Tennessee Qualified Income Trust / Miller Trust (2026)

Go even one dollar over Tennessee's $2,982/month Medicaid income cap (2026) and a long-term care application is denied, because the state has no medically needy pathway for adults. A Qualified Income Trust (QIT), also called a Miller Trust, is the legal device that fixes that, letting a TennCare CHOICES, ECF CHOICES, or institutional Medicaid applicant qualify even when their income runs over the cap. The QIT works because federal law at 42 USC § 1396p(d)(4)(B) and Tennessee rule Tenn. Comp. R. & Regs. 1240-03-03-.03(8) treat trust-held income as not available for the eligibility test, while still flowing the income out monthly to the Personal Needs Allowance, health insurance premiums, spousal allowance, and patient liability.

In This Guide

• The 60-Second Answer
• The Tennessee Income Cap and Why TN Needs QITs
• Federal Authority, 42 USC § 1396p(d)(4)(B) and the Miller v. Ibarra Origin Story
• Tennessee Authority, Tenn. Comp. R. & Regs. 1240-03-03-.03(8) and the ABD Manual
• When You Need a QIT in Tennessee, and When You Don't
• What Income Flows Into the QIT
• What Income Does NOT Flow Into the QIT
• The Four Federal Pillars and the Tennessee Operational Pillars
• The Seven-Tier Monthly Distribution Waterfall
• The State Remainder Beneficiary Clause
• How to Set Up a Tennessee QIT, Step by Step
• Banks That Accept QITs in Tennessee
• Trustee Duties and the Annual Accounting
• VA Pension, Aid & Attendance, and SC Disability, the Bifurcation Rule
• Common Mistakes and the Appeals Path
• Cost, Attorney Involvement, and DIY Guidance
• Three Worked Examples
• Termination, Estate Recovery, and Where to Get Help
• Pending Policy Watch
• Common Misconceptions and Pitfalls
• Related Reading

The 60-Second Answer

If your loved one needs Tennessee Medicaid long-term services and supports, CHOICES, ECF CHOICES, or institutional Medicaid, and their monthly income exceeds $2,982 in 2026:

1. They will be denied for the eligibility test unless a Qualified Income Trust is established before the application is approved.
2. A QIT is an irrevocable trust funded only with the applicant's own income. It is signed before any application is filed.
3. Each month, all of the applicant's income (Social Security, pension, RMDs, etc.) is deposited into the QIT bank account, then distributed back out the same month for the Personal Needs Allowance, Medicare premiums, spousal allowance, and patient liability to the facility or MCO.
4. TennCare must be the primary remainder beneficiary at the applicant's death, up to total Medicaid paid.
5. Cost ranges from $500 (basic attorney drafting) to $5,000+ (full elder-law engagement). DIY templates exist but fail often.
6. Tennessee authority is regulatory: Tenn. Comp. R. & Regs. 1240-03-03-.03(8) under federal 42 USC § 1396p(d)(4)(B). Tennessee does not have a stand-alone QIT statute the way Texas (Tex. Hum. Res. Code § 32.02612) does, the rule controls.
7. Most useful first call: TennCare LTSS Help Desk at 1-877-224-0219 or your county DHS office.

The Tennessee Income Cap and Why TN Needs QITs

Tennessee Medicaid (TennCare) is administered as a §1115 waiver demonstration ("TennCare III," CMS-approved through 12/31/2030 per letter dated 12/16/2024). For long-term services and supports, both nursing facility care under CHOICES Group 1, and home- and community-based services under CHOICES Groups 2 and 3 (and ECF CHOICES Groups 4-8 for I/DD), Tennessee uses the 300%-of-SSI special income standard authorized at 42 USC § 1902(a)(10)(A)(ii)(V).

In 2026, that calculation is:

300% × $994 (the 2026 SSI Federal Benefit Rate) = $2,982/month

That is the income cap for LTSS eligibility. One dollar over and the applicant fails the income test. Tennessee does not have a medically needy adult Medicaid program, there is no spend-down pathway to reduce countable income by incurring medical bills (the way Massachusetts, New York, California, Pennsylvania, Illinois, and Florida non-LTSS Medicaid handle it). TN's options are: under the cap, or QIT.

For complete detail on Tennessee's eligibility framework, Standard ABD's $994 SSI-level limit, the 300% special income standard, the $2,000 asset limit, the 60-month look-back, and the Community Spouse Resource Allowance, see Brevy's Tennessee Medicaid Eligibility and Income Limits guide.

The QIT is the legal device that lets an over-cap applicant pass the income test by treating QIT-deposited income as not "available" for the Medicaid eligibility computation. The income still flows back out the same month, most of it to the facility as patient liability, but the eligibility-test snapshot treats it as non-countable.

Federal Authority, 42 USC § 1396p(d)(4)(B) and the Miller v. Ibarra Origin Story

The federal statute

The QIT mechanism is authorized at Section 1917(d)(4)(B) of the Social Security Act, codified at 42 USC § 1396p(d)(4)(B):

"A trust established in a State for the benefit of an individual if, > (i) the trust is composed only of pension, Social Security, and other income to the individual (and accumulated income in the trust),
(ii) the State will receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan under this subchapter; and
(iii) the State makes medical assistance available to individuals described in section 1396a(a)(10)(A)(ii)(V) of this title, but does not make such assistance available to individuals for nursing facility services under section 1396a(a)(10)(C) of this title."

The (iii) clause is the income-cap predicate: the QIT exception is available only in states that elect the 300%-of-SSI institutional eligibility category and do not extend medically needy nursing facility coverage. Tennessee qualifies on both counts.

