Miller Trust (Qualified Income Trust)
June 3, 2011
A Miller trust can allow those that otherwise have too much income to become eligible for Medicaid.
What is Medicaid?
Medicaid is a federally-funded, but state-administered, program that pays the eligible health care expenses of low-income individuals and families who fit into an eligibility group that is recognized by federal and state law. In Arizona, Medicaid is administered by the Arizona Health Care Cost Containment System (AHCCCS).
Medicaid Income Cap
Because Medicaid is administered by the various states, some eligibility rules vary from state to state. In particular, some states (including Arizona) set a maximum amount of monthly income that a person is permitted to receive and still be eligible for Medicaid benefits.
How Does a Miller Trust Work?
Medicaid places strict restrictions on the transfer of income or assets by the applicant/member for less than fair market value. If a member/applicant violates these restrictions, he/she will not be eligible for Medicaid for a period of time that varies from state to state (60 months in Arizona). However, Medicaid does permit an applicant/member to assign either all of his/her income to a Miller trust or the amount of his/her income that exceeds his/her state's Medicaid income cap.
If the member/applicant chooses to assign all of his/her income to the Miller trust, the trustee will distribute the associated Personal Needs Allowance to the member in addition to paying for the member's Share of Cost, if any, and other expenses.
If the member/applicant chooses to assign only the income that is in excess of his/her state's Medicaid income cap, the member/applicant will be responsible to pay his/her expenses, including share of cost, from the the funds not assigned to his/her Miller trust.
In either case, when the trust terminates, either because the member dies or the member no longer needs Medicaid benefits, the trustee must distribute to the state an amount equal to the total medical assistance paid on behalf of the member. After the state is reimbursed, any remaining funds will either be distributed to the member, if still alive, or the member's estate.
What About Assets?
Medicaid also imposes a limit on the value of non-countable resources that an applicant is permitted to own, $2,000 in 2011. However, Miller trusts are specifically forbidden from owning assets, so the applicant/member must reduce his/her assets in a manner that will not violate the transfer rules and cause ineligibility, e.g. annuities. This usually means spending down those assets before becoming eligible for Medicaid.
This brief overview of some important considerations associated with Miller trusts & qualified income trusts is by no means comprehensive. Always seek the advice of a competent professional when making important financial and legal decisions.