How Qualified Income Trusts (Miller Trusts) Help Medicaid Applicants Become Eligible for Long-Term Care

Last updated: January 25, 2023

 

Introduction

Miller Trusts, also called Qualified Income Trusts, provide a way for Nursing Home Medicaid and Medicaid Waiver applicants who have income over Medicaid’s limit to become income-eligible for Medicaid long-term care. In short, income over Medicaid’s limit is put into a trust and is no longer as counted as income, thus allowing the applicant to become eligible.

Miller Trusts are called by a variety of names and include the following: Qualifying Income Trusts, QITs, Income Diversion Trusts, Income Cap Trusts, Irrevocable Income Trusts, Income Trusts, d4B trusts, and Income Only Trusts. These names are often state specific. Arizona call this type of trust an Income-Only Trust, Oregon calls it an Income Cap Trust, and New Mexico calls it an Income Diversion Trust. Regardless of the name used, the terminology refers to the same type of trust: Qualified Income Trusts. For the purposes of this article, we will use the above terminology interchangeably.

Pooled Income Trusts, a type of special needs trust, are created by non-profit organizations and accomplish the same means as Miller Trusts. They allow disabled applicants with income over the long-term care Medicaid income limit a way to meet the income limit. Pooled Income Trusts are only allowed in a handful of states, two of which are New York and Connecticut. Neither of these states permit Miller Trusts. In simple terms, with Pooled Income Trusts, one’s excess income (the income over the long-term care income limit) is deposited into the trust, no longer counting towards Medicaid’s income limit. The term, “pooled”, comes from the fact that it is not an individual account. Rather, income from a large number of people is pooled and managed together. As Pooled Income Trusts are not nearly as commonly used to become income-eligible for Medicaid as Qualified Income Trusts, the focus of this article will be strictly on the latter.

 

 

Medically Needy & Categorially Needy and Their Relevance to Miller Trusts / QITs

Before discussing the details of a Miller Trust / Qualifying Income Trust, it is important to be aware that some states are “Medically Needy” (also called “Spend Down”) States, while others are “Categorically Needy” (also called “Income Cap”) States.

In “Spend Down” States, Medicaid applicants who are over the income limit can spend “excess” income on medical and care expenses. Once their income is “spent down” to the Medically Needy Income Limit, they are income-eligible for Medicaid for the rest of the spend down period.

Income Cap States do not allow Medicaid applicants to “spend down” their income. In these states, Miller Trusts are utilized to allow persons a way to still meet the income limit, and hence, qualify for long-term care Medicaid. In Income Cap States, the income limit for Nursing Home Medicaid and Home and Community Based Services (HCBS) Medicaid Waivers is generally 300% of the Federal Benefit Rate (FBR). In 2023, this is $2,742 / month for an individual. A portion, or all of one’s income, can be directly deposited into a Miller Trust and it is not counted towards Medicaid’s income limit. Therefore, this option allows an applicant to become income-eligible.

 

How Do Miller Trusts / Qualifying Income Trusts Work?

A Medicaid applicant allocates their monthly income which is in excess of the Medicaid income limit into a Qualified Income Trust and the applicant is permitted to qualify for Medicaid.

To establish a Miller Trust, a bank account must be set up and a trust document drawn up. The person setting up the Income Diversion Trust (the grantor, also called a settlor) can be the Medicaid applicant, their guardian, or power of attorney. A trustee, who manages the trust and follows the guidelines set forth by the trust, must be named. This person must be someone other than the Medicaid applicant, but can be a relative, such as an adult child. The state in which the Medicaid recipient will be receiving long-term care benefits must be named as the beneficiary. Upon that individual’s death, the Medicaid agency will receive remaining trust funds, up to an equal amount for which it paid for that individual’s long term care. The trust must be irrevocable, which means the trust cannot be altered or canceled.

Monthly deposits, consisting only of the Medicaid recipient’s income, are made into the trust. Some state require direct deposit, while others do not, and some states require all of one’s income to be deposited, while other states permit one to deposit only a portion of their income. In all states, the entire payment from a single source must be deposited. For example, if a Medicaid recipient receives only a social security check, the whole check must be deposited into the trust. However, if one lives in a state that doesn’t require all income to be deposited into the trust and they receive a social security check and a pension check, only one check need be deposited, given the retained income is not over Medicaid’s income limit. Remember, income deposited into a QIT does not count towards the income limit; It is exempt.

 Income deposited into a Qualified Income Trust by a Medicaid recipient is not counted towards Medicaid’s income limit. This strategy allows applicants to become income-eligible for long-term care Medicaid in states where Miller Trusts are permitted.

QITs do not assist persons who are over the Medicaid asset limit in meeting that limit. To be very clear, assets cannot be deposited into QITs. However, there are many options for reducing countable assets. If planning well in advance of the need for Medicaid, Medicaid Asset Protection Trusts provide a means to meet Medicaid’s asset limit, as well as protects assets (including one’s home) from Medicaid’s Estate Recovery Program.

 

For What Expenses Can a Miller Trust / QIT Be Used?

Funds deposited in a Miller / Qualifying Income Trust can only be used for very specific purposes. A trustee manages the trust account, which includes paying out money deposited in the trust. If all of a Medicaid recipient’s income is deposited into the QIT, they can be paid a Personal Needs Allowance (PNA). This amount varies by state and by setting in which the long-term care recipient resides. For instance, in 2023, in Washington, a person residing in a nursing home facility can receive a PNA of $75.36 / month, Florida allows $130 / month, and Texas allows $60 / month.

In addition to the PNA, if a Medicaid recipient is married and their non-applicant spouse (also called the community spouse, healthy spouse, or well spouse) has little to no income, a Monthly Maintenance Needs Allowance can be paid to that spouse. This spousal income allowance is intended to prevent the community spouse from the inability to support themself. While this figure varies by state and by circumstances, in most cases, the maximum payout (in 2023) is $3,715.50 / month.

Money in Miller Trusts also goes towards paying “share of cost”, or in other words, goes towards paying for the cost of the Medicaid recipient’s long-term care. For instance, a payment may go to the nursing home to supplement care costs. Medical bills not paid for by Medicaid, and Medicare premiums, are also eligible expenses to be paid from an Irrevocable Income Trust.

 Qualified Income Trusts do not shelter money for the Medicaid recipient or their family.

 

Who Receives the Benefit?

Upon the Medicaid recipient’s death, the state is named as the beneficiary of the Miller Trust / Qualifying Income Trust. If there are any funds remaining in the trust account, the state will receive it as reimbursement for funds paid for the care of the Medicaid recipient. The state will not receive an amount greater than was paid, although it would be very unlikely for a Miller Trust to have funds in excess of this amount.

 

Is There a Maximum Amount that Can Be Deposited into the Trust?

Some states restrict the amount of income that can be deposited into a Miller Trust. Within a state, the limit may vary based on geographic region. In 2023, Oklahoma sets the limit for Income Only Trusts at $5,756 / month, Iowa caps it at $9,507.50 / month, and Arizona allows up to $8,912.70 / month in Maricopa, Pima, and Pinal Counties and $8,138.28 / month in all other counties.

Many states, however, do not set a maximum amount of income that can be deposited into a Miller Trust. While there is no cap set by these states, there is a practical limit. For single individuals, this is no more than the cost of private pay for nursing home care in the state in which they reside. For married couples, this is no more than a spousal income allowance, if applicable, plus the cost of private pay nursing home care.

 

Which States Allow Miller Trusts / QITs?

Not all states allow Miller / Qualified Income Trusts. At the time of this writing, 25 states allow this type of trust in order to meet Medicaid’s income limit.

State States Allowing Miller Trusts / Qualifying Income Trusts and Maximum Monthly Income that Can Be Deposited (Effective Jan. 2023)
Alabama No Limit
Alaska No Limit
Arizona $8,912.70 in Maricopa, Pima, and Pinal Counties / $8,138.28 in all other Counties
Arkansas No Limit
Colorado Varies based on region*
Delaware No Limit
Florida No Limit
Georgia No Limit
Idaho No Limit
Indiana No Limit
Iowa $9,507.50
Kentucky No Limit
Mississippi No Limit
Missouri (only for HCBS Waivers) No Limit
Nevada No Limit
New Jersey No Limit
New Mexico No Limit
Ohio No Limit
Oklahoma $5,756
Oregon No Limit
South Carolina No Limit
South Dakota No Limit
Tennessee No Limit
Texas No Limit
Wyoming No Limit
*Region 1 – $10,551 (Adams, Arapahoe, Boulder, Broomfield, Denver, Jefferson).
*Region 2 – $8,968 (Cheyenne, Clear Creek, Douglas, Elbert, Gilpin, Grand, Jackson, Kit Carson, Larimer, Logan, Morgan, Park, Phillips, Sedgwick, Summit, Washington, Weld, Yuma).
*Region 3 – $8,381 (Alamosa, Baca, Bent, Chaffee, Conejos, Costilla, Crowley, Custer, El Paso, Fremont, Huerfano, Kiowa, Lake, Las Animas, Lincoln, Mineral, Otero, Prowers, Pueblo, Rio Grande, Saguache, Teller).
*Region 4 – $8,844 (Archuleta, Delta, Dolores, Eagle, Garfield, Gunnison, Hinsdale, La Plata, Mesa, Moffat, Montezuma, Montrose, Ouray, Pitkin, Rio Blanco, Routt, San Juan, San Miguel).

Is Professional Assistance Needed to Establish Miller Trusts / QITs?

While professional assistance is not required to establish a Qualified Income Trust or Miller Trust, it is highly recommended that one consult with a Medicaid planning professional. It’s extremely important that one be aware of the rules surrounding Miller Trusts in the state in which one resides and that the trust be properly set up and funded. If a Miller Trust is incorrectly established and funded, it will defeat its purpose, and the income will still count towards Medicaid’s income limit. Therefore, the Medicaid applicant will remain ineligible for Medicaid. For those who are married, spousal income allowance calculations must also be determined and factored in, which can be complicated, in and of itself. Find a Medicaid Planner.

 

Cost to Set Up a Miller Trust / QIT?

There is not a significant cost to setting up a Qualified Income Trust, particularly when one considers that becoming income-eligible, and hence, qualifying for Medicaid will save thousands of dollars per month in the long term. Some Medicaid Professionals include the cost of establishing this type of trust as a package deal with other Medicaid planning services. However, on average, solely setting up a QIT runs approximately $400 to $500, but may run as high as $1,000 or $2,000.

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