How Does a Qualified Income Trust Work?
There are many different types of trusts that a person can create in New Jersey, and different trusts serve varying purposes. Some people create trusts in order to allow their beneficiaries to avoid probate, while others create trusts in order to provide for disabled adult children or grandchildren, for example. Trusts can also be important for Medicaid and long-term care planning. One type of trust that an older adult in New Jersey might want to consider for purposes of Medicaid eligibility is a Qualified Income Trust (QIT).
What is a QIT and how does it work? Consider the following information from our New Jersey estate planning attorneys.
What is a Qualified Income Trust?
A QIT is a specific type of trust that was established by federal legislation to allow an individual to qualify for Medicaid coverage without technically “spending down” their savings. This kind of trust was established through the Omnibus Budget Reconciliation Act of 1993, and New Jersey residents have been able to use QITs for purposes of Medicaid eligibility since 2014.
How Does a Qualified Income Trust Work?
If you (or an elderly parent) require long-term care in a nursing home, you will likely want to be able to qualify for Medicaid so that Medicaid can cover the very high costs associated with a lengthy stay in a nursing home. This is true even for New Jersey residents who earned a comfortable salary and have significant savings. What a QIT does is that it allows the individual who needs long-term care and does not qualify for Medicaid to place certain assets in a QIT so that they can become Medicaid-eligible.
According to the New Jersey Department of Human Services, “when an individual’s monthly income above 300 percent of the Federal Benefit Rate (FBR) is placed in a QIT, it is not counted when determining Medicaid financial eligibility.” This type of trust is specifically for individuals who require long-care and want to qualify for Medicaid.
Requirements for QITs in New Jersey
In order for a QIT to work, there are specific requirements:
- Only income of the individual can be placed in the trust (no other resources or assets can be placed in the trust);
- Trust must be set up as an irrevocable trust;
- Trustee must be assigned according to specific terms for a QIT under state and federal law;
- New Jersey must be the beneficiary of remaining funds up to the amount covered by Medicaid; and
- Income in the QIT can only be used for specific purposes (to pay for approved care and for certain post-treatment expenses).
Contact a New Jersey Estate Planning Lawyer Today for Assistance
Whether you have questions about Medicaid and long-term care planning for yourself, or you are trying to help an elderly parent with these complex issues, one of the experienced Summit estate planning attorneys at Dempsey, Dempsey & Sheehan can speak with you today about options. Paying for long-term care is a major issue for nearly all New Jersey residents who need it, and it is important to have a plan in place. Contact our firm to find out more about how we can assist you or your elderly loved one with both asset protection and Medicaid and long-term care planning in New Jersey.
Source:
nj.gov/humanservices/dmahs/clients/mtrusts.html
