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 applicant fails the income test. A Qualified Income Trust (QIT), also called a Miller Trust, is the device TennCare provides to fix that: an applicant over the cap is given the opportunity to establish one, and must do so to become income-eligible. It lets 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 the TennCare Aged, Blind and Disabled (ABD) Eligibility Policy Manual 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, the spousal allowance, and patient liability.1

In This Guide

• The 60-Second Answer
• The Tennessee Income Cap and Why TennCare Needs QITs
• Federal Authority: 42 USC § 1396p(d)(4)(B) and the Miller v. Ibarra Origin
• Tennessee Authority: the ABD Eligibility Policy Manual
• When You Need a Tennessee Qualified Income Trust (QIT), and When You Don't
• What Income Flows Into the QIT
• What Income Does NOT Flow Into the QIT
• The Federal and Tennessee Operational Pillars
• The Monthly Distribution Waterfall
• The State Remainder Beneficiary Clause
• How to Set Up a Tennessee Qualified Income Trust, Step by Step
• Banks That Accept QITs in Tennessee
• Trustee Duties and the Annual Accounting
• VA Pension, Aid and 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

1. They will be denied for the eligibility test unless a Qualified Income Trust is established before the application is approved.1
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, required minimum distributions, and the like) is deposited into the QIT bank account, then distributed back out the same month for the Personal Needs Allowance, Medicare premiums, the spousal allowance, and patient liability to the facility or managed care organization (MCO).
4. TennCare must be the primary remainder beneficiary at the applicant's death, up to total Medicaid paid.
5. Cost varies widely, from a basic attorney drafting to a full elder-law engagement; see the cost table below. DIY templates exist but fail often.
6. Tennessee authority is regulatory: the TennCare ABD Eligibility Policy Manual under Tenn. Comp. R. & Regs. 1200-13-20-.06, implementing 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 manual and rule control.
7. Most useful first call: TennCare LTSS Help Desk at 1-877-224-0219 or your county Department of Human Services (DHS) office.

The Tennessee Income Cap and Why TennCare Needs QITs

Tennessee Medicaid (TennCare) is administered as a Section 1115 waiver demonstration ("TennCare III," CMS-approved through 12/31/2030). For long-term services and supports, both nursing facility care under CHOICES Group 1 and home- and community-based services (HCBS) under CHOICES Groups 2 and 3 (and ECF CHOICES Groups 4-8 for intellectual and developmental disabilities), Tennessee uses the 300%-of-SSI special income standard authorized at Section 1902(a)(10)(A)(ii)(V) of the Social Security Act, codified at 42 USC § 1396a(a)(10)(A)(ii)(V).1

In 2026, the Medicaid Income Cap (MIC) is $2,982/month, defined as 300% of the $994 Supplemental Security Income (SSI) Federal Benefit Rate effective 01/01/2026.1

That is the income cap for LTSS eligibility. One dollar over and the applicant fails the income test. TennCare's ABD long-term-care pathways run on that 300% special income standard and permit a Qualified Income Trust; an applicant above the cap is given the opportunity to establish one and must do so to become income-eligible. In practice that leaves two routes: under the cap, or a QIT.2,1

For complete detail on Tennessee's eligibility framework, the Standard ABD $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.3

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

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), as a trust composed only of the individual's pension, Social Security, and other income, under which the State receives all amounts remaining in the trust at the individual's death up to the total medical assistance the State paid on the individual's behalf, and which is available only in states that make medical assistance available under the 300%-of-SSI institutional category.1

That income-cap predicate is the key: the (d)(4)(B) exception is available only in states that make medical assistance available under the 300%-of-SSI institutional category at 42 USC § 1396a(a)(10)(A)(ii)(V). Tennessee elects that category, which is what puts the QIT on the table here.1

Implementing federal regulations

• 42 CFR § 435.601, general financial-eligibility methodologies for Medicaid.
• 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.
• CMS State Medicaid Manual § 3259, operational guidance on the 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, whose 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 the Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66), 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 drafted the device. The Deficit Reduction Act of 2005 tightened the 1993 Act's general trust rules but explicitly preserved the (d)(4)(A), (B), and (C) safe harbors.

Why the QIT exists only in some states

Because the (d)(4)(B) safe harbor is tied to the 300%-of-SSI institutional category that Tennessee elects, it is a device of income-cap states.1 States that instead let an applicant reduce countable income by incurring medical bills, against a medically needy income limit, have no need for one. If you are comparing Tennessee against another state, check that state's own LTSS income rules rather than assuming the QIT travels.