Implementing federal regulations

• 42 CFR § 435.601, general financial-eligibility methodologies for Medicaid.
• 42 CFR § 435.602, financial responsibility of relatives.
• 42 CFR § 435.725, post-eligibility treatment of income for institutional residents (the distribution waterfall).
• 42 CFR § 435.726, post-eligibility treatment of income for HCBS waiver participants.
• 42 CFR § 435.733, post-eligibility framework for 209(b) institutional residents (Tennessee is NOT a 209(b) state, but the rule is referenced for context).
• CMS State Medicaid Manual § 3257, operational guidance on the OBRA-93 trust framework.

The Miller v. Ibarra origin

The trust takes its informal name from Miller v. Ibarra, 746 F. Supp. 19 (D. Colo. 1990). The plaintiffs were four elderly women in Colorado, an income-cap state, caught in what the court described as a structural gap: their income was above the cap but below the cost of nursing-home care. The U.S. District Court ruled that placing income into an irrevocable trust did not make it "available" for Medicaid purposes and was not a transfer for less than fair value.

Three years later, Congress codified the Miller holding in OBRA-93 (P.L. 103-66, § 13611), adding the (d)(4)(B) safe harbor to Section 1917 of the Social Security Act. That is why the trust is called the "Miller Trust" even though no individual named Miller personally drafted the device. The Deficit Reduction Act of 2005 (DRA-05) tightened OBRA-93's general trust rules but explicitly preserved the (d)(4)(A), (B), and (C) safe harbors.

Why income-cap states need QITs and medically needy states don't

Twenty-five states are income-cap states for LTSS as of 2026: AL, AK, AZ, AR, CO, DE, FL, GA, ID, IN, IA, KY, MS, MO, NV, NJ, NM, OH, OK, OR, SC, SD, TN, TX, WY. The other 25 states permit applicants to "spend down" countable income against incurred medical bills until they hit a Medically Needy Income Limit (e.g., New York's MNIL is $1,800/month in 2026). A QIT-style device is unnecessary in those states.

Florida is a special case, it is income-cap for LTSS (so QITs are common there) but offers a separate medically needy program for non-LTSS Medicaid (children, pregnant women, ABD outpatient).

For Brevy's federal context on income trusts and the broader (d)(4) family, including pooled trusts and self-settled special needs trusts, see Brevy's Medicaid Personal Needs Allowance Explained federal hub.

Tennessee Authority, Tenn. Comp. R. & Regs. 1240-03-03-.03(8) and the ABD Manual

A common misconception in elder-law writing is that TCA § 71-5-159 is Tennessee's QIT statute. It is not. TCA § 71-5-159 governs Medicaid coverage for complex rehabilitation technology (CRT), wheelchairs and adaptive equipment for individuals with significant disabilities. There is no stand-alone Tennessee QIT statute the way Texas, Iowa, and a handful of other states have promulgated.

Tennessee's QIT authority is regulatory, not statutory, flowing from the federal grant in 42 USC § 1396p(d)(4)(B) and implemented through:

Tenn. Comp. R. & Regs. 1240-03-03-.03(8)

Promulgated by the Tennessee Department of Human Services (which administers Medicaid eligibility under contract for TennCare). Originally adopted as a public-necessity rule on September 30, 2005, then as a permanent rule effective March 7, 2006. The rule sets out the four operational pillars:

1. Irrevocability, "the trust must be irrevocable and cannot be amended or changed by the Medicaid Recipient."
2. Sole beneficiaries, the Medicaid recipient is the only lifetime beneficiary; the State of Tennessee (Bureau of TennCare) is the remainder beneficiary up to total Medicaid paid.
3. Allowable disbursements only, Personal Needs Allowance, trust management expenses up to $20/month, spousal income allocation, health insurance premiums other than Medicaid, qualifying medical or remedial care.
4. Monthly remainder remittance, each month, after permitted disbursements, the trustee must remit the trust balance to the State or directly to the provider of care.

The TennCare ABD Manual, "Trusts" chapter

Operational guidance for eligibility counselors at https://www.tn.gov/content/dam/tn/tenncare/documents/ABDTrusts.pdf. This is the most useful operational reference. The chapter defines:

• "Medicaid Income Cap" (MIC), the 300% special income standard ($2,982 in 2026)
• "Medicaid Allowable Disbursements", the seven-tier waterfall (see below)
• Trustee duties, monthly deposits, monthly distributions, annual accounting
• TennCare's review process for trust agreements before approval

TennCare-issued documents

TennCare does not publish a state-issued QIT trust agreement template form (unlike New Jersey, which posts a state-promulgated template). What circulates as the "TennCare QIT form" is:

• A TennCare QIT Information Sheet / Trustee Notice, a one-page operational summary used by elder-law firms and county DHS workers. It carries no formal state form number.
• Attorney-drafted templates used by NAELA-member firms statewide.
• Generic pdfFiller and uslegalforms.com templates (publicly available but not TennCare-endorsed).

TennCare reviews each individual trust agreement for compliance with 1240-03-03-.03(8) before approving Medicaid eligibility.

