An Update on Income Cap Trusts in Oregon

An income cap trust is, as I have explained in another post, a legal trick that allows people with too much income to qualify for Medicaid to qualify anyway. In brief, the trick works by putting all of the elder's income into a trust every month. At the end of the month the trustee pays all the income to the care center, and Medicaid picks up the difference between what the care center received and what it charges. It is a little more complicated than that, but not much.

In the past people learned about income cap trusts when the Medicaid intake worker announced that the elder didn't qualify for long term care benefits because the elder had too much income. The applicant—usually one of the elder's relatives holding a power of attorney—was advised to get a lawyer. The relative would contact me or some other Oregon elder law lawyer to get a trust.

I have done a lot of income cap trusts. I downloaded a copy of the recommended trust from the Oregon Department of Human Services website and made a few changes. I wouldn't have had to make any changes, but lawyers can't leave anything alone if it was written by another lawyer. When someone hires me to do an income cap trust, I take out my version, change the names to fit the new client, and print it out. Next I call the case worker and agree on the income and payment numbers so that my client, the trustee, will know who and how much to pay each month from the income of the elder. I have my client open a bank account to hold the trust funds, give him advice on how to administer the trust, and my job is done.

Doing income cap trusts is easy work and it pays well. I like that, but it has always seemed to me unnecessary. Medicaid intake workers handle complicated income and asset matters every day. I could never understand why they couldn't take it one more step and help applicants set up income cap trusts.

Now it seems that they have. I have talked to several people in the Portland metropolitan area who have applied for Medicaid, and, when it was determined that the applicant needed an income cap trust, the Medicaid worker handed out a fill-in-the-blank trust form and do-it-yourself instructions. One of these folks wrote me an email, asking me what if any value I could add by doing the trust for them instead of using the form. I couldn't think of a thing. With good forms and the cooperation of the Medicaid intake worker, there is no reason that a reasonably intelligent family member couldn't create and administer an income cap trust without a lawyer.

I think that Medicaid should have been doing this all along, and to the extent that some Medicaid offices are not doing it, I would encourage them to do so. The use of income cap trusts is so standardized that I, as a lawyer, have a hard time providing any value to the client. I will miss the income, I suppose, but I won't miss the work. Creating and funding an income cap trust is necessary drudge work, but it is neither difficult nor creative. I am all for letting unrepresented applicants do all but the most complex of them.