Permanent physical incapacity or advanced age may lead a person to require long-term care for their medical and personal needs. However, such care can become incredibly expensive. Individuals may require Medicaid benefits to help with the cost of long-term care. They might use a Miller trust to qualify by allowing an applicant to meet the income eligibility threshold. But what is a Miller trust, and when does a person need to create one before applying for Medicaid?
What Is a Miller Trust?
A Miller trust, also known as a qualified income trust, allows an individual whose income exceeds the thresholds set by Texas’s Medicaid regulations to qualify for benefits. Miller trusts get their name from a federal case filed in Colorado that affirmed the practice of using irrevocable trusts to bring an individual’s income under the Medicaid eligibility threshold. Congress later codified the practice into federal law, allowing states to accept the use of Miller trusts when determining an individual’s Medicaid eligibility. About half of states, including Texas, require Medicaid applicants to use Miller trusts to meet the income eligibility thresholds.
How Miller Trusts Work
A Miller trust allows an individual to qualify for Medicaid by diverting income, including pension and Social Security payments, directly to the trust. A Miller trust can only receive a Medicaid recipient’s or their spouse’s income; it cannot include any other assets. The trustee of the trust can use income paid into the trust to cover certain eligible expenses for the Medicaid recipient, including medical treatment costs, health insurance premiums, the recipient’s share of long-term care fees, and a small monthly personal needs allowance. If a Medicaid recipient has a low-income spouse who does not also receive long-term care (a “community” spouse), the trust can distribute a minimum monthly maintenance needs allowance to that spouse. The terms of the Miller trust must explicitly state that any remaining funds in the trust upon the recipient’s death must reimburse the State of Texas up to the amount of Medicaid benefits provided to the recipient during their life.
Why Texas Residents Need Miller Trusts
Texas’s Medicaid program operates under an “income cap” rule. This rule prohibits Medicaid applicants and recipients from “spending down” income that exceeds the eligibility threshold to pay for allowable expenses such as medical treatment. Instead, a Texas resident whose income exceeds the eligibility threshold must use a Miller trust to become eligible for Medicaid benefits. A Miller trust “redirects” a Medicaid recipient’s income into the trust, so Texas’s Medicaid program does not count that income as received by the recipient. Residents who receive income from pensions or Social Security above Medicaid eligibility thresholds may need Miller trusts to help pay for nursing home care.
Should You Create a Miller Trust?
You may need to create a Miller trust if you plan to apply for Medicaid or already receive Medicaid benefits and your income will exceed Texas’s monthly income eligibility thresholds. Miller trusts most frequently help individuals whose incomes exceed eligibility thresholds but who cannot afford long-term nursing home care. The Miller trust allows those individuals to qualify for Medicaid benefits that can help cover long-term care costs.
Contact Our Estate Planning Firm for Advice and Assistance with Medicaid Planning
When you or a loved one requires long-term care, Medicaid benefits can help your family afford the cost of such care. However, qualifying for Medicaid benefits requires meeting strict financial eligibility criteria, which can be difficult if your income exceeds permitted thresholds. Contact Carroll Law Group, PLLC today for a free consultation with a Medicaid planning attorney to learn more about Miller trusts in Texas and their importance when applying for Medicaid benefits.