Overview: The Three Eligibility Tests
New Jersey Medicaid for long-term care is administered through several programs — most commonly the Medicaid Long Term Services and Supports (MLTSS) program for nursing home care, assisted living, and home care. To be eligible, an applicant must satisfy three independent tests simultaneously:
- Financial eligibility — Both income and assets must fall within Medicaid's limits
- Medical necessity — The applicant must require the level of care provided (nursing facility, assisted living, or home-based care)
- New Jersey residency — The applicant must be a NJ resident and either a U.S. citizen or qualified immigrant
Failure to meet any single test results in a denial, regardless of the other two. Most Medicaid planning focuses on the financial eligibility test, since medical necessity and residency are generally fixed.
Asset (Resource) Eligibility
New Jersey Medicaid distinguishes between countable assets and exempt assets. Only countable assets are counted toward the eligibility limit. For a single applicant, countable assets must be reduced to $2,000 or less before Medicaid eligibility begins.
Countable Assets
The following assets are typically counted toward the Medicaid resource limit:
- Checking and savings accounts (all banks)
- Certificates of Deposit (CDs)
- Brokerage accounts, stocks, bonds, and mutual funds
- IRAs and retirement accounts (for the applicant; community spouse treatment differs)
- Cash value of life insurance policies (if face value exceeds $1,500)
- Real estate other than the primary residence
- Revocable living trusts (assets inside are counted)
- Annuities not in payout status
Exempt Assets
The following assets are generally not counted toward the Medicaid resource limit:
- Primary residence — exempt while the applicant intends to return home, or while a spouse, minor child, or disabled child resides there. Home equity must be under $1,130,000 (2026)
- One motor vehicle — of any value if used for transportation of the applicant or a family member
- Household goods and personal effects — furniture, clothing, and personal property of reasonable value
- Prepaid irrevocable funeral — burial plot and irrevocable prepaid funeral contract
- Life insurance with face value $1,500 or less per policy
- Assets in an irrevocable Medicaid Asset Protection Trust — after the 5-year look-back period
Asset Limits: 2026 Reference Table
| Situation | Applicant Limit | Spouse Limit |
|---|---|---|
| Single applicant | $2,000 | N/A |
| Married — community spouse CSRA minimum | $2,000 | $32,532 |
| Married — community spouse CSRA maximum | $2,000 | $162,660 |
| Home equity limit (primary residence) | $1,130,000 | |
The Community Spouse Resource Allowance (CSRA) is determined by a "snapshot" of the couple's combined countable assets on the date the institutionalized spouse enters a nursing facility or hospital. The community spouse retains half of the combined assets, subject to the minimum and maximum amounts above. Assets above the maximum may be subject to a spousal income contribution order or transferred using other planning strategies.
Income Eligibility
New Jersey uses an income cap system for Medicaid long-term care. A single applicant whose gross monthly income exceeds $2,982/month (2026 figure) must establish a Qualified Income Trust (QIT) — also called a Miller Trust — before Medicaid will pay for care.
What is a Qualified Income Trust (QIT)?
A QIT is an irrevocable trust established specifically to hold the excess income that pushes an applicant over the income cap. Each month, the applicant deposits the excess income into the trust. The trustee then disburses funds according to Medicaid's rules: to the nursing facility as patient pay, to the community spouse as a MMMNA allowance, and for approved personal expenses. Any income not disbursed within the month is counted as an asset the following month.
A nursing home resident has a Social Security benefit of $1,850/month and a pension of $1,400/month, for total gross monthly income of $3,250/month. This exceeds the 2026 income cap of $2,982/month by $268. A QIT must be established, and the full $3,250 deposited into the trust each month. The trustee then pays the nursing facility, retains the personal needs allowance ($50/month in NJ), and handles other approved disbursements.
Community Spouse Income Protection (MMMNA)
When one spouse is in a nursing facility, the community spouse is entitled to a Minimum Monthly Maintenance Needs Allowance (MMMNA) — a minimum income floor below which the community spouse need not live. For 2026, the MMMNA minimum is $2,643.75/month. If the community spouse's own income falls short of the MMMNA, the institutionalized spouse's income may be redirected to make up the difference before patient pay is calculated.
| Income Figure | 2026 Amount | Notes |
|---|---|---|
| Income Cap (single) | $2,982/mo | QIT required if exceeded |
| MMMNA Minimum | $2,643.75/mo | Community spouse income floor |
| MMMNA Maximum | $3,948/mo | With excess shelter allowance |
| Personal Needs Allowance | $50/mo | Retained by nursing home resident |
| Patient Pay Amount | Calculated individually | Total income minus allowable deductions |
Medical Necessity
To qualify for Medicaid long-term care, the applicant must be assessed as requiring a nursing facility level of care (NFLOC). In New Jersey, this assessment is conducted through a functional assessment tool evaluating the applicant's ability to perform Activities of Daily Living (ADLs) — bathing, dressing, eating, mobility, toileting, and transferring — as well as cognitive status.
