Revocable and Irrevocable Trust Questions

Q. What is a Miller Trust, and how does it work?

A. A Miller Trust is a written trust agreement which makes it possible for people to obtain Medicaid nursing home coverage even though they actually make too much money to qualify for Medicaid. Importantly, they are not actually called Miller Trusts anymore. Instead, they now go by the name Qualified Income Trusts.

The rule in Texas is that you must have both limited resources and limited income in order to qualify for Medicaid coverage. These are two distinct tests that must be met, and if you don't satisfy both of them, then Medicaid nursing home coverage will not be available.

The first of the two requirements--that you must have limited resources--has nothing to do with Qualified Income Trusts. Basically, if you have more than $2,000 worth of assets, you are too wealthy to qualify for Medicaid no matter how little money you earn.

Cash, stocks, bonds, retirement accounts, non-homestead real estate, and other investments are included in the $2,000 figure, but your homestead (no matter how much it is worth), $2,000 of personal property, a burial plot, a small amount of life insurance, and a car are generally not counted.

People with more than $2,000 can give away properties or convert them into properties which are not counted. However, there is a 36 month look-back rule (60 months when gifts are made to a trust) to keep you from giving away all your property and then applying for Medicaid the next day.

Also, there are rules which generally allow the spouse of someone trying to qualify for Medicaid to retain about $87,000 worth of property. A spouse's property is not counted when determining the total value of assets for the $2,000 resources test.

The second of the two requirements--that you can earn no more than a certain dollar amount of income per month--is where Qualified Income Trusts enter the picture. As of March 31, 2003, the monthly dollar limit was $1,656, but this amount changes frequently. People who earn more can't qualify for Medicaid unless they have a Qualified Income Trust.

What you do is assign your income to the Qualified Income Trust, and the wording of the trust limits how much of the income can be distributed. This way, a person who makes more than $1,656 each month will be treated as earning less than that amount, thereby satisfying the Medicaid income test. The trust can allow for certain payments, including insurance premium payments, other payments to support a spouse, and $60 each month for the beneficiary's personal needs.

Money remaining in the trust after those payments must be paid to the nursing home for the beneficiary's care, with Medicaid picking up the balance. With Qualified Income Trusts, people can get the government to cover the portion of the nursing home costs that they can't afford.

Lawyers prepare Qualified Income Trusts. Therefore, everyone who needs one must first meet with a lawyer to discuss the specifics of the trust and all the other planning that goes with it.

To learn more about Qualified Income Trusts, search the internet for the words "Texas qualified income trust." You can also call the Texas Department of Human Services at 888-834-7406 or visit their website at www.dhs.state.tx.us. They have a summary of Qualified Income Trusts, and they also publish a "Medicaid Eligibility Handbook" which contains other helpful information.

The dollar amounts in this answer are accurate as of August 15, 2002, but they change frequently.