kentucky law.

NOTARIAL ACKNOWLEDGMENT (KENTUCKY)

COMMONWEALTH OF KENTUCKY
COUNTY OF [________________]

On this [__] day of [_______________], 20[__], before me, the undersigned notary public, personally appeared [SETTLOR FULL NAME] and [TRUSTEE FULL NAME], known to me (or satisfactorily proven) to be the persons whose names are subscribed to the foregoing Qualified Income Trust, and they acknowledged that they executed the same for the purposes therein contained.

In witness whereof, I hereunto set my hand and official seal.

[SEAL]

SOURCES AND REFERENCES

• 42 U.S.C. § 1396p(d)(4)(B) — federal Qualified Income Trust safe harbor
• 42 U.S.C. § 1396a(a)(10)(A)(ii)(V) — 300% SSI income eligibility
• 42 C.F.R. § 435.726 — post-eligibility income treatment
• 907 KAR 20:001 — Kentucky Medicaid definitions (categorically needy / 300% SSI)
• 907 KAR 20:030 — Kentucky Medicaid trust and transferred resource requirements
• KRS Chapter 205 — Kentucky Medicaid
• KRS Chapter 386B — Kentucky Uniform Trust Code
• KRS Chapter 457 — Kentucky Uniform Power of Attorney Act
• Cabinet for Health and Family Services, Department for Medicaid Services — administering agency
• CHFS Estate Recovery Program — post-death claim administration