For assisted living Medicaid programs, NJ uses a somewhat less restrictive level-of-care standard, but the applicant must still demonstrate a need for ongoing personal care and supervision that cannot be safely managed at home without substantial assistance.
It is possible to meet the financial eligibility requirements but be denied Medicaid because the applicant does not meet the medical necessity standard — or vice versa. Many families invest significant time and money in spend-down planning before confirming whether a nursing home level of care will be approved. An elder law attorney coordinates both assessments simultaneously to avoid surprises.
Residency Requirements
The applicant must be a resident of New Jersey and either a U.S. citizen or a qualified immigrant. There is no minimum period of residency required — a person who moves to New Jersey specifically to access care can still apply for Medicaid, provided they intend to remain in New Jersey indefinitely. Temporary absence from New Jersey for medical care does not interrupt residency.
The 5-Year Look-Back Period
New Jersey Medicaid reviews all financial transactions for the 60 months (5 years) before the application date. Any transfer of assets for less than fair market value during this window may trigger a penalty period — a period of Medicaid ineligibility calculated by dividing the transferred amount by the daily penalty divisor of $402.74 (2026).
In 2023, a Medicaid applicant gifted $120,000 to her children. She now applies for Medicaid in 2026 — within the 5-year look-back window. Medicaid divides $120,000 by the daily penalty divisor of $402.74 and calculates a penalty period of approximately 298 days (roughly 10 months) of Medicaid ineligibility, during which time she must pay privately for nursing home care.
Even within a penalty period, legal strategies exist. Call immediately — time matters.
Certain transfers are exempt from the look-back penalty:
- Transfers to a spouse (or to a trust solely for the spouse's benefit)
- Transfers to a blind or permanently disabled child
- Transfers to a caregiver child who lived in and cared for the applicant for at least 2 years
- Transfers for fair market value (i.e., legitimate sales)
- Certain transfers to siblings with an equity interest in the home
Frequently Asked Questions
For the Medicaid applicant, a Roth IRA is generally a countable asset in New Jersey if it is accessible — meaning the owner can withdraw principal without penalty. For the community spouse, New Jersey treats IRAs (both traditional and Roth) as countable resources in the CSRA calculation. However, a community spouse's IRA can potentially be converted to a Medicaid-compliant annuity through a custodian-to-custodian transfer, converting it from a counted resource into an income stream. This is a complex strategy with significant tax implications — consult both an elder law attorney and an accountant.
Yes. Your primary residence is an exempt asset for purposes of Medicaid eligibility. Owning a home does not disqualify you from receiving Medicaid benefits. However, the home may be subject to Medicaid estate recovery after death — meaning the state can place a claim against your estate to recover benefits paid. Proper planning (irrevocable trust or life estate) can protect the home from estate recovery while preserving Medicaid eligibility.
Joint bank accounts are generally fully counted as the Medicaid applicant's asset unless the co-owner can prove that they contributed the funds. This is one of the most common traps in Medicaid planning — adult children who are added to a parent's bank account for convenience can inadvertently cause the entire balance to be counted as the parent's Medicaid asset, and withdrawals by the child may be treated as disqualifying transfers subject to penalty. An elder law attorney can review account history and advise on proper handling before an application is filed.
An annuity that has not yet begun payout (accumulation phase) is generally a countable Medicaid asset. An annuity in payout status that is irrevocable and actuarially sound is treated as income — not an asset — if it names the State of New Jersey as a remainder beneficiary. Medicaid-compliant annuities are a powerful crisis planning tool when implemented correctly. They must meet specific federal requirements under the Deficit Reduction Act of 2005 and NJ regulations. An elder law attorney should review any annuity before or during a Medicaid application.
Term life insurance — which has no cash value — is not a Medicaid asset. Whole life and universal life insurance policies with cash surrender value are counted as Medicaid assets if the total face value across all policies exceeds $1,500. If the combined face value is $1,500 or less, the cash value is exempt. If it exceeds $1,500, the cash surrender value (not the face amount) is counted as a resource. In many cases, converting the cash value through a policy loan or surrender and using the proceeds for exempt spend-down is part of the planning strategy.