Qualified Income Trusts (QITs) and Medicaid Eligibility in New Jersey
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.