The Public Chapter 986 / TCA § 71-5-147 PNA interaction

Public Chapter 986 of 2024 raised the Tennessee NF PNA from $50 to $70/month effective 1/1/2025, codified at TCA § 71-5-147. This change does not affect QIT mechanics, the PNA is paid OUT of the QIT, not into it. The 1240-03-03-.03(8) rule's reference to "Personal Needs as recognized amount" incorporates the current statutory PNA dynamically. Note that Tenn. Comp. R. & Regs. 1200-13-01-.08(1)(a) still codifies the old $50 figure as of its April 2023 revision; statute controls per TCA § 4-5-203. For full PNA mechanics, the $50→$70 increase, the Resident Trust Fund framework, the Community PNA for HCBS, the VA $90 cap stacking, and the TSVH override, see Brevy's Tennessee Medicaid Personal Needs Allowance guide.

When You Need a QIT in Tennessee, and When You Don't

This is the most often-misstated nuance in TN QIT writing.

Decision matrix for 2026

The middle "trap" row is unique to Tennessee: a 70-year-old with $1,800/month in Social Security who needs Medicaid but doesn't yet need NF-LOC services has no TennCare adult pathway. They wait until they need LTSS, then enter through CHOICES.

Across program categories

• CHOICES Group 1 (NF), QIT required if income > $2,982.
• CHOICES Group 2 (HCBS at NF-LOC), QIT required if income > $2,982.
• CHOICES Group 3 (HCBS at-risk), QIT required if income > $2,982. Note that Group 3 is capped enrollment with a waitlist.
• ECF CHOICES Groups 4-8 (I/DD waiver), QIT required if income > $2,982. Mechanics identical to CHOICES.
• Standard ABD, no QIT pathway. Limit is $994/month SSI level.
• Katie Beckett (children with severe disabilities), QITs are NOT used. Katie Beckett deems out parental income; the child's own income (typically just SSI or Title II disability) is well below the cap. See Brevy's Tennessee Katie Beckett guide.
• PACE, Tennessee operates one PACE site (Ascension Living Alexian PACE, Chattanooga, Hamilton County only). PACE uses the same 300% SSI FBR income cap as CHOICES, so QITs are required for over-cap applicants. Note that Tennessee uses "PACE" exclusively, the "LIFE" branding is a Pennsylvania, New York, and New Jersey convention only.

TennCare reports that a meaningful share of CHOICES applicants are over-income and need a QIT, most often state-employee retirees, retired teachers under TCRS with full pensions, and dual-pension households.

What Income Flows Into the QIT

The federal statute restricts QIT corpus to "pension, Social Security, and other income." Tennessee follows the "name on the check" rule: any payment titled in the applicant's name that is countable for SSI purposes flows into the QIT if it pushes the applicant over $2,982.

Always flows through:

• Social Security retirement, disability (SSDI), and survivor benefits, gross amount, including the Part B premium that is deducted before deposit (you redeposit gross or pay Part B as a Medicaid Allowable Disbursement; see waterfall below).
• Private pensions, corporate, union, multi-employer.
• Tennessee Consolidated Retirement System (TCRS) pensions, for state employees, teachers, local government participants.
• Federal civil service annuities (CSRS, FERS).
• Military retirement pay, taxable retired pay, not VA disability compensation.
• Railroad Retirement Tier 1 and Tier 2.
• IRA / 401(k) / 403(b) periodic distributions and Required Minimum Distributions, when paid as periodic income. The IRA itself is an asset; the distribution is income.
• Annuity payments, commercial fixed annuities and immediate annuities. The corpus is an asset; the monthly payment is income that flows through the QIT.
• VA service-connected disability compensation (38 USC ch. 11), yes, this flows through. SC disability is countable income for Medicaid (it's exempt only from federal income tax, not Medicaid).
• VA Pension base benefit (38 USC ch. 15), base pension flows through the QIT, BUT the $90 cap under 38 USC § 5503(d) reduces it to $90/month after Medicaid NF placement (community NFs only, not TSVH, see below). The Aid & Attendance increment is separated and does NOT flow through.
• Earned income from sheltered workshop or supported employment, flows through, after the SSI earned-income disregard (first $20 general + first $65 earned + half the remainder).
• Trust distributions paid to the applicant, from third-party trusts where the applicant is beneficiary.
• Rental income (net), yes. The rental property is an asset (subject to homestead/income-producing analysis), but net monthly rent received is income.

What Income Does NOT Flow Into the QIT

• Community spouse's income. Tennessee follows strict "name on the check": if the check is in the community spouse's name, it is the community spouse's income. Never enters the QIT, never counts toward the $2,982 cap. The community spouse's income may still affect the MMNA calculation if it falls below the floor (in which case the institutionalized spouse's income is diverted to bring the community spouse up).
• VA Aid & Attendance increment ($1,500–$2,795/month above base pension depending on filing status and 2026 MAPR). Excluded from SSI countable income under 20 CFR § 416.1124. Must be separated before any deposit decision, if the entire VA payment is deposited, the A&A loses its excluded status.
• VA Housebound increment, excluded similarly.
• Reparations payments (Holocaust restitution, Aleut restitution, Japanese internment), federally excluded.
• Tax refunds, one-time receipts treated as resources upon receipt, not income flowing through the QIT.
• Lump-sum inheritances, assets, not income; deposit triggers asset-limit problems but does not enter the QIT.
• Stimulus payments and federal tax credits, federally excluded.
• Crime victim compensation, federally excluded.
• In-kind support and maintenance, not "income" in the deposit sense.
• Loans / advances against future income, not income.
• Foreign government pensions, typically treated as income and deposited if over the cap, but practice varies. Verify with TennCare directly.

The Four Federal Pillars and the Tennessee Operational Pillars

A valid Tennessee QIT must satisfy four federal requirements and four Tennessee operational requirements.

