Maybe you’re not ready for a nursing home but imagine being forced into institutional care to gain eligibility to receive Medicaid coverage. That was the reality for many people who could not afford assisted living or home care but did not qualify for government assistance. That is, until a pivotal change in the law.
Historically, Institutional Medicaid offered two major programs: Medically Needy and Medicaid Only. Program eligibility is based on whether an individual’s income exceeds the “income cap,” which is $2,199 in 2015.
- The Medicaid Only program is offered to individuals whose income is below the income cap. This program paid for long-term in-home care, assisted living care, and nursing home care.
- The Medically Needy program is offered to individuals whose income exceeds the income cap but it only covers long-term care in a nursing home.
On December 1, 2014, New Jersey’s Institutional Medicaid Program eliminated the Medically Needy Program. Now, individuals earning income in excess of the “income cap” may establish a Qualified Income Trust, also commonly referred to as a Miller Trust. Individuals who were receiving benefits through the Medically Needy program prior to December 1 will be grandfathered in and remain eligible for benefits.
What You Need to Know About Qualified Income Trusts
Qualified Income Trusts (QIT) were established by the Omnibus Budget Reconciliation Act of 1993 and are referenced in Section 197 (d)(4)(B) of the Social Security Act. There are specific rules to follow for these accounts, such as payments that need to be made each month to maintain eligibility as set forth under federal and state law. Here’s what you need to know.
- The Trust must have a grantor (you, your spouse, someone acting on your behalf) and a trustee (someone other than you who has the responsibility of managing the income in the Trust).
- If your income exceeds $2,199, a Qualified Income Trust must receive your income in order for you to become eligible for long-term nursing home care benefits. A Medicaid applicant’s income in excess of the eligibility criteria is distributed to a Qualified Income Trust. Funds that are deposited into a Qualified Income Trust account are not counted as income in determining eligibility for Medicaid.
- If your monthly income is above 300% of the Federal Benefit Rate and the income is placed into a Qualified Income Trust, it is not counted in determining Medicaid financial eligibility. Effective January 1, 2015, the Federal Benefit Rate is $733 for an individual and $1,100 for a married couple.
- Applicants using a Qualified Income Trust must require an institutional level of care and must be living in a nursing facility, an assisted living facility or in their home.
- Qualified Income Trusts must be irrevocable. That means they are not able to be changed or reversed.
- Qualified Income Trusts may only contain the income of the applicant. They cannot hold resources such as income from the sale of real or personal property or money from a savings account.
- The State of New Jersey must be the beneficiary of all remaining funds up to the amount paid for Medicaid benefits upon the death of the Medicaid recipient.
Qualified Income Trusts offer individuals a way to maintain Medicaid eligibility despite earning income above the cap. They are an efficient estate planning vehicle to transfer an applicant’s monthly income into a trust and ensure that it is not counted in determining an applicant’s eligibility for Medical Assistance, thus affording the applicant an opportunity to qualify for Medicaid. Please speak with your attorney to find out if a Qualified Income Trust is right for you.
Click link for a printable version – Estate Planning- The Benefits of Qualified Income Trusts.pdf
