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Understanding Qualified Income Trusts in New Jersey

Medicaid has a monthly income cap. In 2016 the income cap is $2,199 gross income per month. That means if your gross monthly income exceeds $2,199 then you must estate a Qualified Income Trust (QIT) before you can qualify for Medicaid benefits. You monthly income in excess of $2,199 is placed into the QIT. Once that is established you can qualify for Medicaid benefits as long as you meet all other Medicaid eligibility requirements.

Conditions for a Valid QIT

A valid QIT must meet the following conditions:

  • The trust must contain only income of the Medicaid applicant;
  • The trust may not contain resources of any sort;
  • The trust must be irrevocable;
  • The trust must be managed by a trustee and the trustee cannot be the beneficiary;
  • The State of New Jersey must be the first remainder beneficiary up to the amount of all Medicaid benefits paid on behalf of the individual;
  • Income deposited in the trust can only be used for specified post-eligibility treatment of income and to pay for the cost of care.

Managing a QIT

Income that can be deposited into a QIT includes, but is not limited to, Social Security, pension and rental income. Some or all of the income can be directed to the QIT but all of the income from any one source must be deposited into the trust. The trust must have its own bank account and there can be no other individual, other than the trustee, who has access to or ownership of those funds. The community spouse's funds cannot be placed into the trust.

Using the Funds in a QIT

New Jersey law governs who can be a trustee. The beneficiary cannot be a trustee. The trustee's responsibility is to disburse assets from the trust on a monthly basis and make payments in the following order of priority no later than the last day of the month in which the income is received:

  • The personal needs allowance for the beneficiary;
  • Payment to the community spouse sufficient to cover the minimum monthly maintenance needs allowance;
  • Incurred medical expenses of the beneficiary as determined by the New Jersey Medicaid program;
  • The cost of medical assistance provided to the beneficiary;
  • Up to $20 a month for banking costs;
  • The trustee's fee of up to 6% of the income paid to the trust that month as compensation.

Any other payments from the trust shall invalidate the trust and income of the beneficiary placed in the trust will be counted toward the $2,199 income cap.

Terminating the QIT

The QIT terminates when the beneficiary ceases to receive Medicaid benefits. Upon termination the trustee shall notify the New Jersey Department of Human Services, Division of Medical Assistance and Health Services. The trustee, upon termination, shall distribute to the Division any remaining trust property up to an amount equal to the total Medicaid expenditures paid on behalf of the beneficiary. Any funds remaining after payment to the State shall be distributed as set forth in the trust.

We Can Help You

Contact Price and Price for assistance with this and all Medicaid issues - Medicaid/asset protection planning or long-term care planning, Medicaid applications, qualified income trusts and estate planning. We can help you create and fund your QIT. We are familiar with all rules and regulations as they relate to QITs and Medicaid applications in general. Let us help you with this most important issue.