For the federal post-eligibility framework the QIT waterfall pays out through, including the federal personal-needs-allowance floor, see Brevy's Medicaid Personal Needs Allowance Explained federal hub.

Tennessee Authority: the ABD Eligibility Policy Manual

A common misconception in elder-law writing is that TCA § 71-5-159 is Tennessee's QIT statute. It is not. 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 the TennCare ABD Eligibility Policy Manual under Tenn. Comp. R. & Regs. 1200-13-20-.06 (ABD Trusts) and 1200-13-20-.08(5) (Institutional Medicaid / MIC). The manual sets out the operational requirements:

1. Irrevocability: the trust must be irrevocable and cannot be modified or amended by the grantor (though a trustee or court may modify it to the extent necessary to maintain eligibility).
2. Sole beneficiaries: the Medicaid recipient and the State of Tennessee; the State is the remainder beneficiary up to total Medicaid paid.
3. Monthly distribution: each month the trustee must distribute the entire amount of income transferred into the trust except an amount not to exceed $20 (or another amount verified with TennCare) for trust expenses, applying the allowable deductions and the remainder to patient liability.1

The TennCare ABD Manual, "ABD Trusts" chapter

The "ABD Trusts" chapter (No. 110.055) is the most useful operational reference for eligibility counselors. It defines the Medicaid Income Cap (the 300% special income standard, $2,982 in 2026), the allowable monthly disbursements, trustee duties, and TennCare's review process for trust agreements before approval.1

TennCare-issued documents

TennCare does not publish a state-issued QIT trust agreement template form. What circulates as the "TennCare QIT form" is typically a TennCare QIT information sheet used by elder-law firms and county DHS workers, attorney-drafted templates used by NAELA-member firms statewide, or generic commercial templates that are publicly available but not TennCare-endorsed. TennCare reviews each individual trust agreement for compliance before approving Medicaid eligibility.

The PNA interaction

Public Chapter 986 of 2024 raised the Tennessee nursing-facility Personal Needs Allowance (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. For full PNA mechanics, the $50 to $70 increase, the Resident Trust Fund framework, the Community PNA for HCBS, the VA $90 cap stacking, and Tennessee State Veterans' Homes, see Brevy's Tennessee Medicaid Personal Needs Allowance guide.4

When You Need a Tennessee Qualified Income Trust (QIT), and When You Don't

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

Decision matrix for 2026

The middle "trap" row is the one families are least prepared for: a 70-year-old whose only income is modest Social Security, who needs Medicaid but does not yet need nursing-facility level-of-care services, is above the Standard ABD income standard and has no LTSS need to open the 300% standard. TennCare reviews an enrollee for every other category before terminating coverage, and the ABD Manual carries several SSI-related categories for people not currently receiving SSI (Pickle Passalong, Disabled Adult Children, and the Widow/Widower categories), so ask which of those applies before assuming there is nothing. Otherwise the entry point is CHOICES, once an LTSS need exists.2

Across program categories

• TennCare CHOICES Group 1 (NF): QIT required if income exceeds the cap.
• CHOICES Group 2 (HCBS at NF level of care): QIT required if income exceeds the cap.
• CHOICES Group 3 (HCBS at-risk): QIT required if income exceeds the cap. Group 3 is capped-enrollment with a waitlist.
• ECF CHOICES Groups 4-8 (I/DD waiver): QIT required if income exceeds the cap. Mechanics identical to CHOICES.
• Standard ABD: no QIT pathway. The limit is the $994/month SSI level.2
• Katie Beckett (children with severe disabilities): QITs are NOT used. Katie Beckett deems out parental income; the child's own income is typically well below the cap. See Brevy's Tennessee Katie Beckett guide.
• PACE: TennCare directs PACE applicants to a single organization, Ascension Living Alexian PACE in Chattanooga, and lists "You must live in Hamilton County" among its published PACE eligibility criteria. PACE runs as a Medicaid State Plan benefit, and one TennCare rule (Tenn. Comp. R. & Regs. 1200-13-01-.10) sets the same nursing-facility level-of-care test for nursing-facility care, CHOICES HCBS, ECF CHOICES HCBS and PACE alike. TennCare's published QIT policy names institutional Medicaid, CHOICES and ECF CHOICES rather than PACE, so if a PACE applicant's income runs over the cap, confirm the QIT requirement with the PACE organization or the TennCare LTSS Help Desk before applying.5