Federal pillars (42 USC § 1396p(d)(4)(B))

1. Irrevocable, once executed, the grantor cannot amend or revoke.
2. Funded only with the applicant's own income, no third-party assets, no spouse's income, no gifts.
3. State as primary remainder beneficiary up to total Medicaid paid.
4. Income-cap state predicate, the state must use the 300% special income category. Tennessee does.

Tennessee operational pillars (Tenn. Comp. R. & Regs. 1240-03-03-.03(8))

1. Irrevocability declaration, must be express in the trust document.
2. Sole-beneficiary clause, the recipient is the only lifetime beneficiary; state of Tennessee (Bureau of TennCare) is the remainder.
3. Allowable disbursements list, bound to the seven-tier waterfall.
4. Monthly remainder distribution, trust balance must be paid out by month-end.

A QIT that fails any one of these is not a valid Tennessee QIT and the entire trust corpus becomes a countable resource, retroactively destroying eligibility.

The Seven-Tier Monthly Distribution Waterfall

Each month, the trustee must distribute the QIT balance in this federally-mandated and Tennessee-operationalized order, drawn from 42 CFR §§ 435.725-733 and the TennCare ABD Manual:

1. Personal Needs Allowance (PNA), $70/month for Group 1 NF residents (TCA § 71-5-147 as amended by Public Chapter 986 of 2024); $2,982/month "Community PNA" for Group 2/3 HCBS members and ECF Groups 4-8.
2. Health insurance premiums, Medicare Part B ($202.90/month standard 2026), Part D ($0–$50 above LIS benchmark), Medigap (varies). Paid out of the trust each month before patient liability is calculated.
3. Spousal MMNA, minimum $2,643.75 to maximum $4,066.50/month for 2026 (federal floor / ceiling effective 7/1/2025–6/30/2026; Tennessee follows the federal range). Diverted to the community spouse if the community spouse's own income falls below the MMNA floor.
4. Family allowance, for dependent children, dependent parents, dependent siblings living in the home (42 CFR § 435.725(d)).
5. Court-ordered support obligations, alimony, child support, restitution.
6. Trust management expenses, up to $20/month for bank fees, per 1240-03-03-.03(8).
7. Patient liability, paid to the nursing facility (Group 1) or to the assigned MCO (Group 2/3, ECF). This is the residual.

For HCBS members (Group 2/3, ECF), the Community PNA of $2,982 typically absorbs the entire monthly income, leaving patient liability at $0 or near-$0. The QIT in HCBS contexts functions primarily as an eligibility-establishment device, income flows in, then mostly back out as PNA.

For Group 1 NF residents, the QIT is the primary patient-liability conduit, most income flows out to the facility.

The State Remainder Beneficiary Clause

The clause must read substantively:

"Upon the death of the Grantor, or upon termination of the trust, whichever occurs first, the State of Tennessee (Bureau of TennCare) shall receive all amounts remaining in the trust up to the total amount of medical assistance paid by the State on behalf of the Grantor."

This is non-negotiable. Without this clause the trust is not a valid (d)(4)(B) trust under federal law and not a valid QIT under Tenn. Comp. R. & Regs. 1240-03-03-.03(8). The application is denied; the trust must be re-executed.

Order of priority on death

1. Final monthly disbursements properly attributable to the month of death (e.g., facility bill for partial month, final Part B premium).
2. Remaining balance to TennCare, up to total Medicaid paid (cumulative, all programs, lifetime).
3. Anything left after TennCare is fully reimbursed (rare, typically a trivial amount in a final month) passes to the trust's contingent remainder. Most well-drafted Tennessee trusts name the grantor's probate estate.

Process at death

The trustee notifies TennCare within a reasonable time after death (the TennCare Trustee Notice references "3 months from date of the end of the trust" for final accounting). TennCare's claims unit calculates total Medicaid expenditures and invoices the trustee. The trustee writes a final check to "Bureau of TennCare" and closes the bank account.

QIT remainder vs. estate recovery

These are operationally distinct. QIT remainder collection is a contractual obligation of the trust itself, TennCare is named in the trust as a beneficiary. Estate recovery under TCA § 71-5-116 and SPA TN-24-0002 (effective 4/1/2024) is a separate post-mortem claim against the recipient's probate estate, subject to the $10,000 minimum recovery threshold and the probate-only limitation. If the QIT pays out fully to TennCare, there may be little or nothing left for separate estate recovery to pursue. If the recipient also owned a home that passes through probate, estate recovery applies independently. For full mechanics of Tennessee probate-only estate recovery, the $10K threshold, and the small-estate procedure under TCA § 30-4-101, see Brevy's Tennessee Medicaid Estate Recovery guide.

How to Set Up a Tennessee QIT, Step by Step

Step 1, Decide whether you need legal counsel

The Tennessee rule references "the Grantor or his/her authorized representative", so legally a POA agent or family member can sign and execute. In practice virtually all successful Tennessee QITs are attorney-drafted. The four pillars in 1240-03-03-.03(8)(i)-(iv) are unforgiving, a single defective clause voids the trust.

Consider legal aid if the household is low-asset and meets income qualifications. Hire a NAELA-affiliated elder-law attorney if there are significant assets, a community spouse, complex VA benefits, or a non-trivial estate.

