How Qualified Income Trusts Unlock Medicaid Benefits: A Comprehensive Guide - Part 1

The Omnibus Budget Reconciliation Act of 1993 introduced Qualified Income Trusts (QITs, also called Miller Trusts), detailed in Section 1917 (d)(4)(B) of the Social Security Act (42 U.S.C. § 1396p(d)(4)(B)). New Jersey adopted the use of QITs effective December 2014. 

What is a QIT? 

A QIT is an irrevocable trust structured to legally divert an individual or married couple's income into a separate entity. This arrangement ensures that the income is disregarded when determining eligibility for Medicaid coverage for institutional care and home services. It's crucial to differentiate QITs from other types of trusts such as special needs trusts or living trusts. The singular purpose of a QIT is to establish a legal avenue for Medicaid eligibility for those whose income exceeds the limit for assistance but is insufficient to cover essential care expenses. In other words, any surplus income placed into the QIT doesn't factor into the applicant's Medicaid eligibility assessment in New Jersey. It is important to note that QITs can be used with all New Jersey Medicaid programs including Assisted Living, Skilled Nursing, and At-Home Care.

How do I know when I need a QIT?

A QIT is necessary only for an individual seeking Medicaid benefits. If the applicant's gross monthly income surpasses the income cap set for the current year, then a QIT is required. The 2024 income limit for a single applicant seeking assisted living, nursing home, or home services Medicaid is $2,829 a month. For a married applicant where only one spouse is applying, the income limit is the same. If both spouses are applying, the income limit is $5,658. It is worth emphasizing that all of a beneficiary's monthly income must go toward the facility cost except for a personal needs allowance (which is $50 a month), Medicare premiums, and potentially a needs allowance for a non-applicant spouse. Additionally, the applicant must meet all other eligibility guidelines for New Jersey Medicaid, such as being clinically eligible. 

In order to create a QIT, it's essential to prepare the required trust documents, set up a separate bank account, and deposit any surplus income into the account every month. Meeting the strict guidelines is imperative to ensure that the QIT aligns with Medicaid eligibility criteria.

What guidelines must be met when establishing a QIT in New Jersey?

1. Only the applicant, their Power of Attorney, or their legal Guardian can sign the QIT.
2. The QIT documents must explicitly state that the Trust is irrevocable.
3. A Trustee and Successor Trustee must be designated for administrative duties, excluding the Medicaid applicant.
4. The State of New Jersey must be the primary beneficiary of remaining funds upon the Medicaid applicant's death.
5. Only the applicant's income may be deposited into the QIT; spousal assets or income are not permissible.
6. The applicant cannot split a deposit from the same payment source (for example, a social security check for $1,000 cannot be broken into $500 inside the trust and $500 outside the trust).
7. The QIT must be funded in the month of the desired eligibility date.
8. The QIT should be established by the last day of the preceding month to ensure the desired effectiveness date.
9. The Trust must receive funding each month and by the month's end for every period of eligibility.
10. The maximum allowable deposit into the Trust upon establishing the bank account is $20.00.
11. Failure to deposit income into the Trust in any given month renders the applicant ineligible for that month.
12. In cases requiring retroactive coverage, failure to establish or properly fund the QIT results in retroactive eligibility denial.
13. Funds placed in the Trust are solely for post-eligibility medical expenses; any other transaction will void the Trust and jeopardize New Jersey Medicaid eligibility for that month.
14. All QITs are subject to review and approval by Medicaid eligibility personnel.