My dad is in a nursing home on Medicaid. His income is from SS and a modest
pension. Some of this income goes through a Qualified Income Trust and then to
my mom as spousal diversion. She in turn pays a chunk to the nursing home each
month. I have no idea how to file their income tax. Any advice would be
I assume we are discussing what is usually referred to as a Miller
Trust. Your dad's income exceeds the allowable amount for Medicaid and
under state rules the trust was created. The trust can provide a benefit
to the well spouse as long as the well spouse's income is below a
certain threshold. This trust is a grantor trust. As such, it is
disregarded for tax purposes. A tax return for your father (I assume it
will be a joint return with his spouse) is filed in the normal manner.
I.e., income would include any of the line items you see on a 1040. The
trust does not file a tax return.
Usually, the state department (E.g., Dept. of Human Services) that runs
the medicaid program sets the guidelines for creating the trust and
typically requires an annual accounting (not a tax return).