Over-income CHOICES applicants who need a QIT are most often state-employee retirees, retired teachers with full Tennessee Consolidated Retirement System (TCRS) 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 $2,982.1

Always flows through:

• Social Security retirement, disability (SSDI), and survivor benefits, gross amount, including the Part B premium deducted before deposit.
• Private pensions, corporate, union, multi-employer.
• Tennessee Consolidated Retirement System (TCRS) pensions, for state employees, teachers, and 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 account itself is an asset; the distribution is income.
• Annuity payments, commercial fixed 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): this flows through. SC disability is countable income for Medicaid (it is exempt only from federal income tax, not from Medicaid).6
• VA Pension base benefit (38 USC ch. 15): base pension flows through the QIT. The $90 cap under 38 USC § 5503(d) reduces it to $90/month for any period after the month of admission to a nursing facility Medicaid is paying for, but only for a veteran with neither spouse nor child (and, under § 5503(d)(5)(A), a surviving spouse with no child). A married veteran, or one with a child, keeps the full pension amount and deposits all of it. The Aid and Attendance increment is separated and does NOT flow through.6
• Earned income from a sheltered workshop or supported employment, after the SSI earned-income disregard.
• Trust distributions paid to the applicant, from third-party trusts where the applicant is beneficiary.
• Rental income (net): the rental property is an asset, 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. It never enters the QIT and never counts toward the $2,982 cap. (The community spouse's income may still affect the spousal maintenance allowance if it falls below the floor.)1
• VA Aid and Attendance increment. Excluded from SSI countable income; aid-and-attendance and housebound allowances are not income for SSI purposes. Identify it before any deposit decision: the exclusion attaches to the increment itself, but a single undivided VA deposit gives the eligibility counselor nothing to trace, so keep the increment out of the QIT and out of the trust's monthly ledger.6
• 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; a 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 or 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 Federal and Tennessee Operational Pillars

A valid Tennessee QIT must satisfy the federal requirements and the 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.1

Tennessee operational pillars (TennCare ABD Manual, ABD Trusts)

1. Irrevocability declaration, express in the trust document.
2. Sole-beneficiary clause: the recipient is the only lifetime beneficiary; the State of Tennessee is the remainder.
3. Allowable disbursements only, bound to the distribution waterfall below.
4. Monthly distribution: the trust balance must be distributed by month-end, retaining no more than $20 (or another amount verified with TennCare) for trust expenses.1

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

The Monthly Distribution Waterfall

Each month the trustee distributes the QIT balance through the payments the TennCare ABD Manual allows. Two things get run together in most Tennessee QIT writing, and they are worth separating:

• What the trust may pay is a closed list. The ABD Manual's "ABD Trusts" chapter permits the Personal Needs Allowance, the trust-expense retention, the Community Spouse Income Maintenance Allowance (CSIMA) and Dependent Income Maintenance Allowance (DIMA), health insurance premiums where the individual has coverage other than TennCare Medicaid, and "Item D" deductions for medical or remedial care recognized under state law but not covered by TennCare Medicaid. No other deduction or expense may be paid from the trust.1
• The manual does not set an order. It presents these as allowable deductions, not as a sequence. The only order federal rule prescribes is at 42 CFR § 435.725(c) for institutional residents in SSI States (42 CFR § 435.733 sets the parallel rule for states using more restrictive requirements than SSI): (1) the personal needs allowance, (2) maintenance needs of a spouse at home, (3) maintenance needs of a family at home, (4) incurred expenses for medical or remedial care not subject to third-party payment (which is where Medicare and other health-insurance premiums, deductibles and coinsurance sit), and (5) continued SSI and state supplement benefits. 42 CFR § 435.726 sets the parallel order for HCBS participants. Note where health-insurance premiums fall in that order: after the spousal and family maintenance allowances, not before them.4,7

The allowable payments, with their 2026 Tennessee amounts:

1. Personal Needs Allowance (PNA): $70/month for Group 1 nursing-facility residents (TCA § 71-5-147, as amended by Public Chapter 986 of 2024); for Group 2/3 HCBS members and ECF Groups 4-8, the full special income standard ($2,982/month) serves as the community maintenance allowance.4,7
2. Community spouse and dependent maintenance allowances (CSIMA / DIMA): for a community spouse, a minimum of $2,705.00/month (effective 7/1/2026) up to a maximum of $4,066.50/month (effective 1/1/2026), diverted if the community spouse's own income falls below the floor; a DIMA covers a dependent residing in the community.7,1
3. Health insurance premiums, coinsurance and deductibles: Medicare Part B ($202.90/month standard in 2026, the figure CMS announced on November 14, 2025, effective 1/1/2026), Part D, and Medigap, where the individual has coverage other than TennCare Medicaid.8,1
4. Incurred medical expenses TennCare Medicaid does not cover and that are allowed under the State Plan (the manual's "Item D" deduction), plus a carry-forward for allowable medical expenses not previously deducted. Families routinely miss this one and overpay: an uncovered medical or remedial-care expense recognized under state law comes out of income before patient liability is set, rather than being paid on top of the patient-liability check.1,4
5. Expenses of the trust, up to $20/month (or another amount verified with TennCare) per the TennCare ABD Manual, a bank fee typically. This is not trustee compensation: the manual expressly bars the trust from paying trustee fees, attorney fees, accountant fees and court costs.1
6. Patient liability, paid to the nursing facility (Group 1) or to the assigned MCO (Group 2/3, ECF). This is the residual.

One category to ask about before you pay it. TennCare's post-eligibility budget, the calculation that produces the patient-liability number, also deducts mandatory expenses, such as court-ordered child support and alimony, garnishments, and conservatorship or guardianship fees. The ABD Trusts chapter's list of what the trust may pay does not name them, and paying a non-allowable expense out of the trust account is what triggers a transfer-of-asset penalty. If a support order or garnishment is in play, confirm with the eligibility counselor how it is to be paid before the trustee writes that check.7,4

For HCBS members (Group 2/3, ECF), the Community maintenance allowance of $2,982 typically absorbs the entire monthly income, leaving patient liability at or near $0. The QIT in HCBS contexts functions primarily as an eligibility-establishment device. For Group 1 nursing-facility residents, the QIT is the primary patient-liability conduit, and most income flows out to the facility.7

The State Remainder Beneficiary Clause

The clause must provide substantively that, upon the death of the grantor or termination of the trust, whichever occurs first, the State of Tennessee (Bureau of TennCare) receives all amounts remaining in the trust up to the total amount of medical assistance the State paid on the grantor's behalf.1

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 the TennCare ABD Manual. The application is denied and the trust must be re-executed.

Order of priority on death

1. Final monthly disbursements properly attributable to the month of death (for example, a facility bill for a partial month, a 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 negligible 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. TennCare's claims unit calculates total Medicaid expenditures and invoices the trustee, who 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 the Tennessee State Plan is a separate post-mortem claim against the recipient's estate, and TennCare treats claims of $10,000 or less as not cost effective. Note what "estate" covers: the State Plan defines it as all property and other assets owned at the moment immediately preceding death, as limited or expanded by T.C.A. Titles 30, 31 and 32 and by Tennessee courts. Tennessee probate law sets that scope, so do not assume a flat probate-only rule protects an asset. 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, estate recovery applies independently. For full mechanics of Tennessee estate recovery, see Brevy's Tennessee Medicaid Estate Recovery guide.1

How to Set Up a Tennessee Qualified Income Trust, Step by Step

Banks That Accept QITs in Tennessee

No bank is contractually obligated to accept QITs. Acceptance is at branch-manager and compliance-team discretion. 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. There is no state-level bank approval process; the "approved bank" terminology that occasionally circulates is informal.

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 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 the small dollar amounts.

Monthly duties

1. Receive income into the QIT bank account within the calendar month it is received. SSA direct deposit is cleanest; for checks, deposit same-day.
2. Distribute per the waterfall by month-end.
3. Keep records: bank statements, copies of disbursements, receipts of patient-liability checks.
4. Reconcile the bank account monthly.

Annual duties

• File an annual accounting with TennCare on request.
• Maintain records for at least 7 years.
• Notify TennCare of any change in trustee, account, or grantor circumstances.

