Qualified Income Trust New Mexico

When a QIT Is Required

New Mexico is a strict income-cap state for Medicaid long-term care. The 2026 monthly income limit is $2,982 — exactly 300% of the SSI Federal Benefit Rate of $994. If your parent's gross monthly income exceeds this threshold by even one dollar, they are disqualified from both Institutional Medicaid (nursing home) and the Turquoise Care Community Benefit (home-based services). There is no medically needy spend-down pathway.

A Qualified Income Trust — which New Mexico legally designates as an Income Diversion Trust and which is also commonly called a Miller Trust — solves this problem. It channels the excess income through a specially structured bank account, bringing the applicant's countable income below the cap for eligibility purposes.

This is relevant for many seniors. A retiree collecting $2,200 in Social Security plus an $1,100 monthly pension has $3,300 in gross income — $318 over the limit. Without a QIT, they are completely locked out of Medicaid-funded care, regardless of how few assets they have or how severe their medical needs are.

How the Trust Works

The QIT must be drafted as an irrevocable trust under New Mexico law. This means once it is established, the terms cannot be changed by the applicant or their representative. The essential structure:

• A separate bank account is opened in the name of the trust at a standard bank or credit union
• A named trustee (typically a family member or the person holding Power of Attorney) administers the account
• All of the applicant's gross monthly income — or at minimum the portion that exceeds $2,982 — must be deposited directly into the trust account each month. Social Security, pensions, VA benefits, and any other income sources are redirected
• Funds are disbursed strictly according to a defined priority: the resident's patient liability contribution to the nursing facility, medical insurance premiums, and (if applicable) the spousal Minimum Monthly Maintenance Needs Allowance

Any funds remaining in the trust at the applicant's death revert to the State of New Mexico to reimburse care costs. The state has a first-priority claim on trust assets as part of its estate recovery program.

The Monthly Disbursement Rules

Once your parent is on Institutional Medicaid in a nursing home, nearly all of their monthly income goes to the facility as their "patient liability." The monthly flow works like this:

1. Personal Needs Allowance: $97 per month is set aside for the resident's personal use — clothing, books, grooming supplies. The facility cannot charge this amount for care, food, or laundry. Veterans receiving a reduced VA pension may retain an additional $90 VA personal allowance, bringing the total to $187.
2. Health insurance premiums: Medicare Part B, Medigap supplement premiums, and any other medical insurance premiums are deducted.
3. Spousal maintenance: If the community spouse's own monthly income falls below the Minimum Monthly Maintenance Needs Allowance ($2,705 effective July 1, 2026 through June 30, 2027), a portion of the institutionalized spouse's income is diverted to close the gap, up to a maximum of $4,066.50 per month.
4. Patient liability: Everything remaining goes to the nursing home to offset the cost of care. Medicaid pays the difference between the patient liability and the facility's Medicaid rate.

Setting Up the Trust

You do not need an attorney to create a QIT — the document follows a standard format — but most families benefit from having one drafted professionally to avoid technical errors that can delay or derail the Medicaid application. Common mistakes include using the wrong legal language (the trust must be "irrevocable" under NMSA rules), failing to name the state as the remainder beneficiary, or not establishing the dedicated bank account before income deposits begin.

The process:

1. Draft the trust document naming the applicant as grantor, a trustee (typically the person holding Durable Financial Power of Attorney), and the State of New Mexico as remainder beneficiary
2. Open a dedicated bank account in the trust's name at any bank or credit union
3. Redirect all of the applicant's income sources into the trust account — contact Social Security, pension administrators, and any other payors to change direct deposit information
4. Submit a copy of the executed trust document with the Medicaid application on YES.NM.GOV
5. Each month, the trustee disburses funds according to the priority order above and maintains records of every transaction

The trustee must keep meticulous records. The state may audit disbursements to verify that trust funds were used only for permitted purposes. Unauthorized disbursements — such as paying a family member's personal expenses from the trust — can result in a loss of Medicaid eligibility.

For a worksheet that calculates your parent's specific patient liability, spousal maintenance needs, and the exact monthly trust disbursement amounts based on their income sources, the New Mexico care decision toolkit includes a QIT disbursement template and a financial eligibility worksheet.

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