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Miller Trusts, also called Qualified Income Trusts, provide a way for Medicaid applicants who have income over Medicaid’s limit to become eligible for Medicaid long term care. In short, income over Medicaid’s limit, is put into a trust and therefore not 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. For example, in Arizona, this type of trust is called an Income-Only Trust, in Oregon it is called an Income Cap Trust, and in New Mexico, it is called an Income Diversion Trust. Regardless of the name that the state uses, 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 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 (New York and Connecticut do not 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 Medicaid income eligible 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 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. For 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). As of 2021, this equals $2,382 / 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.
In order 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, his/her 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, and upon the death of the individual, the state will receive 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 (some states require direct deposit, while others do not) into the trust. Some states require all of one’s income to be deposited, while other states permit one to deposit only a portion of his / her income into the trust. That said, 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 he / she receives both 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, any amount of income deposited into the QIT does not count towards the income limit. In other words, it is exempt.
Please note that 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. For information on reducing one’s countable assets, click here. If planning well in advance of the need for Medicaid, Medicaid asset protection trusts provide another 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, he / she 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, as of 2021, in Washington, a person residing in a nursing home facility can receive a PNA of $71.12/month, Florida allows $130/month, and Texas allows $60/month.
In addition to the PNA, if a Medicaid recipient is married and his / her 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 allowance is intended to prevent the community spouse from the inability to support himself / herself. While this figure varies by state and by circumstances, in most cases, the maximum payout (in 2021) is $3,259.50 / 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.
Who Receives the Benefit?
Upon the death of the Medicaid recipient, the state is named as the beneficiary of the Miller Trust / Qualifying Income Trust. In the event 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 it paid for the deceased Medicaid beneficiary’s long term care, 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. For instance, in 2021, Oklahoma sets the limit for Income Only Trusts at $5,462 / month, Iowa caps it at $8,463.75 / month, and Oregon allows approximately $7,600 / month. On the other hand, many states 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 instance, for single individuals, the practical limit is no more than the cost of private pay for nursing home care in the state in which they reside. For married couples, the practical limit is no more than a spousal 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.
|States Allowing Miller Trusts / Qualifying Income Trusts (updated Jan. 2021)|
|Alabama||Delaware||Iowa||New Jersey||South Carolina|
|Alaska||Florida||Kentucky||New Mexico||South Dakota|
|Arkansas||Idaho||Missouri (only for HCBS Waivers)||Oklahoma||Texas|
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 not correctly 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 allowance calculations must also be determined and factored in, which can be complicated, in and of itself. Find a Medicaid planner here.
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.