A senior’s income and assets must fall below certain limits to qualify for Medicaid long-term care. If their countable assets exceed $2,000, they will not qualify until the excess is spent down or converted to an asset that is exempt from this limit. Income limits can be a little trickier to figure out.
Medicaid Income Guidelines Vary by State
The federal income limit for eligible applicants is $2,523 per month in 2022. However, many states set their own lower thresholds and allow Medicaid applicants to spend down their excess income on medical expenses to get below this limit, thus qualifying for benefits. These states are known as “medically needy” or “spend-down” states.
Other states that use the hard income limit of $2,523 and do not allow spend-downs are referred to as “income cap” or “categorically needy” states. If a hypothetical Medicaid applicant in one of these states meets every other eligibility requirement but has a countable monthly income of $2,600, then their excess income will disqualify them from receiving benefits. Unfortunately, recent research shows that the median cost of a semi-private room in a nursing home is $7,756 per month—a significant expense that this applicant certainly cannot pay out of pocket! So, how are seniors in income cap states supposed to get the long-term care they need but cannot afford?
What Is a Miller Trust?
It was this very situation that led to the 1990 landmark case of Miller v. Ibarra in Colorado. As a result of the decision in this case, states that do not permit income spend-downs give Medicaid applicants the ability to set up a simple irrevocable trust to hold their excess income. Funds in this trust do not count toward the income limit and can be used to pay the Medicaid recipient a monthly personal needs allowance (approximately $60, but this varies by state) and, if applicable, pay their community spouse a minimum monthly maintenance needs allowance (MMMNA). From there, any funds left over are used to pay the Medicaid recipient’s nursing home bill. The difference will be covered by Medicaid, assuming the applicant meets all other eligibility requirements.
This kind of trust is called a Miller Trust (after the court case mentioned above), but it can also be referred to as a Medicaid Income Trust, a (d)(4)(B), an Income-Only Trust, an Income Diversion Trust or a Qualified Income Trust (QIT).
How Does a Miller Trust Work?
Certain rules may differ slightly between Miller Trust states. For example, some states require an applicant to deposit all their income into the trust, while others permit depositing only a portion. Many states require funds to be direct deposited into the account. However, there are some universal requirements that govern Miller Trusts.
The Medicaid 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 (SOC) for long-term care, their personal needs allowance, their community spouse’s MMMNA if applicable, and any other medical costs and premiums not covered by Medicaid and/or Medicare. Medicaid must also be listed as the beneficiary of the trust, which ensures the state will receive any remaining funds upon the applicant’s death.
Additionally, every state mandates that the entirety of an income source be put into the trust account. For example, you can’t deposit half of your social security check into the trust and keep the other half in your checking account—it’s all or nothing. Note that a Miller Trust can only be used to hold income belonging to the individual who is trying to qualify for Medicaid. Assets should not be placed in this account and neither should income sources that already do not count toward eligibility limits. This includes a community spouse’s income, VA benefits like Aid and Attendance and housebound pensions, income tax payments and some annuity payments.
Assuming some basic rules are followed regarding this process, excess income will not prevent an applicant from qualifying for Medicaid, unless their monthly income is so high that it exceeds the cost of private pay nursing home care in their state.
Which States Are Miller Trust States?
At the time of publication, these 25 states permit Miller Trusts in lieu of income spend-down:
- New Jersey
- New Mexico
- South Carolina
- South Dakota
How to Set Up a Miller Trust
If your state is listed above, check to see if it publishes a standard “fill-in-the-blank” Miller Trust form. In some cases, this form may even be available on the state’s Medicaid website. Using such a form means you do not necessarily have to hire an attorney to draft a customized trust document, but it is still advisable to consult with an expert to assist with Medicaid planning and estate planning. Keep in mind that Miller Trusts are irrevocable, so they cannot be amended or cancelled once established. 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 Elder Law Attorney Directory.