How to Use a Miller Trust for Medicaid Eligibility
In order to qualify for Medicaid to pay for a person’s stay in a nursing home or other long-term care facility, their income and assets must be below a certain level. If their countable assets exceed $2,000, they will not qualify until the excess is spent down or converted to an asset that is not countable.
For income, the federal limit for eligible applicants is $2,205 per month for 2017. However, many states allow the Medicaid applicant to spend down their income on medical expenses to get below the $2,205 limit and thus qualify. These states are known as “medically needy” or “spend-down” states. But what can an applicant do if they live in a state that has a hard income limit and doesn’t allow spend-down? Their assets are below the eligibility limit, but their income is, say, $2,210. Now they have too much income to qualify for Medicaid, but they certainly do not have enough to pay for a nursing home or other long-term care!
It was this very situation that led to the 1990 Colorado case of Miller v. Ibarra. As a result of the decision in this case, those states that do not permit an income spend-down all offer Medicaid applicants the ability to set up a simple irrevocable trust to hold their excess income. Funds in this trust can be used to pay the Medicaid recipient a monthly personal needs allowance and pay their community spouse a minimum monthly maintenance needs allowance (MMMNA), if necessary. From there, any funds that are left over are used to pay the Medicaid recipient’s nursing home bill. The difference will be covered by Medicaid, assuming the applicant otherwise qualifies. Such a trust is called a Miller Trust (after the case mentioned above), a Medicaid Income Trust, a (d)(4)(B) or a Qualified Income Trust (QIT).
Each state has different rules, but in “income cap” or “categorically needy” states, at least the excess over the income cap amount must be placed into the trust. The applicant cannot be the trustee of this account since they are essentially giving up their rights to the money it contains. The trustee is typically a family member, and each month they use money from the trust to pay the Medicaid recipient’s share of cost, personal needs allowance, their spouse’s MMMNA, and other medical costs and premiums not covered by Medicaid and Medicare. Assuming you follow some basic rules regarding this process, excess income will not prevent the applicant from qualifying for Medicaid, unless their income is so high that it exceeds the amount that Medicaid would otherwise pay to the nursing home each month for their care.
Keep in mind that a Miller Trust can only be used to hold income going to the individual who is trying to qualify for Medicaid, and many states require this income to be direct-deposited into the trust account. Applicants also cannot put only portions of certain income sources into the account. For example, you cannot put part of your pension or social security check into the trust. It’s all or nothing. Assets and income sources that do not count towards eligibility limits should not be placed in this account either. This includes a spouse’s income, VA benefits like Aid and Attendance and housebound pensions, income tax payments, and some annuity payments.
At the time of publication, these 23 states are “income-cap” states that permit QITs:
- New Mexico
- New Jersey
- South Carolina
- South Dakota
If your state is listed above, check to see if it publishes a standard, short-form trust document that is essentially a “fill-in-the-blank” form. In some cases, this form may even be available online on the state’s Medicaid website. Using such a form means you do not have to hire an attorney to draft a customized trust for you, but it is still advisable to consult with an expert to assist with Medicaid and estate planning. These are complex matters that can have serious and long-lasting ramifications if done improperly.
To decide if you could use an elder law attorney's assistance and to locate one near you, consult the AgingCare.com Elder Law Attorney Directory.