Miller Trust For Medicaid Qualification


March 3, 2020

Use A Miller Trust Title
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If I use a Miller Trust for Medicaid, will I regret it?

Table of Contents

  1. What is A Miller Trust?
  2. Who Qualifies for a Miller Trust?
  3. Can I Use a Miller Trust for More than Nursing Home Costs?
  4. Common problems regarding income deposited to a Miller Trust
  5. What Happens To My Money When I Die?

What is a Miller Trust?

 Miller Trust is like a Rubik's Cube
Much like the Rubik’s Cube, it looks fairly simple at first glance…

Should you use a Miller Trust for Medicaid? Much like the Rubik’s Cube, it looks fairly simple at first glance. But there are so many ways to get it wrong! The purpose of this trust is to hold and distribute income for those over the income limit. It allows a Medicaid Applicant with more than the allowable amount of monthly income to qualify for benefits if he/she is otherwise eligible. We frequently see people not getting it right. It has cost them a month (or more) of Medicaid qualification.

Before we dig into the nitty gritty, let’s take a moment for a brief history lesson. Back in 1990, four “mentally incompetent” elderly women brought suit (Miller v Ibarra) against the Executive Director of the Colorado Department of Social Services, Irene Ibarra. The issue was, their incomes were considered as “too low to enable them to pay their own nursing home costs, but too high to qualify for Medicaid benefits.” Therefore, these women were refused Medicaid benefits.

To make a long legal story short, the ladies won their case. Hence was the birth of the Miller Trust, also known as a Qualified Income Trust.

Who Qualifies for a Miller Trust?

Not all states allow Miller Trusts. As of 2019, half of the country allows this type of trust.

States Allowing Miller Trusts (2019)

New JerseyNew MexicoOhioOklahomaOregon
South CarolinaSouth DakotaTennesseeTexasWyoming

Income Cap

As you can see from the chart, Arkansas is an “income cap” state for Medicaid. Which means that if an applicant’s income is in excess of this cap, they are not eligible to receive Medicaid benefits. However, Congress created the Miller Trust as a way around its own restrictive Medicaid qualification rule. A person who has income in excess of the cap simply assigns all of their monthly income to the Miller Trust. Then they use the income for certain purposes as described below.

Without a Miller Trust, an applicant’s income can not exceed the income cap, which is currently $2,349 (2020 amount) per month. The Department of Human Services (DHS) can deny the application for Medicaid – Long Term Care, which pays for nursing home costs.

Can I Use a Miller Trust for More than Nursing Home Costs?

Can I Use A Miller Trust for...?
We have seen trustees go out for dinner on the Miller Trust dime…

We have seen trustees go out for dinner on the Miller Trust dime. But a nice, juicy steak is probably never going to be a DHS-approved expenditure. We’ve previously discussed some of the income rules regarding a Miller Trust. Here we are going to discuss problems that we have seen regarding expenditures.

4 Authorized Types of Expenditure from a Miller Trust

  1. Personal Needs Allowance
  2. Health Insurance Coverage
  3. Community (or “well”) Spouse
  4. Nursing Home

Personal Needs Allowance

The Trustee may pay a $40 personal needs allowance to the institutionalized person every month out of trust. The Trustee may write a check directly to the institutionalized person. Or they can set this up on direct draft. Sometimes, nursing homes will establish a resident account which will hold the personal needs allowance funds.

Health Insurance Coverage

The Trustee may pay the cost of the resident’s health insurance coverage out of the Miller Trust. This could be for a Medicare supplement, health insurance or Medicare Part D coverage.

Provide for the Community Spouse
The Community (“well”) Spouse may be entitled to some of the monthly income.

Community (or “well”) Spouse

The Community (“well”) Spouse may be entitled to some of the monthly income. This would be up to an amount known as the Minimum Monthly Maintenance Needs Allowance (MMMNA). DHS set the MMMNA at $2,114 per month for 2020.

As an example, say the husband is in the nursing home and has a monthly income of $3,200. The wife is at home with a monthly income of $800 from her Social Security check. She would be short $1,314 from the MMMNA. Thus, it entitles her to receive funds from the husband’s income every month to bring her income up to the MMMNA authorized amount.

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But wait… There’s MORE!
Download your FREE Miller Trust Planning Guide!

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Nursing Home

The Nursing Home is entitled to the remaining current month’s income, after the above authorized uses have been spent. Medicaid policy dictates that only the current month’s income is required.

