Mark Ensign

 

What Is A Miller Trust and Why Do I Need One?

When and why to use a “Miller Trust,” (officially a Qualified Income Trust
 QIT), is probably the most misunderstood concept of elder law. “Street lawyers”
(those non-attorneys who freely dispense advice about elderlaw but whose advice
 is worth what you pay for it – nothing) think this is the magic key to quickly
 qualifying for Medicaid. Not true! They think it is a receptacle for assets in excess
 of the maximum amount of resources (assets) a person can have and still qualify
 for Medicaid. Nothing could be further from the truth!

Here’s when and why and how to properly use a Qualified Income Trust.

Sometimes a potential Medicaid applicant would be able to qualify based upon her
 countable resources being less than $2,000. But her monthly income is too high,
 more than $2,094 (for 2012), so she is disqualified. However, that income is just
 not enough to pay the cost of her long-term care in a skilled nursing facility. So
 she finds herself in a Catch-22 situation. The Qualified Income Trust is designed
 to free her from this problem.

The name “Miller Trust” comes from a federal court case in Colorado approving
 the use of such a trust. The court essentially ruled that if
• All income from one or more sources of income to the Medicaid applicant
 was placed into the QIT each month; and
• It was all expended in specified ways for the benefit of the applicant; and
• The remaining income was less than the maximum allowable income –
then the applicant was income eligible for Medicaid. This method was codified in
 1993.

The Miller trust solution works only for institutional (nursing home) Medicaid, the
 Community Based Alternatives (CBA) program, and some home and community-
 based waiver services.

A Qualified Income Trust agreement must be prepared by an attorney and signed
 by the Medicaid applicant (or by an agent acting for the applicant) and by the
 person named to serve as the Trustee. The applicant should not be the trustee.
 The trust agreement must (1) be irrevocable, (2) provide the State of Texas will
 receive all amounts remaining in the trust upon the death of the applicant, and (3)
 designate precisely which sources of income will be deposited into this trust each
 month (such as Social Security, Teacher Retirement or a monthly pension source.)

Then a QIT checking account must be established at a bank that will have no
 service charges, and no printed check charges, and no fees of any kind. An
 existing account should NOT be used.

When the applicant’s income is received from the designated source, the entire
 amount must be placed into that QIT bank account. No other income or assets
 must ever be placed in this trust bank account. The designated income may
 be direct deposited into the QIT bank account. Or it may be received into another
 account (such as the applicant’s personal checking account) and then transferred
 in whole to the QIT bank account. Either way, all the income from the designated
 source must get into that QIT account in the same month in which it is received.

Then the Trustee is required to make certain payments on behalf of the applicant
 who is the Medicaid recipient and the beneficiary of the trust. First, the Trustee
 must pay to the applicant a monthly personal needs allowance (currently $60).
 Second, if the applicant has a spouse, the Trustee pays the amount (determined by
 the HHSC caseworker) needed to create a minimum monthly maintenance needs
 allowance for the applicant’s spouse. Third, the Trustee pays the applicants’s
 medical expenses that are not subject to payment by a third-party – such as for the
 Medicare supplemental insurance policy premiums and for the Medicare part D
 premiums. Finally, the balance in the QIT bank account must be paid as applied
 income toward the cost of long-term care provided by the nursing home. This will
 result in the QIT bank account having a zero balance at the end of every month.

The QIT terminates at the death of the Medicaid recipient. In most cases no
 balance will remain in the account. If any funds remain, they should be paid by
 cashier’s check to HHSC in coordination with the Medicaid caseworker.

If the Trustee follows these procedures faithfully and in a timely way every month,
 the applicant should remain qualified for Medicaid – despite the fact that the total
 monthly income she is receiving is in excess of the maximum allowed amount.

Thus she will be delivered from the Medicaid Catch-22!

Mark R. Ensign
 Ensign Law Firm, PC
 3131 S. Bell, Suite 202
 Amarillo, TX 79106
 806-373-7705