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.