by Jose D. Roman | Jan 21, 2025 | Estate Administration, Medicaid
Medicaid provides crucial health coverage for individuals and families with limited income and resources, as well as people who require long-term nursing care. However, many recipients and their families may not realize that Medicaid is often entitled to be paid back after the recipient dies. Let’s talk about Medicaid Estate Recovery in New Jersey.
What Is Medicaid Estate Recovery?
Medicaid Estate Recovery is a federal requirement that obligates states to recover the costs of certain Medicaid benefits paid on behalf of a recipient after their death. This means that New Jersey’s Medicaid program may seek reimbursement from the estate of a deceased Medicaid beneficiary for services provided.
When Does Medicaid Estate Recovery Apply?
In New Jersey, Medicaid Estate Recovery applies in the following cases:
- Age 55 and Older: Medicaid benefits provided to individuals aged 55 or older are subject to estate recovery. This typically includes expenses related to nursing home care, home and community-based services, and other long-term care costs.
What Assets Are Subject to Recovery?
The state can only recover from assets that are part of the deceased’s probate estate. In New Jersey, this includes assets owned in the individual’s name at the time of death, such as:
- Real property (e.g., a home)
- Bank accounts
- Investments
Assets held jointly, in a trust, or designated with a beneficiary (like life insurance) may not be subject to recovery or recovery may be delayed, depending on the structure of ownership.
Are There Any Exceptions?
- Hardship Waivers: Families may apply for a hardship waiver if estate recovery would create significant financial hardship for survivors.
- Surviving Spouse: Recovery is deferred until the death of the Medicaid recipient’s surviving spouse.
- Dependent Family Members: If the deceased has a surviving child under age 21, or a blind or disabled child of any age recovery is postponed.
- Home Exemptions: If an adult child lived in the home and provided care that delayed the need for Medicaid benefits, the home may be exempt from recovery.
How to Protect Assets from Medicaid Estate Recovery
There are legal strategies to safeguard assets, but they require careful planning well in advance:
- Creating Trusts: Irrevocable trusts can shield assets from probate and Medicaid recovery.
- Gifting Assets: Transferring assets to family members or others, while adhering to Medicaid’s 5-year look back period rules, can minimize exposure.
- Joint Ownership: Structuring assets as jointly owned with right of survivorship can limit probate exposure.
- Exempt Transfers: Some transfers of assets are exempt from Medicaid’s 5-year look back.
Conclusion
These rules are complicated and confusing, even for the average attorney. It is essential to consult with an attorney who specializes in elder law to explore these strategies and implementing a plan that complies with both federal and your state’s Medicaid regulations.
by Jose D. Roman | Jan 15, 2025 | Medicaid, Trusts
For many individuals in New Jersey, Medicaid serves as a lifeline for accessing essential healthcare services, especially under the Managed Long-Term Services and Supports (MLTSS) program. MLTSS provides coverage for home-based care, assisted living, and nursing home services. For the vast majority of individuals, qualifying for Medicaid is the only way to pay for long-term nursing care. However, since Medicaid was designed to only help people with very low income and assets, qualifying for Medicaid in New Jersey can be complex, particularly for individuals with income exceeding the program’s strict limits. One effective tool for overcoming this hurdle is a Qualified Income Trust (QIT).
What Is a Qualified Income Trust (QIT)?
A Qualified Income Trust, also referred to as a Miller Trust, is a legally established irrevocable trust that allows individuals to meet Medicaid’s income requirements. For individuals whose income exceeds Medicaid’s eligibility threshold, a QIT serves as a vehicle to redirect excess income, ensuring compliance with program limits.
Under New Jersey’s 2025 Medicaid guidelines, the monthly income limit for an individual applying for MLTSS Medicaid is $2,901. Income exceeding this threshold typically disqualifies an applicant. However, with a QIT, the applicant can deposit the source of the excess income into the trust, effectively reducing their countable income to meet the eligibility criteria.
Key Features of a QIT
- Irrevocability: A QIT must be irrevocable, meaning it cannot be changed or canceled once it is created.
- Income Source: Only income can be deposited into the trust, not assets or resources. The entire amount of whatever source is causing the excess income must be deposited into the QIT. For example, if the applicant receives both a pension and a social security check and the pension check is causing the excess income, the entire amount of the pension check must be placed into the trust each month.
- Name Medicaid as Beneficiary: The trust must name the State of New Jersey as the primary beneficiary upon the Medicaid recipient’s death. This ensures that any remaining funds in the trust are used to reimburse the state for Medicaid benefits paid. The law requires Medicaid recipients over the age of 55 to reimburse the state for benefits paid.
- Limited Use of Funds: Funds deposited into the QIT can only be used for specific purposes, such as paying the Medicaid recipient’s share of the cost for long-term care services, personal needs allowances, and medical expenses not covered by Medicaid. A successful Medicaid applicant will receive instructions from the state on how the income must be spent each month. The funds must be spent before the end of each month in accordance with these instructions or coverage could be terminated.
Steps to Establish a QIT:
- Drafting the Trust: Using the template provided by the state, individuals can draft the QIT document themselves. Alternatively, consulting an attorney is recommended for those who prefer personalized guidance or have complex financial situations.
- Setting Up a Bank Account: A separate bank account is opened in the name of the trust. The entire source of income exceeding Medicaid’s limit must be deposited into this account each month.
- Ongoing Administration: Proper administration of the trust is crucial. Funds must be managed according to the state’s guidelines and instructions, with detailed records kept of deposits and disbursements.
