A Miller trust — also called a Qualified Income Trust or QIT — is a special type of trust used in certain states to help people whose income exceeds the Medicaid income limit qualify for nursing home Medicaid benefits. It is named after a 1992 federal court case — Miller v. Ibarra — that established the legal basis for this type of trust.
Miller trusts are used exclusively in what are called income cap states — states that set a hard income limit for Medicaid nursing home eligibility. Understanding how Miller trusts work and whether your state requires one is an important part of Medicaid planning for long term care.
Why Miller trusts exist
Medicaid eligibility for nursing home care involves both an asset test and an income test. In most states excess income is handled through a spend down process in which the applicant applies their income toward the cost of care and Medicaid pays the remainder. However some states — called income cap states — set a strict monthly income limit and simply deny Medicaid eligibility to anyone whose income exceeds that limit regardless of how high their care costs are.
For people in income cap states whose income exceeds the limit a Miller trust provides a legal mechanism to redirect excess income into a trust account allowing them to qualify for Medicaid despite having income above the cap.
How a Miller trust works
A Miller trust is established by or for the benefit of the Medicaid applicant. Each month the applicant deposits some or all of their income — typically Social Security benefits, pension payments, and other monthly income — into the trust account.
The trustee — often a family member or the facility — then disburses funds from the trust account in a specific order:
- A small personal needs allowance for the Medicaid recipient
- A monthly maintenance needs allowance for a community spouse if applicable
- Health insurance premiums
- The patient pay amount — the resident’s share of nursing home costs
- Any remaining funds stay in the trust
Because the income is deposited into the trust rather than received directly by the applicant it is not counted toward the Medicaid income limit for that month. This allows the applicant to qualify for Medicaid even though their gross income exceeds the cap.
Which states require Miller trusts
Miller trusts are only needed in income cap states — states that use a hard income limit rather than a spend down process for nursing home Medicaid. Income cap states include but may not be limited to Alabama, Alaska, Arizona, Arkansas, Colorado, Delaware, Florida, Georgia, Idaho, Indiana, Iowa, Kentucky, Mississippi, Nevada, New Mexico, New Jersey, Ohio, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Texas, and Wyoming among others.
Because Medicaid rules change frequently and vary by state it is important to verify whether your state is an income cap state by consulting with an elder law attorney or your state Medicaid agency.
What happens to funds remaining in the trust at death
When the Medicaid recipient dies any funds remaining in the Miller trust must first be used to reimburse the state Medicaid agency for the cost of benefits paid. This is similar to the Medicaid estate recovery requirement that applies to other assets. Any funds remaining after Medicaid is reimbursed may pass to named remainder beneficiaries.
How to set up a Miller trust
A Miller trust must be properly drafted to comply with federal and state Medicaid requirements. Key requirements include:
- The trust must be established solely for the benefit of the Medicaid applicant
- The trust must be irrevocable during the applicant’s lifetime
- The trust must include a provision that upon the applicant’s death the state Medicaid agency will be reimbursed for benefits paid
- The trust must be established by the applicant, their spouse, their legal guardian, or a court
Because errors in drafting or administering a Miller trust can result in Medicaid ineligibility working with an experienced elder law attorney is strongly recommended.
Miller trust administration
Once established a Miller trust requires ongoing monthly administration. Each month income must be deposited into the trust account and disbursements must be made in the correct order. Keeping accurate records of all deposits and disbursements is essential.
The trustee has a fiduciary duty to administer the trust correctly and in accordance with Medicaid rules. Improper administration can jeopardize the Medicaid recipient’s eligibility.
Miller trust vs spend down
In non-income cap states Medicaid applicants with income above the limit use a spend down process — they apply their income toward the cost of care and Medicaid pays the remainder. This is simpler than a Miller trust because it does not require establishing and administering a trust account.
In income cap states the spend down process is not available for nursing home Medicaid — a Miller trust is the only mechanism for qualifying when income exceeds the cap.
Key terms to know
- Miller trust — a trust used in income cap states to help people with income above the Medicaid limit qualify for nursing home benefits. Also called a Qualified Income Trust or QIT.
- Income cap state — a state that sets a hard monthly income limit for nursing home Medicaid eligibility
- Qualified Income Trust — QIT — another name for a Miller trust
- Patient pay amount — the portion of a nursing home resident’s income that must be applied toward the cost of care
- Spend down — the process used in non-income cap states where excess income is applied toward care costs and Medicaid pays the remainder
- Medicaid estate recovery — the process by which a state seeks reimbursement from a deceased Medicaid recipient’s estate
- Trustee — the person responsible for administering the Miller trust and making monthly disbursements
Sources
- Medicaid.gov
- Centers for Medicare and Medicaid Services
- National Academy of Elder Law Attorneys — naela.org
- USA.gov
This article is for general informational purposes only and does not constitute legal or financial advice. Miller trust requirements vary significantly by state and are subject to change. Consult a licensed elder law attorney for guidance specific to your situation.