Additional Rules Concerning a Qualified Income Trust

            New Jersey permits a person to reduce his or her monthly income below the Medicaid income cap through the use of a Qualified Income Trust, also known as a QIT.  There are legal requirements, however, for the establishment of a QIT.

            The trust must provide that New Jersey is the primary beneficiary of the trust when the person passes away.  In addition, the trust must contain only income from the individual.  Federal and state law prohibits the deposit of assets into the trust.

            The rules governing a QIT differ in each state.  Some states allow a portion of a person’s income to be deposited into the QIT each month.  According to New Jersey law, an entire income from a source must be deposited into the QIT.  By way of illustration, if a person receives $1,200.00 gross per month from Social Security and a gross monthly income of $1,200.00 from a pension, then that person’s income is only $51.00 greater than the Medicaid income cap.  That person, however, will not be allowed to deposit $52.00 from Social Security or the pension into the QIT per month.  Rather, New Jersey law requires that $1,200.00 from either the pension or Social Security be deposited into the QIT each month.

            The Trustee must adhere to the laws that govern Medicaid eligibility.  New Jersey law requires that the Trustee provide an annual accounting of the distributions made from the trust.  New Jersey requires that the bank statements and documents relating to the QIT be provided each year to the County Board of Social Services.

            If all of the laws relating to the QIT are satisfied, then the income that is deposited into the QIT will not be considered “income” for purposes of determining Medicaid eligibility.  The income that is deposited into the QIT each month will reduce that person’s income for purposes of establishing Medicaid eligibility.

            If a person’s gross monthly income is more than the Medicaid income cap of $2,349.00, then he or she can still qualify for Medicaid as long as a QIT has been prepared and has been established and maintained in accordance with applicable federal and state Medicaid laws.

Qualified Income Trust Can Reduce Income to Qualify for Medicaid

            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.

Income Cap Changes for 2020

Medicaid is the only government long-term care insurance program.  Each of the 50 states, as well as Washington, D.C., has Medicaid to help individuals pay for their long-term care needs at home, in an assisted living facility and a nursing home.  In order to qualify for Medicaid, there are strict rules with respect to assets and income.

            In New Jersey, an individual is not allowed to own more than $2,000.00 of resources.  A resource is an asset that can be converted to cash, including most life insurance policies that have a cash surrender value.

            New Jersey is one of a number of states in our country that has an income cap.  If an individual’s income is greater than the income cap then that person will not qualify for Medicaid assistance.  The income cap is based upon a person’s gross monthly income.

            According to applicable law, the Medicaid income cap is based upon the maximum benefits that an individual can receive from Supplemental Security Income, also known as SSI.  The Medicaid income cap is calculated by taking the maximum SSI benefit per month and multiplying it by 300%.  In 2019 the maximum SSI rate was $771.00 per month.  This resulted in a Medicaid income cap of $2,313.00.

            Beginning January 2020, the maximum SSI monthly benefit is $783.00.  Therefore, the New Jersey Medicaid income cap is calculated as follows:  $783.00 x 300% = $2,349.00.

            In summary, an individual must now have a gross monthly income of no more than $2,349.00 to qualify for Medicaid in the State of New Jersey.

Change in Medicare Co-Payment for Skilled Care

If you require rehabilitation or therapy in a nursing home facility, then Medicare may provide some assistance to you, at least for the first several months.  According to federal law, Medicare will cover your skilled nursing care in a facility as long as certain requirements are met.  For example, you must have been receiving care in a hospital for at least three consecutive days immediately prior to your admission into the nursing home facility for care.  In addition, your care in the facility must be considered “skilled” rather than “custodial”.

            If a person requires help with activities of daily living rather than medical care, then that care may be considered custodial.  Medicare does not provide coverage for custodial care.  On the other hand, if a person requires rehabilitation, physical therapy and/or occupational therapy, then that care may be considered skilled, which is covered by Medicare.

            According to federal law, Medicare will provide payment in full for the first 20 days and then a portion of the remaining 80 days.  A federal regulation provides that there must be a daily co-payment equal to one-eighth of the hospital deductible amount.  Pursuant to this law, there was a daily co-payment of $170.50 for the 80 day period of time in 2019.  This daily co-payment, however, has increased effective January 1, 2020.

            Effective January 2020, the daily co-payment for care in a skilled nursing facility is $176.00.  Unless there is adequate coverage through supplemental health insurance, an individual who requires skilled care in a facility and receives payment from Medicare will still have an outstanding balance owed of $14,080.00 for a stay in a facility of 100 days.