To further assist individuals, the State of New Jersey has published a helpful QIT FAQ document, which addresses common questions and provides detailed guidance on setting up and administering a QIT. You can access this resource at QIT FAQs.
Benefits of Using a QIT
- Medicaid Eligibility: A QIT allows individuals with income above Medicaid’s limits to qualify for Long Term Medicaid. It prevents excess income from disqualifying applicants while ensuring compliance with program requirements.
- Access to Long-Term Care: By meeting Medicaid’s income requirements, individuals can access essential long-term care services they might otherwise be unable to afford.
Final Thoughts
While a QIT is a powerful tool, it is not without challenges. Many individuals are intimidated and confused by the process. The trust must be established and managed in strict compliance with Medicaid regulations. Any misstep in administering the trust could jeopardize Medicaid eligibility. Additionally, creating and maintaining a QIT involves administrative responsibilities, which require attention to detail.
For individuals who are confident in their ability to follow the state’s guidelines, the free QIT template offers a cost-effective solution. However, consulting an experienced elder law attorney is highly recommended for those who are seeing to preserve assets or prefer expert guidance and want to ensure that all of their Medicaid planning questions are addressed.
by Jose D. Roman | Nov 27, 2024 | Estate Planning, Medicaid
Qualifying for Medicaid is often the only way most individuals can afford long term nursing care, whether that care is received in a long term care facility such as a nursing home or at home. In New Jersey, a long term Medicaid applicant is only permitted to have $2,000.00 in available assets in order to qualify. Many individuals are required to “spend down” their assets to meet the $2,000.00 limit. One tool that can help individuals qualify for Medicaid, while also saving for inevitable funeral expenses is to establish an Irrevocable Funeral Trust. In this post, we’ll explore what an irrevocable funeral trust is, how it works, and how it can assist with Medicaid planning in New Jersey.
What Is an Irrevocable Funeral Trust?
An Irrevocable Funeral Trust is a legal arrangement that allows individuals to set aside funds to cover funeral and burial expenses. Once funds are placed in the trust, they are managed by a trustee and cannot be withdrawn, altered, or revoked by the individual who established the trust. This ensures the money is exclusively used for pre-arranged funeral costs. While the funds are irrevocable, it is often easy to reassign the funds to a different funeral service provider.
Unlike a revocable trust, which can be changed or terminated, an Irrevocable Funeral Trust offers specific benefits, particularly in the context of Medicaid planning. The funds in an Irrevocable Funeral Trust are generally exempt from being counted as an asset when determining Medicaid eligibility. With the average New Jersey funeral costing in the $10,000.00 to $15,000.00 an Irrevocable Funeral Trust can be a powerful planning tool.
How Does an Irrevocable Funeral Trust Work?
- Establishing the Trust:
- The individual works with a funeral provider or financial institution to set up the trust. They specify the funeral and burial arrangements they want, including items such as a casket, service, and burial plot.
- Funding the Trust:
- The individual transfers a sum of money into the trust, typically based on the anticipated costs of the funeral and burial arrangements.
- Management of Funds:
- The funds are managed by the trustee and used exclusively for the purposes outlined in the trust. Any remaining funds after the funeral services will revert to the State of New Jersey if you are a Medicaid recipient or in other cases to your estate.
Benefits of an Irrevocable Funeral Trust for Medicaid Eligibility
Medicaid is a need-based program, meaning applicants must meet strict income and asset limits to qualify. In New Jersey, individuals often find it challenging to meet these requirements while also setting aside money for necessary future expenses. Here’s how an Irrevocable Funeral Trust can help:
- Asset Protection:
- Funds placed in a Medicaid compliant Irrevocable Funeral Trust are not counted as part of an individual’s assets for Medicaid eligibility. This means you can reserve money for funeral expenses without jeopardizing your ability to qualify for Medicaid.
- Spend-Down Strategy:
- If an individual has excess assets that prevent them from qualifying for Medicaid, funding an Irrevocable Funeral Trust can be an effective spend-down strategy. By transferring assets into the trust, the individual reduces their countable resources while ensuring their end-of-life expenses are covered.
- Peace of Mind:
- An Irrevocable Funeral Trust provides certainty that your funeral and burial arrangements are pre-funded and will not burden your loved ones during a difficult time.
Key Considerations for New Jersey Residents
- State-Specific Rules:
- New Jersey has specific guidelines regarding how the funds in an Irrevocable Funeral Trust can be spent. Services ancillary to the funeral costs may not be permitted. Some states also have a maximum contribution limit. It is essential to work with a knowledgeable professional to ensure compliance with these limits.
- Irrevocability:
- Once funds are placed in the trust, they cannot be withdrawn or repurposed. This is a binding arrangement, so careful planning is crucial.
- Choosing a Trustee:
- Select a reputable funeral home or financial institution to manage the trust. Transparency and reliability are key factors to consider. In New Jersey, Funeral Planning CHOICES, the New Jersey Prepaid Funeral Trust Fund is the leading funeral prefunding product in the state and one of the largest prepaid funeral trusts in the country.
Final Thoughts
An irrevocable funeral trust can be a valuable part of Medicaid planning for New Jersey residents. It offers a way to preserve assets, ensure Medicaid eligibility, and relieve loved ones of financial and emotional burdens associated with end-of-life arrangements. However, navigating the complexities of Medicaid and trusts requires careful planning and professional guidance.
If you’re considering an IFT, consult with an elder law attorney or a trusted funeral director to ensure that your trust is properly established and aligned with New Jersey’s requirements.