In order to qualify for Medicaid to pay for long-term care, a person must have little assets and must also have a monthly income that is less than the “income cap”. Beginning January 2020, the Medicaid income cap in the State of New Jersey is $2,349.00.
If a person has a gross monthly income of more than $2,349.00, then he or she will not qualify for Medicaid assistance even if that person has virtually no assets. New Jersey, however, allows a person to reduce their gross monthly income below the income cap through the use of a special trust known as a Qualified Income Trust. The Qualified Income Trust is commonly referred to as a “QIT”.
In order to establish a QIT, a trust agreement is prepared and signed by the person who needs long-term care and another individual who is the Trustee. In many cases the individual who has power of attorney can sign the trust agreement on behalf of the individual who needs long-term care.
The trust agreement must set forth that the person’s monthly income will be deposited into the trust and will be utilized for that individual’s long-term care needs. The trust must be “irrevocable”. This means that the trust cannot be revoked or canceled.
Both federal and state law requires that the trust agreement provide for reimbursement of Medicaid benefits to the State of New Jersey. New Jersey must be the primary beneficiary of the trust agreement. When that individual passes away, then New Jersey will be reimbursed for all of the Medicaid funding that the person received from Medicaid. Any remaining balance of the trust assets will then be paid to the person’s beneficiaries and heirs.