Qualified Income Trust in NJ: Setup, Funding, and Reporting

A qualified income trust in NJ, often called a Miller trust, is the mechanism that lets a New Jersey resident whose monthly income exceeds the Medicaid long-term care cap still qualify for benefits. In 2026, that cap is $2,982 in gross monthly income, and being even a dollar over disqualifies an applicant unless a QIT is in place.¹ The trust works by routing specific income into a dedicated bank account so the state stops counting it toward the limit. Setting one up involves drafting a compliant document, opening a separate account, funding it correctly each month, and paying the money out in a required order.

Why New Jersey Requires a QIT

New Jersey sets its Medicaid income limit for long-term care at 300% of the federal SSI benefit rate. For 2026, the SSI rate is $994 per month, putting the cap at $2,982.² The cap applies to anyone seeking coverage through the state’s Managed Long Term Services and Supports (MLTSS) program, whether for a nursing home, assisted living, or home and community-based care.

Medicaid counts gross income, meaning the total before any deductions for taxes, Medicare premiums, or health insurance. Nearly every source counts: Social Security, pensions, disability payments, IRA withdrawals, wages, alimony, and dividends. New Jersey excludes a few narrow categories, including the VA Aid and Attendance Allowance above the basic VA pension and Holocaust restitution payments.

The cap is rigid. Someone with $2,990 in gross monthly income faces the same denial as someone $500 over. A QIT is the only way to get past the barrier without actually reducing income.

What the Trust Document Must Say

The state’s Division of Medical Assistance and Health Services (DMAHS) publishes a QIT template and FAQ, and using that form is the simplest way to satisfy the County Welfare Agency reviewer.¹ A custom document must still meet every requirement in Medicaid Communication No. 14-15.³

The core requirements:

The trust may hold only the beneficiary’s income (pensions, Social Security, and similar sources). Savings, property sale proceeds, and other assets cannot go in.
It must be irrevocable once established.
New Jersey must be named as the primary remainder beneficiary, entitled to recover up to the total Medicaid benefits paid after the individual dies.
A trustee must be named to manage the account, along with a successor trustee.

The person seeking Medicaid is the settlor and the lifetime beneficiary. The document needs the trustee’s and successor trustee’s full legal names, addresses, and contact information, plus the name of the bank where the account will be opened.

Opening the Account

Once the document is complete, the trustee signs it before a notary public. Then the trustee gets an Employer Identification Number from the IRS, because the trust is a separate entity for tax purposes. The IRS issues EINs free through its online application, which needs the responsible party’s Social Security number and the trust’s entity type.⁴

With the notarized trust and EIN, the trustee opens a dedicated bank account at any financial institution. This account must be completely separate from the applicant’s personal accounts. No personal funds, savings, or property sale proceeds can be deposited.³

What Goes In

Only enough income to bring the applicant under the $2,982 cap needs to be routed through the trust.¹ One rule catches families off guard: you cannot split a single check between the trust and a personal account. If a particular income source is directed to the QIT, the entire check from that source must go in. So if Social Security is $1,800 and a pension is $1,400, for a total of $3,200, depositing the full pension check into the QIT leaves $1,800 in countable income.³

Timing

The trust must be funded for the month the applicant first seeks Medicaid eligibility. After that, income must be deposited in the same month it is received.³ Missing a month can cost eligibility for that entire month. This trips up new trustees who assume a late deposit can be made up the following month. It cannot.

How Money Comes Out Each Month

Trust funds can only be spent in a specific order set by New Jersey’s post-eligibility treatment of income rules:

Personal Needs Allowance first. Nursing home residents keep $50 per month for personal expenses like clothing and haircuts. Residents of assisted living, comprehensive personal care homes, or adult family care homes receive a higher allowance. Those receiving MLTSS services at home or in a family member’s home generally keep all of their income.⁵
Health insurance premiums next, including Medicare Part B, supplemental policies, and other coverage.
A community spouse maintenance allowance, if the beneficiary is married and the spouse lives in the community.
The remainder goes toward the beneficiary’s share of long-term care costs.

The account does not have to be zeroed out every month. Any funds left after the required payments must stay in the QIT account. Accumulated balances can create problems at the annual redetermination, though, and may trigger transfer penalty questions.¹ Keeping distributions precise and timely avoids unexplained buildup.

Trustee Fees and Banking Costs

The trustee may charge up to 6% of the income deposited into the QIT each month, and up to $20 per month may be spent on banking costs.³ Family members serving as trustee often waive the fee. Paid professionals and fiduciaries typically charge up to the cap.

Reporting and Annual Accounting

After the County Welfare Agency approves the trust document, the trustee sends copies of the trust and a completed checklist to the DMAHS Office of Legal and Regulatory Affairs for monitoring.³ This is part of the initial Medicaid application.

At each annual redetermination, the trustee provides two copies of an informal accounting. It must list every deposit and disbursement (date, check number, amount, and payee), the current trust balance, and copies of all monthly bank statements for the prior year.³ A full accounting is also required when a trustee steps down, when the beneficiary dies, or when the trust is no longer valid. The state does look at these statements for unexplained deposits, wrong payees, and balances that suggest mishandled funds. Sloppy recordkeeping is one of the faster ways to lose eligibility.

The Asset Limit Is Separate

A QIT solves the income problem. It does not solve the asset problem. In 2026, a single applicant is limited to $2,000 in countable assets, and a married couple where both spouses apply is limited to $3,000. The home, one vehicle, personal belongings, and certain other items are typically exempt.

When only one spouse needs care, spousal impoverishment protections let the community spouse keep a Community Spouse Resource Allowance and receive a monthly maintenance allowance from the institutionalized spouse’s income. New Jersey also enforces a five-year lookback on asset transfers before the application date; gifts and below-market sales during that window can trigger a penalty period. The QIT itself does not trigger lookback issues because it holds income rather than assets, but broader Medicaid planning should account for both rules well before applying.

Tax Filing

Because the QIT has its own EIN and is a separate legal entity, it may need to file its own federal return. A trust with $600 or more in gross income for the year must file Form 1041.⁶ Most QITs will meet that threshold since the account exists to funnel income through it. In practice, QITs typically generate little or no taxable income because the money flows out to the beneficiary and care providers within the same year, but the filing obligation still applies.

When the Beneficiary Dies

The trust terminates at the beneficiary’s death. New Jersey holds the first claim on any remaining funds, up to the total Medicaid benefits paid on the individual’s behalf.⁷ A properly managed QIT rarely has much left, because the design is to move income in and pay it out each month. If the trustee kept the balance low and made timely distributions, the state’s recovery from the trust itself is usually minimal. The trustee must provide a full accounting after death so the state can close out the trust and reconcile any remaining balance.³

1
New Jersey Department of Human Services. Qualified Income Trusts
2
Social Security Administration. SSI Federal Payment Amounts
3
New Jersey Department of Human Services. Medicaid Communication No. 14-15 – Qualified Income Trusts
4
Internal Revenue Service. Get an Employer Identification Number
5
New Jersey Long-Term Care Ombudsman. Increasing the Personal Needs Allowance for Nursing Home Residents
6
Internal Revenue Service. Instructions for Form 1041
7
Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets