One of the biggest concerns many people have about growing older is spending the assets they earned over a lifetime to pay for nursing home care. The cost of nursing home care is astronomical. According to the New Jersey Department of Human Services, the average daily cost of nursing home care was approximately $330 a day in 2015. These costs can drain decades’ worth of savings in a relatively short period of time.
Medicaid covers these costs for individuals who qualify. The problem is that in order to qualify for Medicaid, you must prove that you have limited income and assets. Thankfully, there are many effective strategies to qualify for Medicaid without first spending down all of your assets. On December 1, 2014, the federal government authorized the use of Qualified Income Trusts (QITs) in New Jersey. These instruments have proven to be an effective estate planning tool for many families.
How does a Qualified Income Trust (QIT) work?
With a QIT, also known as a Miller Trust, an individual will place income into a trust each month. This income will not be counted when determining whether a person qualifies for Medicaid. Under current law, any person with gross income more than $2,199 a month cannot qualify for Medicaid. With a properly created Miller Trust, each month this income would be placed in the QIT.
Only income can be placed in a QIT. For instance, one cannot place cash, proceeds from the sale of real estate or the proceeds from the sale of personal property in a person’s QIT. On the other hand, pension income or Social Security proceeds can be placed in a QIT. A QIT is irrevocable, meaning once a trust is established, it cannot be changed. In order for a QIT to be valid in New Jersey, the state of New Jersey must be listed as the first beneficiary upon the death of the person who established the trust. This means that the state of New Jersey will have the right to claim any income remaining in the trust upon death.
A lawyer can provide the guidance you need
A skilled estate planning and elder law attorney will be instrumental in helping you decide whether a QIT or other strategies are best for you. For decades, people across Bergen County and beyond have relied on The Manna Helmy Law Group to create effective solutions.
Source: NJ Family Care Qualified Income Trust Frequently Asked Questions, September 21, 2015