Step 2, Draft the trust agreement

The agreement must contain:

• Express irrevocability declaration
• Sole-beneficiary clause naming the recipient as lifetime beneficiary
• State of Tennessee (Bureau of TennCare) as primary remainder beneficiary up to total Medicaid paid
• Allowable disbursements list (the seven-tier waterfall)
• Trustee identification and appointment
• Successor trustee provisions
• Termination provisions
• Governing law (Tennessee)
• Signature, notarization, and witness lines

Step 3, Execute the trust

Sign the trust before any application is filed. Notarization is recommended (not strictly required by Tennessee rule, but smooths bank-account opening and TennCare review). Ideally have two adult witnesses.

Step 4, Obtain a TIN

The trust uses the grantor's Social Security Number as its taxpayer identification number, it is a grantor trust under IRC § 671. The trust does not file its own Form 1041. The grantor still files their own personal Form 1040 reporting the QIT income (which, like Social Security, may or may not be taxable depending on overall income).

Step 5, Open the bank account

• Account titled "[Grantor Name] Qualified Income Trust, [Trustee Name], Trustee"
• Use grantor's SSN as TIN
• Separate, identifiable account, no commingling with personal funds
• Typically a non-interest-bearing checking account
• See "Banks That Accept QITs in Tennessee" below for the call-ahead practice

Step 6, Fund the trust

Make the first deposit of income before the application is filed. This is critical, the application must be supported by an executed trust AND proof of at least one funding deposit. Late-month or post-application funding does not retroactively cure an unfunded application month.

Step 7, Redirect ongoing income

• Change Social Security direct deposit at ssa.gov to the QIT account. Allow 30-60 days.
• Change pension direct deposits. Notify each plan administrator.
• Change RMD distribution accounts.
• For income that arrives at a personal account before redirect takes effect, the trustee transfers to the QIT same-day to avoid commingling exposure.

Step 8, File the Medicaid application

• Apply through TennCare Connect (online) at tn.gov/tenncare or paper through the county DHS office.
• Include with the application: executed trust agreement, bank account confirmation, proof of first deposit, identification of trustee.
• TennCare reviews the trust for 1240-03-03-.03(8) compliance.
• Expect 45-90 days for processing.

Step 9, Run the trust monthly

• All income deposited within the calendar month received
• All disbursements made by month-end per the seven-tier waterfall
• Bank fees up to $20/month retained
• Monthly account reconciliation

Banks That Accept QITs in Tennessee

No bank is contractually obligated to accept QITs. Acceptance is at branch-manager and compliance-team discretion. Anecdotally and from elder-law-firm reporting in 2026:

Always call ahead before opening. Ask specifically: "Can I open a non-interest-bearing checking account in the name of an irrevocable Qualified Income Trust under Tennessee's CHOICES program, with a separate trustee, using the grantor's Social Security Number?" If the answer is yes, schedule with a branch manager who has handled QITs before.

The TennCare ABD Manual does not prescribe a specific bank list. The "approved bank" terminology that occasionally circulates is informal, there is no state-level bank approval process.

Trustee Duties and the Annual Accounting

Who can be trustee

• Must NOT be the grantor.
• Typically a spouse, adult child, or sibling.
• Can be the agent under a durable POA (POA agent and trustee can be the same person if the POA authorizes trust establishment; verify the POA language).
• Cannot be a TennCare employee, the nursing facility, or the MCO.
• Professional fiduciaries (corporate trustees, attorneys) are acceptable but rare given small dollar amounts.

Monthly duties

1. Receive income into the QIT bank account within the calendar month it's earned. SSA direct deposit is cleanest. For checks, deposit same-day.
2. Distribute per the seven-tier waterfall by month-end.
3. Keep records, bank statements, copies of disbursements, receipt of patient-liability checks.
4. Reconcile the bank account monthly.

Annual duties

• File an annual accounting with TennCare on request (TennCare ABD Manual references but does not strictly require automatic annual filing; some counties require, others do not).
• Maintain records for at least 7 years.
• Notify TennCare of any change in trustee, account, or grantor circumstances.

Termination duties

When the trust terminates (grantor's death, end of LTSS need, or disenrollment):

1. Pay final-month obligations.
2. Notify TennCare's claims unit.
3. Receive Medicaid expenditure invoice.
4. Remit balance up to total Medicaid paid.
5. Distribute residual (if any) per contingent remainder clause.
6. Close bank account.
7. File final accounting.

VA Pension, Aid & Attendance, and SC Disability, the Bifurcation Rule

This is the most error-prone area of TN QIT planning. Three distinct VA payment streams interact differently:

(a) VA Pension base benefit (Improved Pension under 38 USC ch. 15)

For a single veteran or single surviving spouse on Medicaid LTSS in a community Medicaid NF, 38 USC § 5503(d) caps the VA pension at $90/month beginning the month after admission (38 CFR § 3.551(i) implements). The $90 cap sunsets 1/31/2033 absent further reauthorization.

The $90 is countable income for Medicaid eligibility, it flows through the QIT. After flow-through, the $90 stacks with the $70 PNA = $160 total personal funds at community Medicaid NFs.

(b) Aid & Attendance increment / Housebound increment

Excluded from countable income for Medicaid eligibility under 20 CFR § 416.1124. Must be separated from the base pension before any deposit decision. If the entire VA payment (base + A&A) is deposited into the QIT, the A&A loses its excluded status and becomes countable for patient liability.

Best practice, bifurcation: Deposit only the base pension (or the post-cap $90) into the QIT. Pay the A&A increment to a separate personal account.

The A&A increment can be substantial, adding a significant amount above the base pension each month depending on filing status and the VA's current Maximum Annual Pension Rate.

