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Using Qualified Income Trusts to Qualify for Medicaid to Fund Long Term Care

Posted on: September 21st, 2018 by Lawrence A. Friedman

To qualify for Medicaid to fund long term care in New Jersey, your monthly Medicaid countable income must not exceed Medicaid income caps– $2,250 per month for an unmarried applicant in 2018. However, not all receipts are Medicaid countable income, and even if your Medicaid countable income exceeds long term care Medicaid income caps, you still may be able to qualify for Medicaid to fund long term care in New Jersey by placing excess. Medicaid countable income into a qualified income trust

A qualified income trust (sometimes called a QIT or Miller trust) may help you get Medicaid even if your Medicaid countable income exceeds Medicaid limits. However, not everyone is a candidate for a qualified income trust / QIT and not every QIT / Miller trust will lead to Medicaid approval. To succeed, a qualified income trust / Miller trust must be drafted, funded, administered, and spent correctly.

A QIT / Miller trust must be drafted in accordance with both Medicaid guidelines and New Jersey’s Uniform Trust Code or it will not lead to Medicaid eligibility. To be administered and spent properly, the trust must pay solely for expenditures allowable under Medicaid rules. These include certain care costs, medical expenses facility charges, and some other kinds of purchases. You may lose Medicaid if your qualified income trust pays for items not allowed by Medicaid authorities.

To properly fund a QIT / Miller trust, all of each income item that would cause Medicaid countable income to exceed Medicaid limits should be deposited into the qualified income trust. However, while you are not required to place every receipt into the qualified income trust, if you deposit any of a particular income item into the QIT, you must put that entire item into the Miller trust. Partial deposits are not allowed. For instance, you may choose to deposit into the QIT both your pension and Social Security or only one of your pension and Social Security, but you can’t place only part of the pension or part of the Social Security into the qualified income trust.

In many cases it will be advantageous to deposit all of your monthly income into the Miller trust/ QIT. However, if income would be left in the QIT after paying out all amounts authorized by Medicaid authorities, savings could prove greater if you don’t deposit all income items into the QIT. This is due to the interplay of QIT and Medicaid gift penalty rules, which is far too complex to discuss further in brief blog post.

Like so much of Medicaid planning, Medicaid qualified income trust rules contain many traps for the unwary. Therefore, it is risky to do it yourself without professional guidance. FriedmanLaw welcomes your inquiries on Medicaid planning and QITs / Miller trusts.

For further information on qualified income trusts / Miller trusts see Mark Friedman’s May 10, 2018 post on this blog titled NJ Medicaid and Qualified Income Trusts.”

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