Qualified Income Trusts

Qualified Income Trusts (QIT’s)

New Jersey Medicaid can pay for care in a nursing home, assisted living facility, or at home with aides, but only if your countable income is less than $2,199 per month (inflation adjusted after 2016). Nevertheless, if you receive more income than the Medicaid limit, you still can get long term care Medicaid with a qualified income trust (QIT), also known as a Miller trust.

To use a qualified income trust, excess income is paid into a bank account opened by the qualified income trust. However, a qualified income trust is more than just a bank account. It is managed by a trustee and governed by a trust agreement that satisfies Medicaid rules. If the QIT is drafted and administered in compliance with Medicaid rules, then the excess income won’t disqualify you from Medicaid.

You must direct the entire source of income into the QIT trust account. For example, if you receive $999 monthly in Social Security and $1,500 monthly from a pension, your income of $2,499 is $300 over the Medicaid income limit ($2,199). It may appear that you need deposit only $300 of your income into the qualified income trust account to qualify for Medicaid. But under Medicaid rules, you have to deposit the entire income source – either the full $999 Social Security check, or the full $1,500 pension check.

A qualified income trust may be spent only by the trustee in accordance with both the trust agreement and Medicaid rules. The bulk of the trust will go to the nursing home or assisted living facility (to pay for the resident’s share of the facility cost) and any spousal income share. For people receiving care at home, there is more flexibility in how a qualified income trust can be spent. Still, a qualified income trust must follow detailed rules to avoid Medicaid disqualification. Any remainder left in the QIT account when you die is paid to Medicaid.

In most situations a family member such as a spouse, child or sibling will serve as trustee. The trustee may be entitled to a small fee, but in many cases no fee will be available.

FriedmanLaw can help you qualify for long term care Medicaid with a QIT / Miller trust.

Medically Needy

Because Miller trusts replaced the Medically Needy Medicaid program for long term care, you no longer can apply for Medically Needy Medicaid to fund long term care in New Jersey. However, folks who already received Medically Needy benefits before December 2014 are “grandfathered” and continue to receive Medically Needy benefits and do not need a Miller trust.

However, if you lose eligibility for Medically Needy and then re-apply to Medicaid, you probably will have to use a Miller trust.

Why “Miller”?

Qualified income trusts arise from the case Miller v. Ibarra, 746 F. Supp. 19 (D. Colo. 1990). Jeannette Miller was representative of the lead plaintiff, who sued the Colorado Department of Social Services. The lawsuit sought to change the previous state of affairs in which seniors and people with disabilities could have too much income to qualify for Medicaid, but not enough income to pay for a nursing home. The lawsuit succeeded, and “Miller” trusts were born.

Qualified income trusts are now codified into federal law, at 42 U.S.C. 1396p(d)(4)(B).  But the old name stuck.

Do I need a lawyer to set up a Miller trust?

You may be able to create a QIT / Miller trust yourself using a DMAHS template, but what if you don’t do it correctly? Actually setting up and administering a Miller trust is complex and full of thorny issues. Banks may not cooperate, the trust may not be established correctly, income might not be directed properly, the trustee might fail to comply with arcane rules– all of which can disqualify you for Medicaid. With most nursing homes costing around $10,000 a month, a simple mistake can prove expensive.

Moreover, QIT’s / Miller trusts often must be coordinated with other components of a Medicaid plan. Like other Medicaid laws, Qualified Income Trust (QIT) law is exceedingly complex, and if you try to do planning yourself you could end up being disqualified for Medicaid for a long time or losing a large chunk of your assets.

For something that important, it’s worth working with knowledgeable counsel.