(c) Service-Connected Disability Compensation (38 USC ch. 11)

Not subject to the $90 cap. SC disability is not a "pension" under 38 USC ch. 15, it's a separate, ratings-based compensation program under chapter 11.

Counts as income for Medicaid eligibility and flows through the QIT in full. This is a common confusion point. Veterans receiving SC disability ratings (10–100%) keep their full compensation; if total income (SC disability + Social Security + other) exceeds $2,982, they need a QIT.

(d) The TSVH override

Tennessee State Veterans Homes (Murfreesboro, Humboldt, Knoxville, Clarksville, Crossville) operate under contracts with the Tennessee Department of Veterans Services that count the full VA pension toward NF cost rather than honoring the federal $90 cap. TSVH Medicaid residents:

• Receive only the $70 PNA, NOT the stacked $160.
• The full pension flows through the QIT (if needed) and toward facility patient liability.

This is a Tennessee-specific carve-out. Veterans considering TSVH placement should ask in writing about pension treatment before admission. For deeper detail, see Brevy's Tennessee State Veterans Homes guide.

Common Mistakes and the Appeals Path

Top failure modes

1. Failure to fund timely, income deposited to a personal account first and transferred mid-month or late-month. Treated as a countable resource for the month received. Retroactive ineligibility for that month.
2. Commingling, adding non-applicant funds to the QIT account (a child's reimbursement, a property-tax escrow refund). Voids the QIT for that month at minimum.
3. Trustee distributing to wrong person, paying the trustee themselves (other than the $20 management fee), paying a family member, paying a non-Medicaid-allowable expense (haircuts, gifts, charitable contributions). Triggers transfer-of-asset penalty under 42 USC § 1396p(c).
4. Missing state remainder beneficiary clause, fatal defect. TennCare denies; trust must be re-executed.
5. Unauthorized purposes, using QIT funds to pay credit cards, mortgage, family loans, or to gift to grandchildren. Penalty period applies under the 60-month look-back at the 2026 transfer-penalty divisor of $295.87/day (TennCare ABD Eligibility Policy Manual, Policy 125.010, dated 1/5/2026).
6. Failure to file annual accounting, can prompt a re-determination request.
7. Drafting errors, using a generic "income trust" template that omits TN-specific language (the irrevocability declaration, sole-beneficiary clause, allowable-disbursements list).

The Tennessee appeals process

When TennCare denies or terminates LTSS based on a QIT defect:

1. First-level fair hearing, administrative law judge (ALJ) within the Tennessee Office of Administrative Procedures. Request must be filed within 40 days of the date of the adverse notice (60 days for Standard TennCare in some categories, check the notice). Per Tenn. Comp. R. & Regs. 1200-13-19.
2. Aid pending appeal, for Standard TennCare, available if requested within 20 days. For LTSS pre-eligibility, generally not available since the applicant is not yet enrolled.
3. Second-level review, Commissioner's review or remand to ALJ.
4. Judicial review, chancery court (typically Davidson County for state agency actions) under TCA § 4-5-322.

Most disputes are resolved at the ALJ level. Tennessee does not have significant appellate case law specifically interpreting QIT mechanics; reported cases on Medicaid trusts deal mostly with self-settled special needs trusts under (d)(4)(A), not income trusts under (d)(4)(B).

Cost, Attorney Involvement, and DIY Guidance

TennCare's official position

No statute or rule requires an attorney. The DHS rule references "the Grantor or his/her authorized representative", meaning a POA agent or family member can sign and execute. In practice, however, virtually all successful TN QITs are attorney-drafted because the precision of language (the four pillars in 1240-03-03-.03(8)(i)-(iv)) is unforgiving.

Cost ranges (Tennessee, 2026)

NAELA member firms in Tennessee

Tennessee has roughly 60–70 NAELA-affiliated attorneys. Among the better-known practices statewide (this is not an endorsement, verify current standing through the Tennessee Bar Association):

• Takacs McGinnis Elder Care Law (Hendersonville)
• Elder Law of Nashville
• The Bailey Law Firm (Memphis)
• Crow Estate Planning (Knoxville/Cleveland)
• Elderlaw Memphis, PLC
• Silva Law (Nashville)
• Graceful Aging Legal Services (Nashville)

Tennessee State Bar resources

The Tennessee Bar Association has an Estate Planning and Probate Section that covers elder law. The Tennessee Chapter of NAELA maintains a referral list. Both at tba.org and naela.org.

Who can DIY

Single applicants with one income source (just Social Security), no community spouse, no minor children, no real estate, no atypical assets, and access to a trustee (adult child, sibling) who can manage monthly transactions reliably. Everyone else should retain counsel.

Three Worked Examples

Example A, Single Tennessee Applicant, $3,400/month, CHOICES Group 1

Mary, 78, widow, sole income: $2,000 Social Security + $1,400 TCRS pension = $3,400/month. Admitted to a Memphis nursing facility on January 15, 2026. Income exceeds $2,982 cap by $418.

Steps:

1. POA agent (her son) and an elder-law attorney draft a QIT naming the son as trustee.
2. Son opens a non-interest-bearing checking account at First Horizon Bank in the name of "Mary Smith Qualified Income Trust, John Smith, Trustee" using Mary's SSN as TIN.
3. Pension direct deposit redirected to the QIT account effective February 1. Social Security direct deposit changed via ssa.gov to QIT account effective March 1 (SSA changes take 30-60 days; for January, son transfers same-day from Mary's personal account to the QIT to avoid commingling).
4. February distributions from QIT: $70 PNA to Mary's personal account; $202.90 Part B premium to CMS; $3,107.10 patient liability to facility; $20 retained for bank fees. Trust closes month at $0.
5. TennCare approves CHOICES Group 1 retroactive to January 15 once executed trust agreement and proof of January funding are filed.

