Understanding the Need for a Qualified Income Trust (QIT) to Qualify for Medicaid

The State of New Jersey Now Mandates the Use of a Qualified Income Trust (QIT) for Excess Income to Qualify for Medicaid Long-Term Care

A QIT finds its origin under Federal law(s) which have been adopted by the state of New Jersey. A QIT is a trust document tied to a special bank account. The primary function of a QIT is to exempt an individual’s income above 300% of the Federal Benefit Rate (FBR) to establish Medicaid eligibility. It is because of this exemption that a higher income individual is able to qualify for Medicaid. For this income to be disregarded, it MUST be deposited monthly into a bank account under the name of the QIT. Checks deposited into a QIT bank account must include the entire dollar amount of that income source, (for example, a social security check for $1,000 cannot be broken into $500 inside the trust and $500 outside the trust), the entire social security check must be deposited inside or outside the trust. There are a number of mandatory rules and requirements that must be closely followed when establishing and funding a QIT, otherwise Medicaid will reject your application. I will discuss these rules and procedures with you now.

Understanding the Use of a Qualified Income Trust

Medicaid eligibility for home-based and assisted living MLTSS using a QIT will be approved after the following conditions are satisfied:

  • The Medicaid application is filed and successfully processed by the County Board of Social Services (CWA);
  • The QIT document is drafted, signed, and then approved by the CWA to ensure its terms are in compliance with federal regulations. At Hanlon Niemann & Wright, we prepare many QITs and counsel hundreds of families on their use and the details of compliance.
  • A medical eligibility examination (Pre-Admission Screening (PAS)), for an institutional level of care, is conducted and approved by the Division of Aging Services.

All QIT documents must include the following provisions:

  • The QIT must contain only the income of the individual applying for Medicaid; no one else.
  • The QIT must not contain resources such as money received from the sale of a home or from a bank savings account or the sale of stock and/or personal property (ie. a car);
  • The QIT must be irrevocable; it cannot be a revocable trust;
  • The QIT must have a trustee to manage the administration of the trust including deposits and income and disbursements in compliance with federal and state law;
  • New Jersey must be named the first and primary beneficiary of any funds remaining in the trust upon the death of the Medicaid recipient and his spouse, if married; up to the amount paid for Medicaid benefits.
  • Income deposited into the QIT can only be used to pay for the Medicaid applicant’s cost share obligation as calculated by the state, once applied.

The order of deductions that must be paid by the Trustee from the trust following Medicaid approval is outlined in federal regulations.

New Jersey controls the priority and order of payments that can be made from a QIT once Medicaid is approved. They are as follows:

  • A Personal Needs Allowance or Maintenance Needs Allowance (based on your living arrangement) comes first, then;
  • A Spousal support and/or family member or dependent maintenance allowance is second;
  • Then an Allowance for unpaid but approved medical expenses;
  • Then health insurance premiums;
  • Finally, cost share contributions for room and board or community residential expenses for home or assisted living care.

Fredrick P. Niemann Esq.

The trustee of the QIT may only be compensated if there is money remaining in the QIT bank account after all Post-Eligibility expenses and cost share payments have been made. The trustee fee may be up to 6% of the income deposited into the QIT bank account each month. All post-eligibility expenses and cost share expenses must be paid by the trustee whether the income is inside or outside the QIT bank account. If there is a balance left after these expenses are paid, it must remain in the QIT bank account.

Please feel free to contact Fredrick P. Niemann, Esq. with questions concerning the use of a QIT to obtain eligibility for NJ Medicaid or applying for NJ Medicaid approval.

You can call Fred toll free (855) 376-5291 or email him at fniemann@hnlawfirm.com to set up an office consultation at your convenience. He welcomes your inquiries.



By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Medicaid Attorney