Termination duties

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

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

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

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

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

For a veteran with neither spouse nor child (and, under § 5503(d)(5)(A), a surviving spouse with no child) in a Medicaid-covered nursing facility, 38 USC § 5503(d) limits the VA pension to no more than $90/month for any period after the month of admission to that facility (38 CFR § 3.551(i) implements this). Federal law adds one protection and only one: § 5503(d)(3) bars reducing the Medicaid payment to the facility by the retained $90. That is an anti-offset rule about what the state pays the nursing home, not a rule about what the resident receives alongside a state personal needs allowance. Whether the $90 sits on top of a state's PNA or takes its place is set by state post-eligibility policy, and states answer it both ways. Tennessee stacks, by its own rule. TennCare's Aged, Blind and Disabled Manual, Policy 125.020 (Post-Eligibility Treatment of Income), lists a VA pension limited to $90 per month among the income not included in total income, so the $70 PNA is deducted from the resident's other income and the $90 is left untouched by that deduction. The $90 is still countable income for Medicaid eligibility and flows through the QIT; after flow-through, a resident with at least $70 a month besides the pension keeps $160 in total personal funds at a Medicaid-covered nursing facility. Brevy's Tennessee Medicaid Personal Needs Allowance guide works through the full treatment.6,4

(b) Aid and Attendance / Housebound increment

These are excluded from countable income for Medicaid eligibility under SSI methodology, and they should be separated from the base pension before any deposit decision. The exclusion belongs to the increment itself, not to the account it lands in, but a single undivided VA deposit leaves nothing for a TennCare counselor to trace and invites the whole payment to be counted. Best practice (bifurcation): deposit only the base pension (or the post-cap $90) into the QIT, and pay the Aid and Attendance increment to a separate personal account. The increment can be a substantial monthly amount above the base pension, depending on filing status and the current Maximum Annual Pension Rate.6

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

Not subject to the $90 cap. SC disability is not a "pension" under chapter 15; it is a separate, ratings-based compensation program under chapter 11. It counts as income for Medicaid eligibility and flows through the QIT in full. This is a common confusion point: veterans receiving SC disability ratings keep their full compensation, and if total income exceeds $2,982 they need a QIT.6

(d) Tennessee State Veterans' Homes: ask about pension treatment first

Tennessee State Veterans' Homes (TSVH) are run by the Tennessee State Veterans Home Board and are independent of the U.S. Department of Veterans Affairs. Five homes operate as of 2026 (Murfreesboro, Humboldt, Knoxville, Clarksville, and Cleveland), and a sixth in Arlington, on 28.5 acres in rural Shelby County, is under construction; TSVH's own Arlington page still gives an anticipated opening of "late 2025," a date that has passed. Admission requires an honorable discharge from active service and a need for skilled-level care, plus at least one Tennessee connection: residency at the time of admission, birth in Tennessee, entering the armed forces in Tennessee, a Tennessee address as the official Home of Record, or an immediate family member who is the primary caregiver and a Tennessee resident. Spouses and Gold Star parents are admitted on a space-available basis.9

How the stay is paid for also differs from a community nursing facility. TSVH describes two VA programs: a Basic Per Diem, applied toward a private-pay bill to reduce the out-of-pocket daily room rate, and a Higher Per Diem, under which the VA covers 100% of the cost of the stay (available only to a veteran with a service-connected disability rated 70% or more, a veteran needing nursing home care related to a service-connected disability, or a veteran rated totally disabled based on individual unemployability). A veteran not eligible for VA assistance may pay through Medicare, a Medicare managed care plan, Tennessee Medicaid, long-term care insurance, or private funds.9

Because a state home can be funded by VA per diem rather than by TennCare, the pension arithmetic above does not automatically carry over, and neither TSVH nor TennCare publishes a document setting out how a VA pension is treated for a state-home resident. Do not assume the $90 cap and the PNA stack the same way. Before admission, ask the home in writing whether TennCare will be billed for the stay, how the VA pension will be treated, and what monthly personal allowance the resident will keep.6,9