Never Assume How to Use a Miller Trust

The primary factor for all above “Authorized Uses” is to first get case worker approval. Don’t assume that an expenditure is OK. A caseworker may authorize necessary medical expenses of a resident when requested.  A Caseworker may require spending down excess funds held by a Miller Trust. This scenario occurs when the resident goes to the hospital and has subsequent rehab days with Medicare paying for it. Misuse of funds in a Miller Trust can cost valuable Medicaid benefits.

Common problems regarding income deposited to a Miller Trust

My Cash is flying away!
If you don’t use a Miller Trust properly, the money can fly away…

We’ve discussed some basic rules regarding the establishment of and authorized ways to use a Miller Trust. Now, we’ll share some common problems regarding income deposited to a Miller Trust account.

4 Troublesome Situations and Ways to Avoid Them

  1. Using existing accounts to set up the Miller Trust
  2. Depositing Spousal Income to the Miller Trust
  3. Not depositing all income to the MIller Trust
  4. Joint Payments

Using Existing Accounts to Set Up Miller Trust

When a person sets up a Miller Trust, the best practice is to establish a new account with no existing money in it. Then, only income can be deposited in that account. We have seen situations where applicants used an existing account. But did not pull out previous deposits first.

The result of this is a non-compliant account. Even if they leave in a few dollars, that money is not acceptable as “income.”

In one particular situation, an applicant used an existing account to hold Miller Trust income. But in order to keep the account open, the bank would not allow withdrawing all existing money in the account. In this situation, DHS required a letter from the bank stating that at least $1 must remain in the account.

This was to make sure that the account remained open to receive the income of the institutionalized spouse. Don’t count on the “$1 bank letter.” This was simply an accommodation in this particular case. Again, the best way to set up a Miller Trust is with a brand new account with shiny new income.

Depositing Spousal Income to Miller Trust

It is very common for both spouses to have income such as Social Security checks or pension income that they deposit into a common account. This is not possible with a Miller trust account. You can’t deposit the income of the community spouse to the trust account. The only income allowed is that of the institutionalized spouse. If that happens, it will result in a denial or an over-payment.

Use A Miller Trust - Planning
Proper deposits into the Miller Trust are important!

Not Depositing ALL Income to Miller Trust

All income of the institutionalized person must be deposited in the trust account each month. We have seen situations where a family member, acting under power of attorney for the Medicaid applicant, did not deposit ALL income monthly into the Miller Trust. Not doing so will result in a denial. Or even worse, to a closure of the Medicaid case discovering the discrepancy.

Joint Payments

Sometimes joint payments are received, such as rent payments or royalty payments. The husband and wife must divide the income. Then, deposit half of it into the Miller Trust account. The caseworker will ultimately decide what belongs in the Miller Trust.

Occasionally the money can’t be split at the source. Then you need to deposit the income to another account and write a check for the half to the trust. This occurs each time the income is received.

What Happens To My Money When I Die?

Use A Miller Trust-End of the tunnel
“What happens to my money when I die?”

The last question that we will answer today is, “What happens to my money when I die?” Specifically, of course, we are referring to any money left in the Miller Trust account. 

Any money remaining in the Miller Trust account is payed to the state as reimbursement for Medicaid Benefits. 

At ELP, we work to protect you!

We work with people to do various types of estate planning. There is no one size fits all plan and no plan is categorically better than others. The key is to meet with your attorney (hopefully us!) to discuss your unique situation and have a plan crafted that is best for you. If you or your declining parent is not 100% sure of their beneficiary designations, please be proactive and give us a call before you (or they) lose capacity.

Without a properly flexible plan, how will you care for your declining Loved One, be there for your family, get work done, and pivot in the event of a crisis? What about cost? How will you pay for it all? If you make the Assisted Living Facility choice, how long will the money last? Together, we can craft a proactive plan! Lets get started protecting your assets!

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We have covered some legal topics in this edition and as always, I want to emphasize that (1) the law is different in every state, so if you live in a state other than Arkansas, just know that the law may be totally different in your state; (2) your situation is unique, so one size doesn’t fit all – meaning what we discuss herein may not be right for you; (3) we have purposely over-simplified many of the topics above (otherwise this would be many pages long and unreadable because of all of the legalize). It is imperative that you meet with your attorney (hopefully us!) and get a plan that will work for you. Don’t try to plan based on what you read in this (or any) article AND don’t try to go it alone. Please consider this, get your questions answered and take action.

The information provided on this blog is general information only for a broad audience. It is not legal advice and should not be acted upon as such. If any reader has questions or concerns about any matter mentioned herein, he/she should contact an Elder Law Attorney or other appropriate professional.

If any reader has questions or suggestions about a future topic area that he/she would like to see discussed, please leave us a comment below.


About the author 

Doug Jones

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