By Austin Senior Advisor Care Team · August 19, 2026
Texas will not let a family spend down excess income to qualify for nursing home Medicaid. If your parent clears every other test but earns a little over the cap, a Qualified Income Trust is the mechanism that closes the gap, and it is not the same thing as spending down.
The scenario that trips up otherwise-qualified families
Here is how this usually surfaces. A parent needs nursing home care, the family has already spent down savings on private pay or in-home help, and countable assets are comfortably under Medicaid's $2,000 limit for a single applicant. Everything points toward approval. Then someone runs the income test and the math does not work: Social Security plus a small pension comes to $3,150 a month, and Texas's 2026 income limit for nursing home Medicaid is $2,982 a month. The application is $168 over.
In most states with a Medicaid spend-down program, that gap is manageable. You show medical bills that exceed the excess income and the state treats you as if you met the limit. Texas does not offer that option for long-term care Medicaid. It is what's called an income-cap state, and the cap is a hard line: one dollar over it and, absent the tool this article is about, the application is denied on financial grounds regardless of how much of that income goes straight to a nursing facility bill.
This is one of the more common reasons a Medicaid application for an Austin-area nursing home gets denied even when the family did everything else right. It is also one of the more fixable ones, which is the part that gets lost in the panic of a denial letter.
The tool: a Qualified Income Trust, still often called a Miller Trust
Texas has allowed this mechanism since the 1990s. A Qualified Income Trust, or QIT, is sometimes still called a Miller Trust after the federal court case that established it. The idea is narrow and specific: income that would otherwise push an applicant over the cap is redirected into an irrevocable trust account instead of being paid directly to the applicant. Because that income now belongs to the trust rather than to the applicant personally, it is not counted against the income limit when Medicaid runs its eligibility test.
It is important to be precise about what this does and does not do. A QIT does not let your parent keep the money. It does not shelter income for the family. The trust exists to move money out of the applicant's countable income column and then, almost immediately, back out again to pay for the applicant's own care. The state ends up receiving essentially the same dollars it would have received anyway, just routed through a different account. What changes is that the eligibility test now passes.
How the money actually moves
Texas follows what practitioners call the name-on-the-check rule. If a payment source, such as a Social Security deposit or a pension check, would push total income over $2,982 a month, the entire payment from that source has to go into the trust account, not just the $168 that exceeds the cap. A family cannot deposit only the overage and keep the rest outside the trust.
Only income can go into a QIT. Assets, savings, or a lump sum from selling a car cannot be deposited into it; those are handled through the separate asset limit, not the income mechanism. Most deposits are Social Security and pension payments, though annuity payments and required minimum distributions from a traditional IRA are sometimes routed through a QIT as well.
Once income is in the trust, a trustee, who must be someone other than the applicant, pays it back out in a specific order the state requires: Texas's $75 monthly personal needs allowance for the resident, Medicare and Medicare Supplement premiums, an allowance to a spouse still living at home if there is one, and the remainder as the resident's monthly co-payment toward the nursing facility bill. If the trustee accumulates money in the account instead of paying it out each month, that is a sign something is being administered wrong, not a benefit of the arrangement.
What it means if there is still a spouse at home
When one spouse enters a Medicaid-funded nursing facility and the other, the community spouse, remains at home, Texas allows a diversion from the QIT to bring the community spouse's income up to a protected floor, currently up to roughly $4,066 a month combined income for the community spouse. If the community spouse already earns more than that on their own, no diversion happens, since the protection is a floor, not an addition on top of existing income.
This detail matters in the Austin market specifically. A surviving spouse still paying a mortgage or HOA dues in Travis, Williamson, or Hays County on one income needs this allowance factored into the family's planning before, not after, the nursing home application goes in. Waiting until the application is filed to think about the at-home spouse's monthly budget is a common and avoidable stress point.
What a QIT will not fix
A Qualified Income Trust addresses income. It does nothing for the asset side of eligibility. If your parent has more than $2,000 in countable assets as a single applicant, or more than $3,000 combined for a couple where both are applying, that is a separate problem requiring separate planning, and a QIT will not touch it.
It also will not retroactively fix a period when income should have gone into the trust but did not. Because Texas applies the name-on-the-check rule, income received in a month and deposited into the trust the following month does not count for the earlier month. Families who set up the trust late sometimes lose a month of eligibility they could have had, simply on timing.
And it does not reduce what your parent actually pays for care. Nearly all of the trust income still flows to the nursing facility each month as the resident's co-payment. The trust is a qualification mechanism, not a cost-reduction strategy.
Setting one up: why this is not a do-it-yourself form
A QIT requires opening a dedicated bank account and drafting an irrevocable trust document that names a trustee, names the State of Texas as the remainder beneficiary, and follows the specific payment order Texas requires. The trust has to be funded correctly from the first eligible month, and some banks are unfamiliar with how these accounts work, which can itself cause delays.
Professional guidance is not legally required to create a Qualified Income Trust, but an incorrectly drafted or incorrectly funded trust defeats its own purpose. If it is set up wrong, the income still counts against the applicant, and the family is back to square one, often after losing weeks during an already stressful hospital-to-facility transition. Texas elder law attorneys who handle Medicaid planning set these up regularly, and the cost of getting it drafted correctly is small compared to what a denied or delayed application costs in private-pay nursing home bills, which is not a niche fee here. Given how tight the timeline usually is once a hospital discharge or facility placement is already underway, this is a case where the modest cost of legal help is generally worth paying rather than attempting the paperwork alone.
The question to ask before you assume you are over the limit
Before concluding a QIT is even necessary, run the actual numbers rather than a rough estimate. Some income is excluded from the calculation, and small differences in how a pension or annuity is categorized can matter. A family who assumes they are over the cap based on gross Social Security alone sometimes finds they are not once allowable deductions are applied, and a family who assumes they are fine sometimes finds a small pension pushes them over. Either way, this is a financial eligibility test worth getting precise numbers on before the application is filed, not after a denial letter arrives.
If your parent is applying for the STAR+PLUS waiver rather than nursing facility Medicaid, the same $2,982 income cap and the same QIT mechanism apply, with one difference: STAR+PLUS never covers assisted living room and board, so even a successful QIT-based approval leaves that cost with the family. That is a separate planning conversation from the income cap itself, but the two often arrive on a family's desk in the same week.
