Qualifying for Medicaid Using a Miller Qualified Income Trust

Many clients first call the ELET office seeking help in establishing a Miller or Qualified Income Trust (QIT).  Over time, we have noticed a trend:  the vast majority of those who ask for help with a Miller Trust do not really understand what it is or how it is used.  Many of them have been referred by nursing homes with little explanation as to why the recommendation for a Miller Trust has been made or how a Miller Trust will help them to qualify for Medicaid (also known as CHOICES or TennCare) benefits.  Sometimes a Miller Trust really is the best solution for the client, but in quite a few situations a Miller Trust is either not ideal or not comprehensive enough to achieve the client’s goals.  Before establishing a Miller Trust, it is important to seek legal advice to ensure that it truly is the right tool to help you meet your goals.

What is a Miller Trust or Qualified Income Trust?

A Miller Trust, or Qualified Income Trust (QIT), is a tool which may be used by individuals whose monthly income is too high to qualify for Medicaid/TennCare benefits but too low to pay for care in a long-term care facility.  It is essentially a bank account for holding income that exceeds the Medicaid/TennCare income cap.   Using a Miller Trust enables the person to qualify for benefits if the person’s income is over the cap.  Unlike some other types of trusts, which may enable an individual or couple to ensure that assets are passed on to the next generation, a Miller Trust cannot be used to shelter assets.  Funds in a Miller Trust must be used exclusively for meeting care needs, health insurance premiums, a spousal allowance for married couples, and providing a modest personal needs living allowance.

Who needs a Miller Trust?

The ideal candidate for a Miller Trust is someone whose countable monthly income is low but exceeds $2,199 (the 2015 maximum amount allowed for Medicaid/TennCare qualification; this number may increase as cost of living expenses increase).  “Countable” is the operative word here, as income from certain sources (e.g. VA pensions, tax refunds, and others named in Medicaid/TennCare policy) are not counted in an individual’s total income for Medicaid purposes.  In addition, to use this planning strategy, a person must be eligible for Medicaid/TennCare in every other respect.

How does a Miller Trust work?

Establishing a Miller Trust involves preparation and signing of a trust document.  The trust document naming a Trustee (not the Medicaid/TennCare applicant) would be signed by the applicant or his or her attorney in fact under a durable power of attorney.  Once the trust is established, the trustee will set up a trust bank account.The Medicaid/TennCare applicant then directs some or all of his or her income into the trust bank account.  The minimum amount that should be transferred to the trust account is the amount of income over the $2,199 cap for benefits qualification.  Non-income assets may not be directed to the trust account.  Income which is excluded for Medicaid/TennCare qualifying purposes typically should not be deposited into the trust account.

Income which passes through a Miller Trust may only be used to pay for the care of the qualifying individual, health insurance premiums, a small personal needs allowance for that individual, and a monthly allowance for a low-income community spouse to increase the community spouse’s income to the minimum of at least $1,991.25 in 2016 (a number which increases annually in July).  Funds in the trust account may also pay  some medical expenses which are not covered by either Medicare or Medicaid.

Upon the death of the Medicaid/TennCare beneficiary, any funds remaining in the trust are subject to a “payback provision.”  This means that the state gets first dibs on reclaiming funds equal to the amount which the state paid for care of the beneficiary during his or her lifetime.  It is unusual for any funds to accumulate in the trust as it is nearly empty every month.

Stumbling Blocks for Establishing a Miller Trust

While a Miller Trust can be a great tool for qualifying individuals for much-needed benefits, the process can be somewhat tricky, and a Miller Trust may not be the only document needed for Medicaid/TennCare qualification.  For example:

1. Often adult children of elders who need to qualify for benefits seek legal help in setting up a Miller Trust.  While this may be the best move for the elder, he or she may not be in a health condition that allows him or her to do the necessary legwork (such as going to the bank and setting up the trust account).  If this duty falls to an adult child, that person must have financial power of attorney for his or her parent.  It may be necessary for the elder to sign a power of attorney document granting financial powers to the adult child before the Miller Trust can be established.
2. A Miller Trust cannot solve other problems that prevent an individual from qualifying for benefits.  For instance, Medicaid/TennCare has strict rules about gifts and transfers of money in the five years leading up to the application date, and there are also limits to the amount of non-income assets which an applicant may possess.  If someone who wishes to apply for benefits will be disqualified for any of these other reasons, a Miller Trust alone will not enable them to qualify.

Conclusion

A Miller Trust is only one of the pieces in the puzzle that is a Medicaid/TennCare application.  Individuals whose financial qualification for benefits is not straightforward may require other planning strategies or legal assistance to help them get through the application process and get the result they need.  Since every situation is unique, there is not a one-size-fits all solution.  Seeking advice from a qualified attorney can help expedite the process and ensure that the elder gains access to the benefits he or she needs.