Annual accounting filed January 2027 showing 12 deposits ($3,400 × 12 = $40,800), 12 PNA distributions, 12 Part B distributions, 12 facility patient liability checks, $240 trustee management ($20 × 12).

Example B, Married Tennessee Applicant with Community Spouse, MMNA Scenario

David, 81, admitted to a Knoxville NF; community spouse Helen, 79, remains at home. David's income: $2,800 Social Security + $1,400 federal civil service pension = $4,200/month. Helen's income: $1,100 Social Security only. Couple's countable assets (after CSRA exclusion of $162,660): $200.

Steps:

1. David's $4,200 exceeds the $2,982 cap → QIT required.
2. Helen's $1,100 is below the MMNA floor of $2,643.75 → MMNA diversion applies. Diversion = $2,643.75 − $1,100 = $1,543.75/month diverted from David's QIT to Helen.
3. QIT established for David's $4,200. Helen's $1,100 stays in her personal account ("name on the check").
4. Monthly QIT distributions:
   • PNA: $70 to David
   • MMNA spousal allowance: $1,543.75 to Helen
   • Part B premium: $202.90 to CMS
   • Family allowance: $0 (no dependents)
   • Patient liability: $4,200 − $70 − $1,543.75 − $202.90 = $2,383.35 to facility
   • Bank fees: $20 retained
5. Helen's effective monthly resources: $1,100 own SS + $1,543.75 MMNA diversion = $2,643.75 (exactly the floor).

If Helen's shelter costs are very high, her MMNA could be raised up to the maximum $4,066.50 with documentation (using the Excess Shelter Allowance formula, see Tennessee Spousal Impoverishment Rules for the full ESA calculation, including TN-specific Standard Utility Allowance of $451/month FY 2026 and SHA of $793.13), increasing the diversion and reducing patient liability paid to the facility.

Example C, Tennessee Veteran Applicant, $90 Cap and QIT Interaction

Robert, 84, single veteran, Korean War service. Income: $1,800 Social Security + $1,500 SC disability compensation (50% rating) + $300 VA pension base + $1,200 A&A increment = $4,800/month total. Admitted to a community Medicaid NF in Chattanooga (NOT a TSVH).

Steps:

1. After NF admission, VA pension base drops to $90/month under 38 USC § 5503(d).
2. New monthly income for Medicaid purposes: $1,800 SS + $1,500 SC disability + $90 capped pension = $3,390 (the $1,200 A&A is separated, paid to a personal account, NOT counted).
3. $3,390 exceeds $2,982 → QIT required.
4. QIT funded with $3,390/month: SS, SC disability, and the $90 capped pension. A&A bifurcated to Robert's personal bank account.
5. Monthly QIT distributions:
   • PNA: $70 to Robert (combined with $90 pension stack and $1,200 A&A in personal account = $1,360 monthly personal funds)
   • Part B premium: $202.90
   • Patient liability: $3,390 − $70 − $202.90 = $3,117.10 to facility
   • Bank fees: $20

If Robert were placed at a TSVH instead (Murfreesboro, Humboldt, Knoxville, Clarksville, or Crossville), the full pension would count toward NF cost (TSVH override), no $90 stacking, only $70 PNA. The full pension would flow through the QIT.

Termination, Estate Recovery, and Where to Get Help

Trigger events for termination

1. Death of the Medicaid recipient.
2. End of LTSS need, recipient leaves NF/HCBS care and no longer needs CHOICES (rare; usually only with rehab discharge).
3. Disenrollment from TennCare, move out of state, voluntary disenrollment, or loss of eligibility for non-income reasons.
4. Income drops below cap, QIT no longer mandatory but typically maintained because income may rebound.

Distribution at termination

• All Medicaid Allowable Disbursements properly attributable to the final month are paid first.
• TennCare receives remainder up to total Medicaid paid.
• Anything left passes per the trust's contingent remainder clause to the grantor's estate or named beneficiaries.
• Trust account is closed within 3 months per the TennCare Trustee Notice.

Coordination with estate recovery

If the recipient dies and the QIT remainder is fully consumed by TennCare's claim, there is nothing for separate estate recovery to pursue. If the QIT remainder is small but other estate assets exist (a home that passes through probate), TennCare's separate estate recovery claim under TCA § 71-5-116 and SPA TN-24-0002 (probate-only, $10,000 minimum threshold, $50,000 small-estate procedure under TCA § 30-4-101) is pursued against the probate estate independently of the QIT.

