New Jersey recently implemented a significant change to its Medicaid program. Medicaid is a health insurance program for needy individuals. Unlike private health insurance policies, Medicaid will pay for long-term care costs, such as care in a nursing home, an assisted living residence, or at home, such as a home health aide.

Prior to the recent change, the Medicaid program that paid for care at home or in an assisted living residence had an income cap. If the applicant’s gross monthly income exceeded the cap, which is currently $2,199, then he could not qualify for Medicaid at home or in an assisted living residence, no matter how few assets the applicant had.

The State changed the Medicaid program to eliminate effectively the income cap for purposes of determining an applicant’s eligibility for Medicaid. If an applicant’s income exceeds the cap, then the applicant must place his excess income into a trust.

The trust is known as a Qualified Income Trust or Miller Trust. Essentially, the trust allows Medicaid to disregard the applicant’s income in assessing his eligibility for Medicaid benefits. After he is determined to be eligible for benefits, his income still must be paid over to the facility (the nursing home or assisted living residence) as his cost share, but for purposes of determining his eligibility for Medicaid benefits, the trust allows the State to disregard his income.

There are many issues that elder law attorneys (and I’m sure the general public) have with the mechanics of these trusts. One issue with respect to the mechanics of the trust is, Who can sign the trust for the Medicaid applicant?

Many applicants for Medicaid benefits do not have a level of mental capacity sufficient to govern their affairs; in short, many applicants for Medicaid are mentally incapacitated. The question then becomes, How does an individual who is mentally incapacitated establish a trust? A person who lacks mental capacity cannot sign a legal document such as a trust; he does not understand the nature of the transaction into which he is entering and cannot sign the document.

The State has put out a series of frequently asked questions and other helpful documents. In part, the State has said that an agent under a general power of attorney has the appropriate authority to sign a Qualified Income Trust.

In reviewing New Jersey’s power of attorney statutes, I believe that this statement is true. While a power of attorney agent cannot gift a principal’s agent without specific authority to gift in the power of attorney document, there is nothing in the power of attorney statutes that requires a specific grant of authority to sign a trust document.

But what if the Medicaid applicant did not sign a power of attorney and has a legal guardian appointed for him by the courts? For instance, assume that Mr. Smith’s son Robert is serving as Mr. Smith’s guardian. Can Robert sign the trust for Mr. Smith without further approval by the courts? Probably not.

There is a guardianship statute that confers unto our courts the ability to create revocable and irrevocable trusts for the property of the ward’s estate. Given this statute, many elder law attorneys believe that unless the court has specifically authorized a guardian to create a trust for the ward, then the guardian cannot create a trust for the ward.

What this means from a practical standpoint is that a guardian will probably have to petition the court to obtain authority to create a Qualified Income Trust for his ward. An agent under a general power of attorney will not, in most cases, need to obtain additional authority to create such a trust.

A trust can give you control and security over your assets. Properly structured, it helps protect your family and ensures your wishes are followed.

A trust does more than transfer assets—it changes how control is exercised over time. Once authority is placed in someone else’s hands, the outcome depends on how those powers are defined and used. Looking closely at those details can help avoid unintended consequences later on.

Trust-based estate planning can provide families with greater flexibility, privacy, and long-term asset protection. Understanding how trusts work and when they should be used helps individuals create plans that support their goals while reducing uncertainty for loved ones in the future.