Some government programs are means-tested, meaning they restrict the pool of eligible recipients by imposing financial eligibility requirements. Eligibility is determined after a review of the applicant’s assets and income. Assuming the applicant’s assets meet the eligibility standard, it’s still possible that their monthly income remains too high.

You will see this primarily with applicants for Medicaid long-term care services. The individual may meet the $2,000 asset limit for a Medicaid recipient, but have income well above the long-term care income cap. As of July 2020, the monthly income cap is $2,349/month. Medicaid applicants with monthly income exceeding this amount can still be eligible for services if they work with an experienced elder law attorney to create and fund an Income Cap Trust.

An Income Cap Trust is designed to hold the Medicaid recipient’s monthly income. Each month the recipient’s monthly income is deposited into a separate bank account opened in the Income Cap Trust. The Trustee of the trust (usually a spouse, child, etc.) ensures the money in the account is applied towards the individual’s care costs and other costs allowed by the Department of Human Services. If regulations are properly followed, the individual needing long-term care will not be disqualified from receiving Medicaid.