Where to get help in Tennessee

Pending Policy Watch

• No pending Tennessee legislation specifically targeting QITs in the 114th General Assembly (2025–2026 session) as of May 2026.
• HR 5685 (PNA Modernization Act, 119th Cong., Schakowsky), would raise the federal PNA floor from $30 to $200 indexed to CPI. Effect on QITs: minor, would push more state PNA increases like TN's $70 → $200, which would slightly reduce QIT-derived patient liability. No effect on (d)(4)(B) framework.
• Federal (d)(4)(B) framework, Congress has never seriously attempted repeal. The mechanism is bipartisan-supported. The DRA-2005 explicitly preserved (d)(4)(A), (B), and (C) safe harbors.
• CMS regulatory activity, no pending rulemaking on (d)(4)(B) or 42 CFR § 435.601 implementation.
• Watch item, RMD reclassification: Some advocacy groups argue retirement-account RMDs should be treated as asset distributions, not income, which would invalidate them as QIT corpus. No current legislative or regulatory movement.
• TennCare III §1115 demonstration, currently approved through 12/31/2030; CMS renewal in 2030 may revisit cost-sharing or eligibility provisions. The QIT framework operates under the State Plan, not the §1115 waiver, so unaffected.
• VA $90 cap sunset (1/31/2033), without reauthorization, the cap expires and full VA pension would resume flowing through QITs and to facility patient liability. Reauthorization push expected 2030–2032.
• TennCare 1240-03-03-.03(8) rule update, no proposed amendment as of May 2026 to incorporate the 2024 PNA increase explicitly. Statute controls per TCA § 4-5-203.

Common Misconceptions and Pitfalls

1. "I read TCA § 71-5-159 is the QIT statute." Wrong. TCA § 71-5-159 governs complex rehabilitation technology. Tennessee has no stand-alone QIT statute. Authority is regulatory at Tenn. Comp. R. & Regs. 1240-03-03-.03(8) plus federal 42 USC § 1396p(d)(4)(B).

2. "I can put my house or savings in the QIT." No. The QIT is funded with INCOME only, not assets. Real estate and savings have to be addressed separately under the $2,000 asset limit and the 60-month look-back.

3. "My spouse's income has to go in the QIT too." No. Tennessee follows "name on the check", community spouse income stays with the community spouse and never enters the institutionalized spouse's QIT.

4. "The QIT protects my money from Medicaid." Mostly false. The QIT lets the applicant qualify for Medicaid by treating income as not "available" for the eligibility test, but the income still flows out to the facility as patient liability. What's left at death goes to TennCare under the remainder clause.

5. "I can use QIT money to pay my mortgage / credit cards / family member's expenses." No. Disbursements are limited to the seven-tier waterfall: PNA, premiums, MMNA, family allowance, court-ordered support, $20 trust fees, patient liability. Anything else is a transfer-of-asset penalty.

6. "DIY templates work fine." They sometimes do, but the failure rate is much higher than attorney-drafted trusts. The four pillars of 1240-03-03-.03(8) are unforgiving, one missing clause voids the trust.

7. "My A&A increment goes in the QIT." No. A&A is excluded from countable income under SSI methodology. Bifurcate before deposit, base pension (or post-cap $90) into QIT, A&A into separate personal account.

8. "VA service-connected disability is exempt." From federal income tax, yes. From Medicaid eligibility, no. SC disability flows through the QIT.

9. "Once I have a QIT I'm protected from estate recovery." No. The QIT's state-remainder clause directly remits trust balance to TennCare at death. Separate estate recovery (TCA § 71-5-116) applies to other probate assets independently.

10. "My nursing facility can be the trustee." No. Trustee cannot be the facility, MCO, or any TennCare-affiliated entity. Family member typical.

11. "I can wait to set up the QIT after I'm approved for Medicaid." No. The trust must be executed AND funded before TennCare approves the application. Late establishment does not retroactively cure pre-application months.

12. "$50 PNA / $30 PNA, that's what I read." Outdated. The 2026 Tennessee NF PNA is $70/month under Public Chapter 986 of 2024 (TCA § 71-5-147), effective 1/1/2025. The administrative rule still says $50 (rule lag), statute controls. See Brevy's Tennessee Personal Needs Allowance guide for full mechanics.

Related Reading

• Tennessee Medicaid (TennCare) overview, the umbrella TennCare guide
• Tennessee Medicaid Eligibility and Income Limits, the $2,982 cap, asset rules, look-back, CSRA
• Tennessee Spousal Impoverishment Rules, full mechanics behind the MMNA diversion you saw in Example B (snapshot date, Income-First rule, Hughes v. McCarthy 6th Circuit SPIA precedent, fair hearings, four worked examples)
• Tennessee Personal Needs Allowance, $70 NF + $2,982 Community PNA + Resident Trust Fund + TSVH override
• Tennessee Long-Term Care Nursing Home guide, daily rates, level-of-care, admission process
• Tennessee CHOICES program overview, Groups 1, 2, and 3
• Tennessee ECF CHOICES (I/DD), Groups 4–8
• Tennessee How to Apply for Medicaid, application process, document checklist
• Tennessee Medicaid Estate Recovery, probate-only, $10K threshold, SPA TN-24-0002
• Tennessee Medicaid Look-Back and Penalty Divisor, 60-month look-back rules
• Tennessee Standard Medicaid (ABD), non-LTSS pathway
• Tennessee BlueCare Plus FIDE-SNP, managed care for dual eligibles
• Tennessee State Veterans Homes (TSVH), TSVH facilities and the $90 cap override
• Tennessee Medicaid Managed Care Plans, BlueCare, UnitedHealthcare, Wellpoint
• Medicaid Personal Needs Allowance Explained, federal hub: $30 floor, complete state-by-state PNA table, Resident Trust Fund mechanics, VA $90 cap stacking
• Medicaid Estate Recovery Explained, federal hub
• Medicaid Eligibility Explained, federal eligibility framework

Learn More

• Tennessee Medicaid Programs Overview
• TennCare Eligibility & Income Limits
• Tennessee Long-Term Care & Nursing Homes
• Tennessee 5-Year Lookback & Penalty Divisor
• Tennessee Spousal Impoverishment
• How to Apply for TennCare

Find personalized help setting up a Tennessee Miller Trust at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.