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 is treated as a countable resource for the month received, causing retroactive ineligibility for that month.
2. Commingling: adding non-applicant funds to the QIT account voids the QIT for that month at minimum.
3. Trustee distributing to the wrong person: paying the trustee, a family member, or a non-allowable expense triggers a transfer-of-asset penalty under 42 USC § 1396p(c). The TennCare ABD Manual's list of what the trust may not pay names trustee fees first, alongside attorney fees (including the cost of setting the trust up), accountant fees, court costs, guardian ad litem fees, funeral expenses, past-due medical bills and other debts. The up-to-$20 retention is for expenses of the trust, such as a monthly bank fee, and is not trustee compensation.1
4. Missing the state remainder beneficiary clause: a fatal defect. TennCare denies, and the trust must be re-executed.
5. Unauthorized purposes: using QIT funds to pay credit cards, a mortgage, family loans, or gifts. A penalty period applies under the 60-month look-back: for applications dated on or after 01/01/2026, Tennessee's transfer-penalty divisor is $295.87/day ($8,846.10/month), per the TennCare ABD Manual 125.010 ("Average Cost of Nursing Facility Care" table, manual dated January 5, 2026). Do not confuse this with the separate CHOICES "Cost Neutrality Cap" of $294.87/day, which caps HCBS plan-of-care spending and is not the penalty divisor.10
6. Failure to file an annual accounting: can prompt a re-determination request.
7. Drafting errors: using a generic "income trust" template that omits Tennessee-specific language.

The Tennessee appeals process

A QIT defect produces an eligibility decision, so it runs on TennCare's eligibility-appeal track, not the medical-appeal track used for a denied service.

1. File the eligibility appeal with TennCare Connect: 1-855-259-0701, online through the member's TennCare Connect account, or by mailing the Eligibility Appeal form to the Eligibility Appeals Unit, P.O. Box 23650, Nashville, TN 37202-3650.11
2. Watch two clocks, not one. An appeal filed within 40 days of the termination or denial notice is timely. To keep benefits flowing while the appeal is decided, the request has to be in within 20 days of the notice (or before the coverage end date, if that is later). If TennCare's action is upheld, the member may have to repay benefits continued in the meantime. These state timeframes sit inside the federal fair-hearing ceiling at 42 CFR 431.221(d), which allows a state to give claimants up to 90 days from the mailing of the notice to request a hearing; the 40-day figure above is Tennessee's own, tighter window, so do not count on 90.11
3. The hearing is internal to TennCare. TennCare adjudicates its own fair hearings, and an Administrative Judge renders the final decision on the appeal.11
4. Delayed-decision hearing: a long-term-care applicant who has waited more than 90 days without a decision (more than 45 days on a standard application) can ask for a hearing on the delay itself.12
5. Judicial review of the final agency decision lies in chancery court (typically Davidson County for state agency actions) under Tennessee's Uniform Administrative Procedures Act, TCA § 4-5-322.

For the full appeal mechanics, including the separate 60-day medical-appeal track for a denied CHOICES service, see Brevy's Tennessee Medicaid Appeals and Fair Hearings guide.

Most disputes are resolved at the administrative-law-judge level. Tennessee has little 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, virtually all successful Tennessee QITs are attorney-drafted because the precision of language is unforgiving.

Cost ranges (Tennessee, 2026)

The figures below are typical market ranges reported by Tennessee elder-law firms; they are not an official TennCare fee schedule and vary by firm and complexity.

NAELA member firms in Tennessee

Tennessee has a number of NAELA-affiliated attorneys. Better-known practices statewide include the following (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, and the Tennessee Chapter of NAELA maintains a referral list. Both are 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 reliable trustee. Everyone else should retain counsel.

Three Worked Examples

Example A: single Tennessee applicant, $3,400/month, CHOICES Group 1

Mary, 78, a widow, has $2,000 in Social Security plus a $1,400 TCRS pension, for $3,400/month. She is admitted to a Memphis nursing facility on January 15, 2026. Her income exceeds the $2,982 cap by $418, so a QIT is required.1

Steps:

1. Her son (POA agent) and an elder-law attorney draft a QIT naming the son as trustee.
2. The son opens a non-interest-bearing checking account at First Horizon Bank titled "Mary Smith Qualified Income Trust, John Smith, Trustee," using Mary's SSN as the TIN.
3. The pension direct deposit is redirected to the QIT account; the Social Security direct deposit is changed via ssa.gov (these take 30-60 days, so for January the son transfers same-day from Mary's personal account to the QIT to avoid commingling).
4. February distributions from the QIT: $70 PNA to Mary's personal account; $202.90 Part B premium; $3,107.10 patient liability to the facility; $20 retained for bank fees. The trust closes the month at $0.4,8
5. The son files the TennCare application on January 15, the day of admission, because TennCare will not extend eligibility to any date before the application is filed and a CHOICES applicant gets no retroactive coverage.13 TennCare then approves CHOICES Group 1 once the executed trust agreement and proof of January funding are in hand. Had the family waited until March to apply, January and February would have been private-pay and stayed that way.

Example B: married applicant with a community spouse, MMNA scenario

David, 81, is admitted to a Knoxville nursing facility; his community spouse Helen, 79, remains at home. David's income is $2,800 Social Security plus a $1,400 federal civil-service pension, for $4,200/month. Helen's income is $1,100 Social Security. Their countable assets, after the Community Spouse Resource Allowance exclusion of up to the federal maximum of $162,660, are $200.3,14

Steps:

1. David's $4,200 exceeds the $2,982 cap, so a QIT is required.
2. Helen's $1,100 is below the spousal maintenance floor of $2,705.00, so a maintenance diversion applies: $2,705.00 - $1,100 = $1,605.00/month diverted from David's QIT to Helen.7
3. The QIT is established for David's $4,200. Helen's $1,100 stays in her personal account ("name on the check").
4. Monthly QIT distributions: $70 PNA to David; $1,605.00 spousal allowance to Helen; $202.90 Part B premium; $0 family allowance (no dependents); $2,302.10 patient liability to the facility; $20 retained for bank fees.4,8
5. Helen's effective monthly resources: $1,100 own Social Security plus the $1,605.00 diversion = $2,705.00 (exactly the floor).

If Helen's shelter costs are high, her maintenance allowance can be raised toward the maximum $4,066.50 with documentation (using the Excess Shelter Allowance formula, which uses Tennessee's Standard Utility Allowance of $451/month, effective 10/1/2025, and a Standard Housing Allowance of $811.50/month, effective 7/1/2026), increasing the diversion and reducing patient liability. See Brevy's Tennessee Spousal Impoverishment Rules for the full calculation.7

Example C: Tennessee veteran applicant, the $90 cap and QIT interaction

Robert, 84, is a Korean War veteran with neither spouse nor child. His income is $1,800 Social Security, $1,500 SC disability compensation, $300 VA pension base, and a $1,200 Aid and Attendance increment. He is admitted to a TennCare-covered community nursing facility in Chattanooga (not a Tennessee State Veterans' Home).6

Steps:

1. For any period after the month of admission to the nursing facility, the VA pension base drops to $90/month under 38 USC § 5503(d).
2. New monthly income for Medicaid purposes: $1,800 Social Security plus $1,500 SC disability plus the $90 capped pension = $3,390 (the $1,200 Aid and Attendance increment is separated, paid to a personal account, and not counted).
3. $3,390 exceeds the $2,982 cap, so a QIT is required.
4. The QIT is funded with $3,390/month (Social Security, SC disability, and the $90 capped pension); the increment is bifurcated to Robert's personal account.
5. Monthly QIT distributions: $70 PNA to Robert; the $90 capped VA pension also to Robert, because TennCare's ABD Manual 125.020 leaves a $90-limited VA pension out of total income, so the $70 PNA comes out of his other income instead; $202.90 Part B premium; $3,007.10 patient liability to the facility; $20 retained for bank fees. The five lines total $3,390, the full month's deposit. Robert's personal funds are $70 plus $90, or $160 a month, plus the $1,200 Aid and Attendance increment paid outside the trust.4,8

If Robert were admitted to a Tennessee State Veterans' Home instead, the payment picture could look different: a state home may be funded by VA per diem rather than by TennCare, and neither TSVH nor TennCare publishes a rule on how a resident's VA pension is treated there. Ask the home in writing before admission.9

Termination, Estate Recovery, and Where to Get Help

Trigger events for termination

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

Distribution at termination

• All allowable disbursements properly attributable to the final month are paid first.
• TennCare receives the remainder up to total Medicaid paid.
• Anything left passes per the trust's contingent-remainder clause to the grantor's estate or named beneficiaries.
• The trust account is closed within a reasonable time after termination.

