What Is the Medicaid Income Cap Trust?

A Medicaid income cap trust is a specific estate planning tool used to hold income, including Social Security income.

For most people, even a relatively short period of long-term care can eat up a large portion of their life savings. For longer stays, the cost of care in a nursing care facility can burn through your bank accounts, retirement savings, and emergency funds.

Fortunately, there are options to help people protect their assets while preserving their Medicaid eligibility. With Medicaid planning, you can protect your assets, provide for your loved ones, and qualify for long-term care benefits. Contact a local elder law attorney for legal advice.

Using Medicaid To Cover Long-Term Care Costs

Long-term care, including nursing home care, is incredibly expensive. According to the Federal Long-Term Care Insurance Program, the average yearly cost of a semi-private room in a nursing home was $112,420.

As a starting point, it is important to understand how most families in the United States afford long-term care and assisted living care. Except in limited situations, these types of healthcare services are not covered by Medicare — even if the applicant is over 65.

For most older Americans, long-term care services are typically covered through Medicaid. This is an important distinction because Medicaid has strict financial eligibility requirements.

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What You Need To Know About Medicaid Benefits and Financial Eligibility

Medicaid is the primary government program that covers nursing home costs and other long-term care expenses. Financial limits and eligibility requirements are strict for Medicaid recipients.

Medicaid is a joint state-federal program, with joint funding and eligibility rules. However, each state administers its own program, including eligibility and benefits.

The American Council on Aging (ACOA) provides an overview of the income caps and asset limits in specific situations. For most states in 2026, a single senior applying for nursing home Medicaid must have income no higher than $2,982 per month.

Married Couples and Qualifying for Medicaid

For married couples in which only one spouse is applying for Nursing Home Medicaid or a HCBS Medicaid Waiver, only the applying spouse’s income counts toward the income limits. The non-applicant community spouse may qualify for a Monthly Maintenance Needs Allowance (MMNA).

For most states, the standard minimum MMNA is $2,643.75 per month for the community spouse. Many states have higher allowances for non-applying spouses. For example, the MMNA in California, Georgia, and New York is $4,066.50 per month. If a non-applicant’s monthly income is under the limit, the applicant spouse can transfer their income to the non-applicant spouse up to the limit.

The Medicaid Income Cap Trust Explained

Sometimes referred to as a qualified income trust (QIT) or a Miller trust, a Medicaid income cap allows older people to qualify for Medicaid benefits while still maintaining a minimum income. Each month, a long-term care recipient’s qualifying income goes into a protected Medicaid income cap trust account.

Not all states treat income the same way for Medicaid applicants. Generally, states take either an income cap or “medically needy” approach. For income cap states, including Texas, Colorado, and Arizona, the applicant’s income determines if they qualify. For medically needy states, like California, Illinois, and New York, applicants can qualify if they spend down their income below the cap.

The trustee of the account — typically a close relative such as a spouse or adult child — will be responsible for spending the income. When set up right away, you can put your income in this type of trust and keep your Medicaid long-term care eligibility. You can continue to receive benefits even if your monthly income is technically above the limit.

Asset Protection Trusts for Medicaid Recipients

In states without a Medicaid income cap, seniors can still benefit from an asset protection trust. Asset protection trusts are irrevocable trusts that keep some assets from counting towards Medicaid limits.

As assets in an irrevocable trust, the state cannot take them back during probate. Trust strategies and benefits vary by state. Talk to your local elder law attorney about Medicaid planning options to keep your assets and provide for your loved ones.

Trust Planning and the Medicaid Lookback Period

Medicaid has a lookback period for any asset transfers made before applying for nursing home benefits. For most states, the lookback period is five years (60 months). However, California has a 30-month lookback period for asset transfers made on or after January 1, 2026, to prevent disqualification.

As important and valuable as it is, an income cap trust is just one part of an effective estate plan. With advanced estate planning — starting before any long-term care or nursing home care is necessary — you can use trusts to transfer assets and protect your life savings, while also preserving Medicaid eligibility.

If you have any specific questions about Medicaid income caps or long-term care planning, contact an elder law attorney for help.