What Is a Miller Trust and How Does It Work?

For individuals who require long-term care but earn too much income to qualify for Medicaid, a type of trust called a Miller Trust can help bridge the gap. Sometimes called a qualified income trust (QIT), this type of trust allows individuals to meet Medicaid’s income requirements while still using their funds to cover care-related expenses. It’s especially relevant in states that enforce a strict income cap for Medicaid eligibility, meaning even earning a few dollars above the threshold could disqualify an applicant from receiving essential coverage.

Because the rules governing these trusts can vary by state and involve specific legal and financial provisions, it can be a good idea to work with a financial advisor.

A Miller Trust helps people qualify for Medicaid long-term care benefits in income-cap states. These states enforce strict monthly income limits for Medicaid eligibility, and applicants who exceed that limit by even a few dollars may be denied coverage. A Miller Trust helps circumvent this issue by legally redirecting the income into a trust that doesn’t count against Medicaid’s income threshold.

The term “Miller Trust” originated from a court case, Miller v. Ibarra, which challenged Medicaid eligibility rules in Colorado. The results of that case have allowed certain states to use the Miller Trust structure. Today, Texas, Florida, Arizona and other income-cap states that do not allow Medicaid applicants to spend down excess income use Miller Trusts.

Miller Trusts are irrevocable, meaning once they’re created, the grantor cannot cancel or modify them. Applicants must fund the trust solely with earned income, not with other assets like savings or investments. The funds in the trust have specific purposes, such as paying a portion of the beneficiary’s nursing home costs, health insurance premiums, or other approved expenses.

Because federal and state rules govern these trusts, setting one up incorrectly can result in Medicaid disqualification. This is why it’s a good idea to consider working with a financial advisor. 

A Miller Trust works by diverting income that exceeds Medicaid’s eligibility cap into a designated trust account. Instead of disqualifying the applicant, the state recognizes that the funds placed in the trust no longer count as income for Medicaid purposes. The income in the trust must then be used for approved expenses, typically related to the beneficiary’s care.

Let’s say the Medicaid income limit in a given state is $2,829 per month, and an individual earns $3,200. Without a Miller Trust, that individual would be over the limit and therefore ineligible. By placing the excess $371 into a Miller Trust, the applicant can qualify for Medicaid and still contribute toward their care costs.

Each month, the individual’s income (or at least the portion that exceeds the Medicaid limit) deposits directly into the Miller Trust account. A trustee, usually a family member or legal representative, manages the funds. The trustee is responsible for using the funds according to Medicaid guidelines. This can include paying the nursing facility, personal needs allowance, and certain medical bills.

Several defining characteristics make a Miller Trust unique in the landscape of Medicaid planning tools.

A Miller Trust is not appropriate for everyone, but it can be a vital tool for individuals in income-cap states who need long-term care but earn just over Medicaid’s income limit. These situations often arise with retirees living on fixed incomes that slightly exceed the allowable threshold for Medicaid coverage.

Elderly individuals facing the prospect of extended care, individuals with chronic health conditions, or those transitioning into nursing homes might want to explore this option, especially if they live in a state that enforces strict income caps. It’s also an option for married couples when only one spouse requires care. In some cases, a portion of the income diverted into the trust can be allocated to the healthy spouse, providing added financial stability.

It’s worth noting that a Miller Trust does not protect assets or offer estate-planning benefits. Its purpose is narrowly focused on Medicaid income eligibility. People who have significant assets or more complex planning needs might need to explore additional tools, such as Medicaid Asset Protection Trusts or long-term care insurance, in coordination with a Miller Trust.

A Miller Trust is a valuable Medicaid planning tool that allows individuals in income-cap states to qualify for long-term care benefits by placing excess income into an irrevocable trust. It’s designed to comply with state and federal regulations, ensuring that applicants aren’t denied coverage simply for earning slightly too much.

• A financial advisor can help you evaluate which type of trust is a fit for your situation. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• While it may be tempting to save some money and plan your estate by yourself, you should still be careful with these DIY estate planning pitfalls.

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