Facing the challenges of long-term care planning while tackling Medicaid’s strict eligibility requirements can feel overwhelming for many families. For those with income exceeding the Medicaid cap, a Qualified Income Trust (QIT) can be the key to securing essential benefits without sacrificing financial stability. At The Matus Law Group, we understand how important it is to protect your family’s legacy while ensuring access to the care and assistance your loved ones need.
Our compassionate and experienced New Jersey Medicaid trust attorneys are here to guide you through every step of the QIT process. From determining if a QIT is the right solution for your situation to drafting a trust that complies with state Medicaid regulations, we are committed to helping families like yours find peace of mind.
With our guidance, you can avoid costly mistakes, manage income appropriately, and maintain eligibility for Medicaid benefits—all while preserving the assets and legacy you’ve worked so hard to build. Schedule a consultation by calling (732) 281-0060 today. Learn how we can support your family during this critical time and design a plan that meets your unique needs.
What Is a Qualified Income Trust (QIT) and Why Does It Matter in New Jersey?
A Qualified Income Trust is a legally established irrevocable trust used to manage excess income for Medicaid applicants. Medicaid is a vital program that helps individuals and families access healthcare and long-term care services. However, eligibility for Medicaid in New Jersey is determined based on strict financial criteria, including income limits.
In New Jersey, individuals applying for Medicaid long-term care services must meet strict income limits to qualify for assistance. For adults under 65 without dependent children, the income limit is typically 138% of the Federal Poverty Level (FPL).
Institutional / Nursing Home Medicaid and Home and Community-Based Services Limits
For individuals applying for Medicaid long-term care services, such as nursing home care or home and community-based services (HCBS), the following limits apply in 2025:
- Single Applicants:
Income Limit: $2,901 per month- Asset Limit: $4,000
- Married Applicants (Both Spouses Applying):
- Income Limit: $5,802 per month (combined income for both spouses)
- Asset Limit: $3,000 (combined assets for both spouses)
- Married Applicants (Only One Spouse Applying):
- Income Limit: $2,901 per month (for the applicant spouse)
- Asset Limit: $2,000 (for the applicant spouse)
- Non-Applicant Spouse Asset Allowance: $157,920
For married couples where only one spouse is applying, the non-applicant spouse’s income is not counted toward the Medicaid income limit. Additionally, the higher asset allowance for the non-applicant spouse helps ensure they have sufficient financial resources while the applicant spouse qualifies for Medicaid.
Regular Medicaid / Aged, Blind, and Disabled (ABD) Limits
Medicaid for the Aged, Blind, and Disabled (ABD) program has different income and asset limits for those who do not require institutional or long-term care services:
- Single Applicants:
- Income Limit: $1,304.17 per month
- Asset Limit: $4,000
- Married Applicants:
Income Limit: $1,762.50 per month (combined income for both spouses)- Asset Limit: $6,000 (combined assets for both spouses)
What Happens if Income or Assets Exceed the Limit?
Applicants who exceed these income or asset limits may not qualify for Medicaid benefits unless steps are taken to comply with the financial requirements. For individuals with incomes above the Medicaid limit, one commonly used solution is a Qualified Income Trust (QIT). A QIT allows excess income to be placed into a trust account, so it is excluded from Medicaid’s income calculation. This allows applicants to meet the eligibility criteria while directing their income toward approved expenses, such as their share of long-term care costs.
- The trust is irrevocable, meaning it cannot be changed or revoked once established.
- A trustee, often a trusted family member or professional, is designated to manage the funds in the trust.
- Funds deposited into the QIT can only be used for specific, state-approved expenses, such as the Medicaid recipient’s share of long-term care costs.
The trust serves as a mechanism to comply with Medicaid’s financial rules without violating income limits. Redirecting excess income into the QIT and using it exclusively for allowable expenses helps applicants reduce their countable income and meet Medicaid’s requirements. This approach is particularly significant for individuals who are just slightly over the income limit but still cannot afford long-term care out-of-pocket.