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, for example), TennCare's separate estate recovery claim under TCA § 71-5-116 is pursued against the estate independently of the QIT. Claims of $10,000 or less are treated as not cost effective, and the reach of a claim is set by Tennessee probate law rather than by any flat probate-only rule in the State Plan itself.1

Where to get help in Tennessee

Pending Policy Watch

• No pending Tennessee legislation specifically targeting QITs in the General Assembly as of mid-2026.
• The federal PNA floor has not moved since 1988: the statutory minimum is still $30/month for an institutionalized individual and $60/month for an institutionalized couple where both spouses are aged, blind, or disabled (42 USC § 1396a(q)(2); 42 CFR § 435.725(c)(1)), unchanged since OBRA-87 made those figures effective July 1, 1988. It is a floor, not a ceiling, and Tennessee already sits well above it at $70. Even if Congress were to raise the floor, the effect on QITs would be minor (a higher state PNA slightly reduces QIT-derived patient liability) with no effect on the (d)(4)(B) framework.4
• Federal (d)(4)(B) framework: Congress has never seriously attempted repeal, and the Deficit Reduction Act of 2005 explicitly preserved the (d)(4)(A), (B), and (C) safe harbors. No pending CMS rulemaking targets it.
• TennCare III Section 1115 demonstration: currently approved through 12/31/2030; the QIT framework operates under the State Plan, not the waiver, so a renewal would not change it.
• VA $90 cap: 38 USC § 5503(d)(7) states that the subsection "expires on January 31, 2033," a date Congress has moved before (Pub. L. 119-43 pushed it out from November 30, 2031). If it is allowed to lapse rather than extended again, the full VA pension would resume flowing through QITs and toward facility patient liability.6

Common Misconceptions and Pitfalls

1. "TCA § 71-5-159 is the QIT statute." No. Tennessee has no stand-alone QIT statute; authority is regulatory through the TennCare ABD Manual under Tenn. Comp. R. & Regs. 1200-13-20-.06 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 are addressed separately under the $2,000 asset limit and the 60-month look-back.3

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 by treating income as not "available" for the eligibility test, but the income still flows out to the facility as patient liability, and what is left at death goes to TennCare under the remainder clause.

5. "I can use QIT money to pay my mortgage, credit cards, or a family member's expenses." No. Disbursements are limited to the waterfall, plus up to $20 a month retained for the trust's own expenses (a bank fee, typically). The manual's non-exhaustive list of what the trust may not pay includes trustee fees, attorney fees for setting the trust up, accountant and court fees, funeral expenses, past-due medical bills and other debts; anything outside the waterfall risks a transfer-of-asset penalty.1

6. "DIY templates work fine." They sometimes do, but the failure rate is much higher than for attorney-drafted trusts, because one missing clause voids the trust.

7. "My Aid and Attendance increment goes in the QIT." No. The increment is excluded from countable income under SSI methodology; bifurcate it before deposit.6

8. "VA service-connected disability is exempt." From federal income tax, yes; from Medicaid eligibility, no. SC disability flows through the QIT.6

9. "Once I have a QIT I am protected from estate recovery." No. The QIT's state-remainder clause remits the trust balance to TennCare at death, and separate estate recovery under TCA § 71-5-116 applies to the rest of the estate independently.1

10. "My nursing facility can be the trustee." No. The trustee cannot be the facility, the MCO, or any TennCare-affiliated entity. A family member is typical.

11. "I can wait to set up the QIT after I am 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. "The PNA is $50 (or $30)." Outdated. The 2026 Tennessee nursing-facility PNA is $70/month under Public Chapter 986 of 2024 (TCA § 71-5-147), effective 1/1/2025, above the federal $30 floor. See Brevy's Tennessee Personal Needs Allowance guide.4

Related Reading

• Tennessee Medicaid (TennCare) overview: the umbrella TennCare guide
• Tennessee Medicaid Eligibility and Income Limits: the income cap, asset rules, look-back, CSRA
• Tennessee Spousal Impoverishment Rules: the mechanics behind the maintenance diversion in Example B
• Tennessee Personal Needs Allowance: the NF PNA, the Community PNA, and Tennessee State Veterans' Homes
• Tennessee Long-Term Care Nursing Home guide: daily rates, level of care, admission
• Tennessee CHOICES program overview: Groups 1, 2, and 3
• Tennessee ECF CHOICES (I/DD): Groups 4-8
• Tennessee How to Apply for Medicaid: the application process and document checklist
• Tennessee Medicaid Estate Recovery: who is subject, the cost-effectiveness threshold, undue hardship, and what "estate" covers
• Tennessee Medicaid Look-Back and Penalty Divisor: the 60-month look-back and the transfer-penalty divisor
• Tennessee State Veterans' Homes: the five homes, admission requirements, and how a stay is paid for
• Medicaid Personal Needs Allowance Explained: the federal hub
• Medicaid Estate Recovery Explained: the federal hub

Learn More

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.