What is a Miller Trust?

person making calculations and preparing documents

To qualify for Medicaid benefits, applicants must meet strict financial requirements, including asset and income limitations. About half of states apply an additional income restriction, or income cap, for individuals whose income exceeds a certain amount ($2,349 in 2020). That income must then flow through a Qualified Income Trust, also known as a QIT or “Miller Trust.”

A Brief History of the Miller Trust

The case that first addressed using QITs to gain Medicaid eligibility was Miller v. Ibarra. The plaintiffs resided in nursing homes in Colorado, a state with an income cap. Their income was too high to qualify for Medicaid but too low to pay the nursing home. [Miller v. Ibarra, 746 F. Supp. 19 (D. Colo. 1990)]

Shortly after Miller v. Ibarra, the Omnibus Budget Reconciliation Act (OBRA) of 1993 established the Miller Trust regulations that all income cap states currently use. [42 U.S.C. § 1396p(d)(4)(B)]

  1. The trust must contain only pension, Social Security, and other income in addition to the accumulated income on the trust amounts.
  2. Upon the death of the beneficiary, any remaining funds in the trust must first be used to repay the funds expended by Medicaid on behalf of the beneficiary.

How Does a Miller Trust Work?

A Miller Trust, or QIT, is an irrevocable, income-only trust that holds the income of a Medicaid recipient. The individual’s income flows into the trust each month, and the trustee disburses the funds to the individual’s allowable expenses. Monthly expenses may include the individual’s co-pay to the nursing home, their personal needs allowance, and any applicable shift in income to the community spouse under the Monthly Maintenance Needs Allowance (MMNA) rules. Although most states only require that income in excess of the income cap flow through a Miller Trust, you may want to plan conservatively and put the client’s total income into the trust.

Following the Medicaid recipient’s death, any funds remaining in the trust are subject to reclaim by the state Medicaid agency, which can collect up to the amount expended on behalf of the recipient.

Establishing a Miller Trust

Since a Miller Trust is a legal document, we strongly recommend consulting with an attorney to set one up. To establish a QIT, you’ll generally follow these steps:

  1. Put together a valid trust document that complies with your state’s requirements. (Many states provide a template for this.)
  2. Set up a bank account to act as the trust account.
  3. Assign income to the trust before applying for Medicaid.

If you have a client in an income cap state, we recommend working with an elder law attorney before seeking Medicaid benefits. To find out if your state has a separate income cap, you can access the Medicaid planning figures for your state through a free Agent Access account. For specific questions about Miller Trusts, feel free to reach out to The Krause Agency team.