How A Miller Trust Might Be Your Answer to Medicaid Long Term Care Support

June 2, 2022

Kate Grayson

How A Miller Trust Might Be Your Answer to Medicaid Long Term Care Support

Affording long term care support is a tremendous problem in our country. Medicare doesn’t cover long term care, and it is often prohibitively expensive to pay for care privately. Unless you have good long term care insurance – which is becoming increasingly difficult to access – many Americans have to look to Medicaid for long term care support. Unfortunately, Medicaid has strict eligibility requirements that can be difficult to navigate.

Medicaid Long Term Care Support

This gap in Medicaid eligibility is a large problem throughout one’s life, but becomes even more pressing as you age, when it is likely you will require more care. For somebody turning 65 this year, there’s a 70% of requiring some type of long term care support. Given the enormous costs of care facilities, many Americans must rely on Medicaid to fund their long term care. But what can you do if you earn too much to qualify for Medicaid?

In order to qualify for Medicaid long term care support, an individual must have income below a certain threshold. The income thresholds for Medicaid can be quite low, and many people earn too much from Social Security, pensions, and retirement investments to qualify. This creates a tremendous gap in coverage for individuals who earn too much to qualify for Medicaid assistance, but not enough to afford to pay for long term care out of pocket. Medicaid limits vary state to state, but are often 300% of the federal poverty level. (Please note: we are referring to the Medicaid long term care income limits, not the Medicaid health insurance limits. They are separate requirements.)

Income Cap States

It is a common problem to earn too much to qualify for Medicaid. Because of this, some states let individuals “spend down” any income above the threshold on care expenses, so that they can still qualify for Medicaid assistance. For example, if your state’s Medicaid income threshold is $2,500/month and you earn $2,900, you would pay the difference of $400 towards your care. The initial $2,500 would be yours to keep, and you would qualify for Medicaid long term care assistance.

However in other states, it is much more challenging. In certain states, individuals cannot qualify for Medicaid long term care if their incomes are above the Medicaid eligibility threshold. These are called “income cap” states, because you do not qualify for Medicaid long term care if your income is at above that cap, even by $1.

In those situations, many individuals look to shield some of their income so that they can become eligible for Medicaid’s assistance. In this article, we will be taking you through a common solution called Miller Trusts.

What is a Miller Trust?

Miller Trusts, also known as Qualified Income Trusts, provide a way for individuals with incomes above the limit to become eligible for Medicaid long term care assistance. This works by putting some or all of one’s income into a trust, thereby removing it from Medicaid consideration and allowing individuals to receive Medicaid assistance. This allows individuals to lower their incomes enough to become Medicaid eligible.

When the individual passes away, the money that’s accumulated in the Miller Trust goes towards paying back Medicaid for long term care expenses accrued. If there is any additional money left once Medicaid has been reimbursed, then remaining assets go into the individual’s estate to be passed onto heirs.

How Does a Miller Trust Work?

When a Miller Trust is established, the individual’s income (partial or total) is deposited into the trust, instead of into their personal bank account. The individual and their spouse can be paid allowances from the Miller Trust account, but otherwise all money accumulated in the Miller Trust must go towards the cost of their care. If there is any money left in the trust when the individual dies, those funds will go towards reimbursing Medicaid for care expenses. 

Miller Trusts are “irrevocable trusts,” meaning that they cannot be altered or reversed once established. This prevents people from being able to create a Miller Trust to access Medicaid, and then revoking it without reimbursing Medicaid.

Next Steps

If you are nearing retirement age, it’s never too early to consider your financial and healthcare plans. If you live in an Income Cap State and anticipate higher retirement income, a Miller Trust could be a good solution.

The laws and requirements for Miller Trusts vary state to state. We always suggest working with an estate planning or elder law attorney to determine the right plan for you.

Photo by Lukas from Pexels

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