Another Word About QITs – Part 2
In my post last week I revisited a Medicaid topic that I am frequently asked about – qualified income trusts. An applicant’s income that exceeds Medicaid’s strict monthly income cap ($2382 in 2021) must deposit some of that income into a QIT before then sending it where it must go according to Medicaid rules. That’s the very general overview, however, the State of New Jersey has imposed very specific rules that must be followed or else – meaning a mistake can cost you Medicaid eligibility.
Enough income must pass through the QIT so that the income that is left totals under the income cap, however, the income can’t be split. All of a source of income must be deposited into the QIT. For example, if you receive $1000 from a pension and $1500 from Social Security you can’t simply deposit $250 from the pension or the Social Security into the QIT to drop the amount down to $2250 which falls under the income cap. You must deposit the entire pension income or the entire Social Security amount received into the QIT.
When I set up the QIT and review it with the proposed trustee, I give very detailed instructions on how the trust is to be used. We try to have trustees automatic things as much as possible however, over the years I have seen mistakes happen. The trustee forgets to consult those instructions and make an adjustment or a timely payment. Increasingly the State is focusing on these oversights and miscues as a way to avoid providing Medicaid benefits.
As I stated above, the entire source of income must be deposited to the QIT. One trap stems from the fact that the income often changes from year to year. That’s because Social Security and many pensions have a cost of living adjustment (COLA) to account for inflation. In one application that we filed and was decided last month, the trustee deposited the entire amount of Social Security into the QIT when it was created, however, the following year when the amount received increased because of the COLA she kept depositing the same amount as in the previous year. Since this was no longer the entire amount received from Social Security she violated the QIT rules which would result in a loss of Medicaid for every month she used the QIT incorrectly.
As you can see, these rules are quite punitive. Thankfully, in that case the caseworker stated that she would relax the rule since the trustee did not realize the mistake and had not been advised of it by the caseworker previous to the denial of Medicaid benefits.
In another case we have in a different county a denial was issued for improper use of the QIT and the caseworker there has not been willing to overlook the oversight. I’ll cover that next week.