by Thomas D. Begley, Jr., CELA
New Jersey is an income cap state for purposes of nursing home level of long-term care services. Nursing home level of services includes nursing homes, assisted living and most home care. The income cap is 300% of the Federal Benefit Rate (FBR). For 2015, 300% of the FBR is $2,199. This figure is indexed for inflation. This means that if an individual’s income exceeds $2,199 in 2015, they would not be eligible for Medicaid long-term care services. Historically, individuals with income in excess of the income cap were eligible for Medicaid in a nursing home setting, because New Jersey had a “Medically Needy” program. This enabled individuals to spend down income to obtain Medicaid eligibility. The Medically Needy program applied only to nursing home care and not to assisted living or home care.
New Jersey has obtained a waiver from the federal government to abolish the Medically Needy program. In place of the Medically Needy program, New Jersey will not permit Miller Trusts. Under a Miller Trust, monies in excess of the income cap are deposited into a trust known as a Miller Trust or Qualified Income Trust (QIT). Any income deposited into the Miller Trust is non-countable. A problem typically arises when an individuals has both Social Security and a pension. Let’s suppose an individual has Social Security income of $2,000 per month and pension income of $1,500 per month. That would place that individual over the income cap of $2,199 per month. Under the New Jersey regulation, 100% of either source must be placed into the Miller Trust. In our example, either 100% of the individual’s Social Security or 100% of the individual’s pension could be deposited into the Miller Trust and bring the applicant’s income down below the income cap.
The Miller Trust must meet certain conditions:
- it must contain only income of the individual;
- it must not contain resources, such as income from the sale of real or personal property or money from a savings account;
- it must be irrevocable;
- it must have a trustee to manage administration of the trust and expenditures from the trust as set forth in federal and state law;
- New Jersey must be first beneficiary of all remaining funds up to the amount paid for Medicaid benefits upon the death of the Medicaid recipient; and
- income deposited in the QIT can only be used for specific post-eligibility treatment of income and to pay for costs of care.
From the Miller Trust only certain expenses are permitted. These include the following:
- $20 maximum bank fee;
- trustee’s fees;
- medical expenses;
- Personal Needs Allowance (PNA);
- Minimum Monthly Maintenance Needs Allowance (MMMNA); and
- any balances paid to the care provider.
The PNA is $35 per month for a nursing home resident, $107 per month for an assisted living resident; and $2,199 per month for an individual receiving home care. The MMMNA is $1,966.25 per month for the community spouse increased by a certain calculation for an excess shelter allowance and reduced by any other income being received by the community spouse. The trustee is almost always going to be an individual who is unfamiliar with trusts, so, in the author’s opinion, it is simpler to pay only the bank fees and the provider out of the trust and pay all of the other expenses listed above out of the funds not deposited into the trust.
The trust can be established by the individual trust beneficiary, someone holding a power of attorney on behalf of the individual, or the trust beneficiary’s guardian.
The trustee can be the spouse, child, someone holding a power of attorney on behalf of the beneficiary, or a guardian for the beneficiary, but cannot be the trust beneficiary. Whether a facility can serve as trustee is an open question. The trustee does not have to post bond. Statutory trustee’s fees are 6% of income; however, Division of Medical Assistance and Health Services (DMAHS) has not indicated what constitutes income. If all monies deposited into the trust are income, the trustee will receive a fee, if only monies remaining in the trust after payment of all disbursements are considered income, there will, in effect, be no trustee’s commissions. The state has published a template for a Miller Trust. It makes sense to use this template, because Medicaid workers will be familiar with it. If the lawyer drafts his or her own trust document, it will undoubtedly have to be sent to Trenton for review, and the application process will be significantly delayed. If a trustee resigns, the resigning trustee must provide an accounting. A successor trustee should be named in the document, and that trustee will take over responsibility for trust administration. If there is a trustee resignation, notice must be given to the remainder beneficiaries, to DMAHS, and to the County Board of Social Services (CBSS).
While the trust is being administered, there must be annual accountings to CBSS. The accounting must list all checks, including the date, the check number, the amount, and the payee. Receipts for all trust expenditures must also be provided. The accounting must also include the balance in the trust, copies of bank statements, and any change in the beneficiary’s income or resources. The accounting is given at the time of redetermination.
The trust will terminate if Medicaid medical assistance is no longer being provided or if the beneficiary is no longer over the income cap. This might occur if the individual is receiving annuity income for a term of years and the term of years expires. Upon termination, there must be notification to DMAHS and a payback. Theoretically, remainder beneficiaries can be named to receive any monies in the trust in excess of the payback, but no one will take a trip around the world on this money.
The trust must contain a spendthrift provision. The assets in the trust must be non-assignable. The trust must contain payback provisions. Anyone currently on the Medically Needy program will be grandfathered. It is likely that individuals will be grandfathered even upon redetermination. However, if a situation arises where an individual is on Medicaid pending the sale of a home and the home is then sold rendering the individual no longer eligible for Medicaid, upon reapplication will that individual be grandfathered? Likely, the answer is no, but DMAHS has not yet clarified this issue. Under Medically Needy the resource limit was $4,000 for an individual and $6,000 for a married couple. That resource limit is now reduced to $2,000 for an individual and $3,000 for a couple. The trust must be approved by CBSS and reviewed annually by DMAHS.