Qualified Income Trust / Pooled Trust and their Application
Overview
The purpose of this article is to shed light on the complex topic involving Qualified Income Trusts and Pooled Trusts. Furthermore, I will try to distinguish between New York Law and New Jersey Law.
Qualified Income Trust N.J. Admin. Code § 10:71-4.11
The purpose of a Qualified Income Trust (QIT) is to qualify an applicant for Medicaid in cases where income exceeds 300% of Federal Benefit Rate (FBR). For purposes of this document, I will refer to this as excess income. Under New Jersey regulations, excess income can be placed in a properly drafted QIT in the same month as this income was earned. A Qualified Income Trust is available to nursing care level applicants. While there is no limit on how much income can be placed in a Qualified Income Trust, some of this income must be applied toward the care of the applicant. The required amount needed for care is based on a formula. A QIT is a trust formed using applicant’s assets, for the sole benefit of the applicant.
Limitations of a Qualified Income Trust
A Qualified Income Trust can hold only income. If assets are placed in a QIT the applicant will be subject to a Medicaid penalty just like any other transfer for less then market value. Another notable fact is that a QIT is only available in New Jersey. New York applicants are limited to Pooled Trusts. New York Pooled Trust is similar in mechanics to a QIT, with the main difference being that these are created by a non-profit organization to hold assets of multiple individuals.
Pooled Trusts
Pooled Trusts are organized by a non-profit organization to hold assets of a disabled or elderly individual. In New York (N.Y. Comp. Codes R. & Regs. tit. 18 § 360-4.5), a Pooled Trust can also function as a QIT as explained above. New York does not have a separate QIT provision. A further Pooled Trust limitation in New Jersey is that assets of an elderly individual must be placed there prior to the individual’s 65th birthday.
Conclusion
Both QIT and Pool Trust name the State as the primary beneficiary of anything remaining in the trust after death of such individual. The primary difference between the two trusts is that a QIT is created by an individual for his or her sole benefit. A Pooled Trust is a trust holding assets of multiple people, with the non-profit organization, or someone acting on its behalf, serving as the trustee.