Medicaid Eligibility and the Qualified Income Trust (QIT)

Eligibility for Medicaid long-term care assistance depends on several factors, including:

• Citizenship/residency
• Being aged, blind, or disabled
• Asset limits
• Income limits

Certain types of assets are non-countable and will not affect eligibility. However, the income cut-off is a clear line: as of 2018, an applicant may not have more than $2,250 in monthly income. With typical nursing home costs in New Jersey ranging from $6,000-10,000 per month, it’s easy to see the problem. A New Jersey resident in need of long-term care who has few assets but more than $2,250 in monthly income may not be able to afford to pay for care, even using every dollar of income. But, he or she will also be ineligible for assistance to cover the cost of that care.

Fortunately, a new option became available in 2014. Now, an income-ineligible applicant who is otherwise qualified for Medicaid long-term services can become eligible through the use of a qualified income trust (QIT), also known as a “Miller trust.”

What is a Qualified Income Trust?

A QIT is an irrevocable trust created specifically to receive and hold excess income. This income is ignored in determining eligibility for Long Term Services and Supports. However, strict rules apply to the structure of the trust, management of the income and the trust itself, and distribution of trust assets.

Key requirements include:

• The QIT must be funded during the month the applicant is seeking eligibility
• A trustee other than the Medicaid recipient must be appointed to administer the trust
• Only income may be deposited into the trust; it cannot hold resources such as funds from the applicant’s bank account or proceeds from the sale of an asset
• Income must be deposited into the trust in the month in which it is received
• Income deposited in the QIT can be used only for specific purposes
• The state of New Jersey must be designated as beneficiary of any trust assets remaining after the Medicaid recipient’s death, up to the amount paid on behalf of the recipient

Use of QIT Funds

Although funds paid into a qualified income trust are ignored for purposes of determining eligibility, all income is considered in determining the Medicaid recipient’s cost share for care. Funds in the trust are subject to the same rules and application as other income under the post-eligibility treatment of income rules.

Allowed uses, in order of priority, include:

• A small monthly “personal needs” allowance to the resident
• A monthly allowance for maintenance of a spouse living independently, which is determined by subtracting the spouse’s own income from a monthly maximum
• State-approved medical expenses that are not covered by Medicaid
• Cost share paid to the long-term care facility

Eligibility Rules Involving Income and Assets Can Be Complicated

When something as important as your medical care or your spouse’s access to adequate income and assets to live independently is at stake, you can’t afford to take chances. Although New Jersey law provides exemptions and processes to assist the elderly and disabled in accessing the care they need, the analysis and processes can be technical and complicated.

Working with a New Jersey estate planning attorney who is experienced in long-term care planning can simplify the process and help you avoid costly mistakes. While early planning is in your best interest, it is never too late to take a strategic approach. Get knowledgeable guidance before making decisions you may regret.