Federal law, specifically 42 U.S. Code § 1396p(c)(2)(D), dictates that a state must establish procedures that allow a Medicaid applicant to receive needed care via a hardship waiver. In these cases, the applicant (or their spouse) had made a transfer during the look-back period that would otherwise incur a penalty whereas the applicant would not be eligible to receive Medicaid benefits for a certain period of time. If the applicant can show that the imposition of the penalty period would deprive the applicant of necessary medical care or the necessities of life, then the hardship waiver can be approved, allowing the applicant to get needed care immediately. Basically, the penalty period is waived if the hardship waiver is granted.

What happens if a Medicaid applicant has funds in a bank account but cannot access those funds due to their medical condition? Are those funds still a countable resource? This issue was recently litigated in Indiana.

Samuel was admitted to the nursing home in 2019. A few months thereafter, he was diagnosed as “incapacitated by senile degeneration of the brain.” In February 2020, Samuel’s representative applied for Medicaid benefits and was denied due to excess assets. Samuel twice appealed and the case was affirmed each time.

The legal authority to create a Qualified Disability Trust (QDisT) falls under §642(b)(2)(C) of the Internal Revenue Code. To qualify as a QDisT, the trust must meet the following criteria:

1. A QDisT must be irrevocable.
   
   
2. All beneficiaries must be disabled and receive Supplemental Security Income or Social Security Disability Income benefits. There can be more than one beneficiary, but all beneficiaries must be disabled. (According to IRC 642(b)(2)(C)(ii), a trust can still qualify as a QDisT if the corpus of the trust transfers to someone who is not disabled after all disabled beneficiaries are deceased.)
   
   
3. A QDisT cannot be a grantor trust; the trust must be the taxpaying entity.
   
   
4. The trust must be established for the benefit of disabled individuals 65 years of age or younger. (The QDisT does not cease to be a QDisT after the beneficiary turns 65, but it must be established beforehand.)