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 originates under Federal law(s) 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. This exemption allows a higher-income individual 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 several mandatory rules and requirements that must be closely followed when establishing and funding a QIT. 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 comply with federal regulations. At Hanlon Niemann & Wright, we prepare many QITs and counsel hundreds of families on their use and compliance details.
- 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, from a bank savings account, or from the sale of stock and/or personal property (i.e., a car);
- The QIT must be irrevocable; it cannot be a revocable trust.
- The QIT must have a trustee to manage the trust’s administration, including deposits, 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 the Trustee must pay 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 after Medicaid approval. 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 any balance remains after these expenses are paid, it must remain in the QIT bank account.
Please feel free to contact Fredrick P. Niemann, Esq., with questions about using a QIT to obtain eligibility for NJ Medicaid or to apply for NJ Medicaid approval.
You can call Fred at (732) 863-9900 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