What Can an Income Trust Pay For in South Carolina?
South Carolina's Income Trust form (Form 905) says the trust's money is distributed each month for expenses related to the beneficiary's care that South Carolina Medicaid allows, never more than the Medicaid rate. SCDHHS's manual lists the deductions taken first, including a personal needs allowance, a trustee fee and bank charges; the remainder goes to the cost of care, and anything above the facility's Medicaid rate is left to accumulate in the trust. Every item below is cited to SCDHHS's own published rules; where SCDHHS says nothing about an item, this page says so instead of filling the gap. This guide is informational only and is not legal or financial advice.
Income goes into a South Carolina Income Trust each month, and the trustee may pay it out only for the purposes SCDHHS allows. Paying for anything else can put eligibility at risk. Here is the list, with the SCDHHS source for each item.
What SCDHHS's rules allow
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Personal needs allowance
$60 a month in a nursing facility (more with work therapy); for someone on a home and community-based waiver, the allowance equals the Medicaid cap.
Source: SCDHHS Medicaid Policy and Procedures Manual 304.19.06
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Trustee fee
$10 a month to manage the trust; a higher amount must be approved by SCDHHS.
Source: SCDHHS Medicaid Policy and Procedures Manual 304.19.06
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Bank charges
Actual bank charges on the trust account, up to $20 a month.
Source: SCDHHS Medicaid Policy and Procedures Manual 304.19.06
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Income taxes owed by the trust
Federal or state income taxes owed by the trust (not the individual), once per calendar year.
Source: SCDHHS Medicaid Policy and Procedures Manual 304.19.06
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Court-ordered guardianship fees
The lesser of 10% of gross income or $25.
Source: SCDHHS Medicaid Policy and Procedures Manual 304.19.06
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Community spouse and dependent family
An allowance the institutionalized spouse chooses to give the community spouse, up to $4,066.50 a month less the spouse's income, and allowances for other dependent family members.
Source: SCDHHS Medicaid Policy and Procedures Manual 304.19.06
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Health insurance premiums
Premiums paid by or for the beneficiary from the beneficiary's funds, not including Medicare Parts A and B.
Source: SCDHHS Medicaid Policy and Procedures Manual 304.19.06
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Home maintenance and medical expenses
A home maintenance allowance, if any, and medical expenses not paid by a third party, which the nursing facility adjusts in its billing.
Source: SCDHHS Medicaid Policy and Procedures Manual 304.19.06
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Cost of care
The remainder pays the cost of care, up to the facility's monthly rate; for home and community-based services, SCDHHS bills the trustee monthly.
Source: SCDHHS Medicaid Policy and Procedures Manual 304.19.06 and 304.19.07; Form 905
The order payments are made in
SCDHHS's manual lists the deductions in this sequence: personal needs allowance, trustee fee, guardianship fees, bank charges, income taxes, family allowances, health insurance premiums, home maintenance, medical expenses. It doesn't describe the sequence as a required order, and Form 905 lists the categories without one.
Trustee and bank fees
Form 905 and the SCDHHS manual describe fees differently. The form keeps $10 a month in the trust for upkeep, such as bank charges, an annual tax return, required reports, and trustee pay if no one is available to serve without pay. The manual allows a $10 trustee fee (more with SCDHHS approval), actual bank charges up to $20 a month, and income taxes owed by the trust once a year.
What the trust can't be used for
Form 905 says none of the money in the account may be used for any purpose except expenses the Medicaid agency authorizes, and the trust's payments for services can't exceed the Medicaid reimbursement rate. Excess funds used for any other purpose may be treated as a transfer of assets or as countable income (SCDHHS manual).
Timing, and money left over
Distributions are monthly. Funds left after the required distributions and allowable deductions are kept and accumulated in the trust (Form 905). In income trust cases, income is not protected in the months of entry and discharge (SCDHHS manual).
Keeping the monthly record
The trustee is the one who has to show that the trust paid only these items. A month-by-month record of every deposit and every payment, checked against the bank statement, is what makes that easy to show when SCDHHS asks.
Related: who can be the trustee in South Carolina, what happens to the money at death, and the Miller Trust trustee guide for how the monthly cycle works in every state.
Trust not open yet? The account comes first
None of these payments can start until the trust account exists, and most branches have never opened one. Free one-pager: the questions to ask before you drive to a branch, emailed now. Then 4 more short emails over the next 10 days — then we stop.