It is important to note that Medicaid eligibility requirements can change. Working with a skilled attorney is crucial. At The Matus Law Group, our team can guide you through the process and create a strategy tailored to your personal circumstances, helping you make an informed decision. Contact us today for a consultation.
How Qualified Income Trusts Work: A Step-by-Step Breakdown
Creating a Qualified Income Trust in New Jersey involves several important steps to comply with state Medicaid regulations.
Establishing a Qualified Income Trust in New Jersey
The process begins with drafting the trust document, which must include specific language to designate the trust as irrevocable and comply with federal and state Medicaid guidelines. The QIT must also name a trustee who will manage the trust and oversee its operations. This trustee can be a trusted family member, friend, or professional. A Medicaid applicant should not be selected as the trustee of a Qualified Income Trust established for their benefit.
Once the trust document is finalized, a dedicated bank account must be opened in the name of the trust. All income that exceeds New Jersey’s Medicaid income cap must then be deposited into this account each month. A skilled New Jersey trust lawyer can assist in drafting the trust documents, identifying a reputable financial institution, and ensuring that the trust is established correctly to meet Medicaid requirements.
How Income Is Deposited and Managed in a QIT
After the trust is established, the applicant’s monthly income must be deposited into the QIT account. This is a critical step, as failure to deposit the correct amount on time may result in the applicant being disqualified from Medicaid benefits.
The trustee is responsible for ensuring that income is deposited consistently, and only the amount exceeding the Medicaid income cap needs to be transferred into the trust. The funds in the QIT are then managed according to strict rules. A portion of the funds is typically used to pay the Medicaid recipient’s share of long-term care expenses, while the remaining income may be allocated to other allowable costs, such as a personal needs allowance or spousal income allowance.
Collaborating with a New Jersey trust lawyer can help families establish a clear plan for managing income deposits and allocating funds in compliance with Medicaid rules. This guidance can prevent costly mistakes and keep the applicant’s Medicaid benefits secure.
Rules for Using Funds in a Qualified Income Trust
The funds in a QIT are not unrestricted and can only be used for allowable expenses, as defined by Medicaid regulations. In New Jersey, these expenses generally include:
- The Medicaid recipient’s share of nursing home or long-term care facility costs.
- A personal needs allowance for the Medicaid recipient.
- A spousal income allowance to support the applicant’s spouse, if applicable.
- Health insurance premiums or other approved medical expenses.
The trustee is legally obligated to follow these rules and ensure that funds are distributed appropriately. Unauthorized use of QIT funds—such as paying for non-Medicaid-approved expenses—can result in penalties or disqualification from Medicaid benefits. A Medicaid trust lawyer can provide guidance on how to manage the trust account and interpret the rules for fund usage, helping families avoid potential complications.
The Importance of Trustee Responsibilities in Managing a QIT
The role of the trustee is central to the proper functioning of a Qualified Income Trust. The trustee is tasked with managing the trust account, making timely deposits, and disbursing funds in accordance with Medicaid guidelines.
Trustee responsibilities include:
- Maintaining accurate records of all deposits and disbursements.
- Ensuring that income is deposited on time each month.
- Distributing funds only for Medicaid-approved expenses.
- Communicating with Medicaid agencies and providing any required documentation.
Given the legal and financial obligations associated with managing a QIT, selecting the right trustee is crucial. The trustee should be someone trustworthy and capable of handling detailed financial tasks. Many families choose to work with a New Jersey trust lawyer to assist the trustee in fulfilling their responsibilities and navigating state-specific requirements.
Proper trustee management is essential for maintaining Medicaid eligibility and avoiding penalties. With the support of a knowledgeable legal professional, families can feel confident that their QIT is being managed effectively, allowing them to focus on securing the care their loved ones need.
Who Needs a Qualified Income Trust in New Jersey?
