New Jersey's Qualified Income Trust

In New Jersey, prior to December 2014, if a Medicaid applicant's income was higher than the allotted monthly income level allowed by the state, the applicant would be put into the Special Medically Needy Medicaid program. New Jersey decided to abolish the Special Medically Needy program. That left many applicants with too much money to qualify for Medicaid but not enough money to pay for nursing home costs. Realizing that this was a large issue, New Jersey created Qualified Income Trusts (QITs). They are sometimes referred to as Miller Trusts (based upon a court case with the same name).

Why would I need a Qualified Trust

New Jersey is an income cap state, which simply means that there is a finite amount of monthly income a Medicaid applicant can receive and still qualify for Medicaid coverage of long-term care costs. In New Jersey, the income limit is $2,313 (300% of the monthly SSI amount in 2019).

When a Medicaid applicant receives income that exceeds the monthly amount allowed, the applicant can become eligible by redirecting some or all of that income to an income trust. The money coming into the income trust is not counted when determining income eligibility for Medicaid. Because these trusts reduce the amount of income received directly by the applicant to an amount less than the income cap, they help the applicant qualify for Medicaid.

With an income trust, the monies are directed monthly into the trust, and that amount is then paid to the long term care facility. This essentially further reduces the amount that Medicaid pays for the cost of care for the Medicaid recipient. For example, say a person has Social Security of $2,000 and a Pension of $2,000 for total income of $4,000 per month. The applicant would create a QIT and have the Social Security check direct-deposited into the income trust. The Medicaid applicant will now qualify for Medicaid, because the pension is less than $2,313 and the Social Security is being paid to the QIT.

All of the applicant's income, including any income deposited into the trust account, is counted in determining the applicant's share of cost, which is the portion of medical expenses that remain the applicant's responsibility. The QIT can pay the Medicaid applicant a small personal needs allowance and, if married, it can pay the Medicaid applicant's spouse (called the community spouse) a monthly allowance. An income trust can also pay for Medicare premiums and medical costs not covered by Medicare and Medicaid.

A Medicaid applicant establishes a QIT by designating someone to serve as trustee and establishing a bank account in the name of QIT. The applicant's income is then direct-deposited into this newly created account. The account must be opened with a $0 balance or, a minimal amount required by the financial institution to open the account. No resources may be added to this type of trust. It can be composed only of income going to the individual.