This week’s blog continues the discussion of the changes to Ohio Medicaid’s Aged, Blind and Disabled (ABD) program coming in 2016-2017. The initial installment (April 28, 2016) provided an overview of the transition from the old system (following section 209(b) of the federal Medicaid law) to the new system (that will follow section 1634 of the federal Medicaid law.) The May 5, 2016 installment discussed the new income rules that will go into effect with the new eligibility system. The May 12, 2016 installment discussed setting up a Qualified Income Trust (aka Miller Trust) that will be necessary for people who need ABD Medicaid to help pay for long term care. The June 16, 2016 installment discussed the Ohio rules that describe how to use the Miller Trust each month. The June 23, 2016 installment discussed the difficulty in understanding the need for a Miller Trust. The July 1, 2016 installment discussed the need to empty the Miller Trust account every month. The July 7, 2016 installment discussed the need to balance the Miller Trust with the desire to have health insurance. The July 15, 2016 installment discussed the confusing deposit rules for Miller Trusts. Today’s installment will discuss the changes that the Ohio Department of Medicaid has made to the form Miller Trust document.
The Ohio Department of Medicaid has finalized its new rule on Miller Trusts (aka Qualified Income Trusts or QITs.) A copy of the final rule is available here. The first form Miller Trust from the Ohio Department of Medicaid can be found here. The new version of the form Miller Trust from the Ohio Department of Medicaid can be found here.
Because the rule calls them QITs and today’s installment makes a number of references to the new rule, for this installment, I’ve started usually to call them QITs.
The Ohio Department of Medicaid had originally announced that the new rules would take effect on July 1, 2016. As that date approached, and the enormity of the changeover became more apparent, the effective date was delayed until August 1, 2016. I recently heard a rumor (and it is just that, only a rumor) that the implementation will be delayed again.
While the delays may seem frustrating, it is very hard to overstate the enormity of the changes that Ohio’s Department of Medicaid is trying to make. Not only are there the rule changes for people who need long term care that I have been discussing (and will continue to discuss) in my blog and newsletter. There are bigger changes (affecting tens of thousands more people) in the eligibility rules for Medicaid for people who are disabled but do not need long term care. In addition, to oversee the new requirements for all affected people, the state and county Medicaid offices have to move to a new software system to manage the Medicaid program.
As discussed previously, someone in Ohio who needs Medicaid support to pay for long term care whose gross monthly income exceeds the Special Income Level ($2,199.00 at this time) must use a QIT to make the income over the Special Income Level not “income” anymore in the eyes of Medicaid. (Yes, the process is as hard to follow in real life as it is to follow in that sentence.) In order to get the benefits of the QIT, the amount of income over the $2,199 must be placed into the QIT each month so that the remaining “countable” income is $2,199 or less each month. (It’s not getting any more understandable, is it?)
As mentioned above, the Ohio Department of Medicaid already has changed the QIT template.
First, a sentence has been added to specify that the trust’s taxpayer identification number will be the Social Security number of the Primary Beneficiary (i.e., the person receiving or applying for Medicaid for long term care.) This added sentence clarifies that the money handled by the trust, and the small amount of interest earned by the trust, belong to the Primary Beneficiary for tax purposes. (Few, if any, people receiving Medicaid’s help to pay for long term care have to pay taxes, but the income (even the possibility of income) in a bank account must be assigned to a taxpayer ID number or a Social Security number.) This added sentence takes away the question of the number to use. That added language will also, for some banks and credit unions, clarify what kind of account the QIT will need. (e.g., a personal checking account, or a business account, or a fiduciary account, etc.)
Second, language has been added regarding powers of the trustee . Like the language specifying the taxpayer ID number, this language alleviates some of the concerns that banks and credit unions had about their obligations to verify that the trustee was following the law and carrying out his/her/its duties. Among the concerns was the issue whether the trustee has the power to open an account, for example. (Remember, there are no inherent powers of a trustee. The trustee has only the powers given to him/her/it by the trust agreement.) The new language makes it clear that the trustee can open an account.
Third, in the same part of the document describing the trustee’s powers, language has been added to require the trustee to prepare a Certification of Trust. A Certification of Trust is a document that has existed under Ohio law (Revised Code section 5810.13) before the new QIT rules were written. The Certification is a verification by the trustee that he/she/it has the authority to act as trustee and to carry out the activities that he/she/it is asking the bank to help with (such as opening a trust account, accepting deposits into the trust account, and paying money out of the trust account.) Banks and credit unions have certain obligations to make sure that they aren’t used to defraud anyone and aren’t defrauded themselves. There are lots of legal obligations placed on banks and credit unions. A Certification of Trust relieves the bank or credit union from having to investigate the trustee to determine if he/she/it is legitimate and is performing his/her/its duties correctly. Because these QIT accounts will not have much money in them and because the accounts must be emptied each month, forcing the banks and credit unions to spend a great deal of time and money to investigate and oversee the QIT trustee would cause the banks and credit unions to lose money on these account. If these QIT accounts were money-losers to the banks and credit unions, they wouldn’t take these accounts. If banks and credit unions didn’t take these accounts, there would be no way to comply with the QIT requirements. In short, allowing banks and credit unions to accept QIT accounts without undertaking expensive oversight is better than not having QIT accounts in Ohio. We can’t let people lose their Medicaid benefits because banks and credit unions don’t want the QIT accounts.
To go along with this requirement that the trustee prepare a Certification of Trust, the new QIT template includes a template for a Certification of Trust as well.
Finally, the QIT template changes the terminology that describes the person signing the trust declaration with the Trustee. In the first version of the QIT template, a Trustee and a Settlor signed the document. In the new version, a Trustee and a Grantor sign the document. This change may not mean much, or it may mean a great deal. I haven’t figured it out yet.
Historically, in trust law, Grantor and Settlor meant the same thing. There was no reason to choose one term or the other. In fact, some trust documents (even some published form trust documents) used the terms interchangeably in the same document. But, someone at the Ohio Department of Medicaid consciously chose to change these terms. My distrust of the Ohio Department of Medicaid makes me think over and over that the change of terms has some significance that I haven’t yet found.
This terminology change is even more puzzling coming at the same time that the requirement for a Certification of Trust was inserted into the document. The Ohio statute that created the Certification of Trust (Revised Code section 5810.13) uses the term Settlor and doesn’t use the term Grantor. In fact, despite the use of the term Settlor in the Certification of Trust statute, the template Certification of Trust uses the term Grantor. One would think that whomever was looking at the statute would probably have used the same term (i.e., Settlor) in the template documents, especially when Settlor was already in the first version of the template QIT.
This change bothers me. I’m wondering what I’m missing. (I’m puzzling and puzzling ’til my puzzler is sore, like the Grinch did.) I’ve posed this question to a number of elder law colleagues but have not yet received any response. This one really gnaws at me.
Thanks go out to my friend Steve Caine, a Solon, Ohio estate planning attorney, for his help with in confirming that “Grantor” and “Settlor” usually mean the same thing.