New Jersey Medicaid imposes strict income limits for applicants seeking long-term care benefits. Anyone whose income exceeds this limit—even by a small amount—will be considered ineligible for Medicaid unless they have a plan in place to manage their excess income.
A QIT is designed for individuals in this situation. It allows applicants to redirect their income above the Medicaid limit into a legally established trust, which prevents it from being counted as available income during the Medicaid eligibility determination process.
This is particularly relevant for individuals who:
- Receive Social Security, pensions, or other fixed income that exceeds the Medicaid cap.
- Have income that fluctuates but periodically exceeds the eligibility limit.
- Cannot afford to pay for long-term care costs out of pocket despite exceeding the income cap.
For these individuals, a QIT offers an effective solution to meet Medicaid’s financial requirements while still using their income for allowable expenses. QITs only address excess income above the limits for Medicaid. For those with other types of assets that exceed the limits, additional strategies may be required to meet or maintain eligibility. Consulting a skilled attorney can be beneficial to ensure compliance.
Seniors and Families Facing Long-Term Care Costs in New Jersey
Long-term care costs in New Jersey are among the highest in the country, often exceeding $10,000 per month for nursing home care. Many seniors and families who face these expenses find themselves in a difficult financial position. They earn too much to qualify for Medicaid but not enough to cover the full cost of care on their own.
A QIT can be particularly beneficial for:
- Seniors requiring nursing home care or in-home care services.
- Families who are financially supporting a loved one but cannot sustain the high costs of care without Medicaid assistance.
- Individuals with a spouse who needs financial support while the other spouse applies for Medicaid.
In these cases, a QIT serves as a crucial tool for bridging the gap between income and care costs, allowing families to access Medicaid benefits without exhausting their resources.
Scenarios Where a Qualified Income Trust Becomes Necessary
There are specific scenarios where creating a QIT becomes essential for Medicaid planning in New Jersey. These situations often involve individuals who are on the borderline of Medicaid eligibility but have no alternative way to manage their income.
Common scenarios include:
- A sudden need for long-term care: When an individual requires immediate access to a nursing home or other long-term care services, a QIT can be established quickly to meet Medicaid’s income requirements.
- Receiving a cost-of-living increase: Slight increases in Social Security or pension payments can push an individual’s income above the Medicaid cap, making a QIT necessary to maintain eligibility.
- Planning for spousal support: If one spouse requires Medicaid for long-term care, a QIT can help protect income for the community (non-applicant) spouse while meeting Medicaid’s rules.
These scenarios highlight the importance of addressing income-related challenges early to avoid delays or denials in Medicaid benefits.
| Scenarios where creating a QIT becomes essential | Explanation |
|---|---|
| Sudden need for long-term care | An individual requires immediate access to nursing home or long-term care services but has income exceeding Medicaid’s cap. Establishing a QIT allows excess income to be managed appropriately, ensuring eligibility. |
| Cost-of-living adjustments | Minor increases in Social Security or pension payments push an individual’s income over the Medicaid threshold. A QIT can hold the excess amount, maintaining eligibility despite these adjustments. |
| Spousal income protection | When one spouse requires Medicaid for long-term care, a QIT helps allocate the institutionalized spouse’s income appropriately, protecting the community (non-applicant) spouse’s financial needs while complying with Medicaid rules. |
Working with an Attorney to Determine If a QIT Is Right for You
Creating a QIT requires careful consideration of an individual’s financial situation and Medicaid’s specific rules. Working with a New Jersey trust attorney can provide clarity on whether a QIT is necessary and how it should be structured.
An attorney can assist with:
- Evaluating income levels and expenses to determine if a QIT is required.
- Drafting the trust document to comply with New Jersey Medicaid regulations.
- Advising families on trustee selection and trust management.
- Identifying other financial planning tools that may complement the QIT.
For families facing the challenges of long-term care planning, legal guidance can make the process of establishing a QIT more straightforward and efficient. This collaboration provides peace of mind, knowing that the correct steps are being taken to secure Medicaid benefits while addressing income-related obstacles.
