In order to be approved for Medicaid benefits in 2016, an individual can have no more than $2,199.00 in monthly income. This includes Social Security, pension and other monthly income. Many times, particularly when a widow or widower collects their spouse’s Social Security, the individual’s monthly income exceeds the monthly income cap.
In New Jersey, the Medicaid regulations permit those persons whose income exceeds the income cap to qualify for Medicaid if they create and fund a Qualified Income Trust, or QIT. Two things are needed: 1) the approved QIT document, executed by the individual or their legal representative, naming a Trustee who will handle the funds; and 2) a checking account in the name of the QIT, with the Trustee as the signer on the account.
Each month, the entire Social Security or pension payment, is deposited into the Trust account. The amount remaining in the ordinary checking account must be lower than the income cap. For example, Gerry is applying for Medicaid. He gets $1,100.00 in Social Security and a pension payment in the amount of $2,300.00. His monthly income total is $3,400.00, which is well over the income cap of $2,199.00.However, he immediately drafts a QIT document appointing his daughter as Trustee. His daughter takes this document to her local bank and opens a checking account in the name of Gerry’s QIT. Each month, his daughter takes the $2,300.00 pension payment out of her father’s checking account, and deposits it into the QIT account by the end of the month. This leaves Gerry with $1100.00 in his checking account, which is under the income cap. Gerry qualifies for Medicaid.
Then, before the last day of each month, Gerry’s daughter pays her father’s bills with the QIT money, leaving only enough for bank fees. While the law states that she is entitled to a Trustee’s commission, it is extremely unlikely that she will ever get one, since this money is needed to pay her father’s bills.
The QIT checking account should be near empty by the last day of each month, leaving Gerry with income under the income cap, and continuing his qualification for Medicaid payments.
Sounds great? After a while, you will begin to realize that all you are doing is moving money into a second bank account, and spending it from there. Why, you may ask, can’t the State make things less complicated and allow me to spend my money out of my original, personal checking account? Isn’t this just a shell game?
I would agree with you. But, “them’s the rules”.
Robert J. Shanahan, Jr. Esq. focuses his practice in estate planning, elder law and probate matters. Mr. Shanahan additionally practices in business law and non-profit matters. He is a trained, experienced mediator and offers dispute resolution services, particularly for those arising from probate and elder law matters. Additionally, Mr. Shanahan’s firm, Shanahan & Voigt, LLC, offers a breadth of additional services to families and businesses throughout central New Jersey.
Mr. Shanahan received his Juris Doctor from the Temple University School of Law in 1985, and obtained licensure in New Jersey in the same year. He received a Bachelor of Arts degree in History in 1981 from William Paterson University, with honors. Robert is a member and Past President of the Hunterdon County Bar Association, and is a member of the New Jersey State Bar Association, and its Elder Law and Disability Section. He is also active in the National Academy of Elder Law Attorneys. Robert is a member of the Hunterdon Medical Center’s Bio Ethics Committee and was awarded a Five Star Financial Services Professional Award for 2016.
You may contact Bob at (908) 751-1551, or [email protected]
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