Common Mistakes to Avoid When Setting Up a Qualified Income Trust
Setting up a Qualified Income Trust (QIT) is a crucial step for individuals in New Jersey who need Medicaid long-term care benefits but have income exceeding the eligibility cap. However, certain mistakes during the creation or management of a QIT can jeopardize Medicaid eligibility or lead to penalties.
Failing to Properly Fund the QIT Each Month
One of the most frequent mistakes is neglecting to deposit the required income into the QIT every month. Medicaid requires that all income above the eligibility threshold be redirected into the trust account on a consistent basis. Failure to do so can result in Medicaid benefits being delayed, reduced, or even denied.
For example, if a Medicaid applicant earns $4,000 per month but only deposits $1,000 into the QIT when the income cap is $2,901, their Medicaid eligibility may be at risk. The entire amount exceeding the cap must be deposited monthly.
To avoid this issue, families should establish a system for timely and accurate deposits. Many individuals work with a New Jersey trust attorney to set up clear guidelines for funding the QIT and to monitor compliance with Medicaid’s requirements.
Mismanaging QIT Funds or Using Them for Ineligible Expenses
Once income is deposited into a QIT, it can only be used for Medicaid-approved expenses. Misusing these funds is a serious mistake that can lead to penalties or disqualification from Medicaid. Common errors include using QIT funds for purposes such as:
- Paying personal debts unrelated to long-term care.
- Making unauthorized purchases or withdrawals.
- Failing to allocate the funds toward the Medicaid recipient’s share of care costs.
In New Jersey, QIT funds are typically used for specific expenses like nursing home care, a personal needs allowance, or spousal income support. Trustees should maintain accurate records of all expenditures and avoid using the funds for unapproved purposes.
Not Naming a Reliable Trustee to Oversee the Trust
The trustee plays a central role in managing the QIT and ensuring that its operations follow Medicaid’s rules. Choosing an unsuitable trustee—someone who lacks the time, financial knowledge, or reliability to oversee the trust—can lead to significant problems.
If the trustee fails to perform their duties accurately, the Medicaid recipient’s eligibility may be affected. Families should carefully consider who they appoint as trustee, whether it’s a trusted family member or a professional. Many individuals in New Jersey consult with trust attorneys to assist trustees in understanding their responsibilities and complying with state regulations.
Overlooking State-Specific Rules for QIT Compliance in New Jersey
Each state has its own rules regarding how QITs must be structured and managed, and New Jersey is no exception. Overlooking these state-specific requirements can lead to a QIT being deemed invalid or non-compliant, putting Medicaid benefits at risk.
Working with a legal professional familiar with New Jersey’s Medicaid laws can help families avoid errors and ensure the QIT is properly structured from the start.
By addressing these common mistakes and seeking the right guidance, families can establish and manage a QIT effectively, preserving Medicaid eligibility and securing long-term care benefits for their loved ones.
Why Legal Guidance Is Critical for Medicaid Planning
A Qualified Income Trust (QIT) offers a way to direct excess income while meeting Medicaid requirements, but setting up and managing a QIT requires careful attention to legal and financial details. Even small mistakes in the trust document or fund management can cause delays or put benefits at risk.
With the guidance of a skilled Medicaid trust attorney from The Matus Law Group, families can move forward with confidence, knowing that their QIT is properly structured to comply with New Jersey’s Medicaid rules. From drafting the trust to selecting a trustee and maintaining compliance, legal support can help minimize errors and avoid unnecessary complications.
Securing long-term care should not come with unnecessary stress. A properly established QIT protects Medicaid eligibility while offering financial stability for loved ones. The Matus Law Group is here to provide clear, compassionate legal support so families can focus on what matters most. Contact us today to discuss how our Medicaid trust attorneys can help. Call our office at (732) 281-0060 to schedule a consultation.
