Medicaid Income Rules: How Does the Miller Trust Work?

Purpose of a Miller Trust

A Miller Trust solves a single problem. The problem is that the person applying for Medicaid (Medicaid) has too much income. A Miller Trust is not useful for any other purpose. The Miller Trust is NOT an asset protection trust. If Anything other than monthly income goes into the trust, Medicaid will assess a transfer of assets penalty.

Directing Income into the Miller Trust

The term “Miller Trust” is an informal name. A more accurate name for this trust is an “Income Cap Trust”.

In the eyes of Medicaid, if the Miller Trust is receiving income, the patient is not receiving that income. This is how the patient solves the excess income problem. It simply is a tool to get around the Medicaid Income Cap.

Who can create a Miller Trust?

What if the patient is too disabled, physically or mentally, to sign a trust? If the patient has previously made a power of attorney for finances, the agent under that power of attorney can create the Miller Trust. Medicaid is liberal in permitting this, even if the power of attorney does not explicitly authorize the creation of a Miller Trust. If the patient is too disabled to understand that he or she is creating a trust, and if the patient has not granted a financial power to another, it will be necessary to obtain court conservatorship in order to create the Miller Trust.

Establishing the Miller Trust Bank Account Once the Miller Trust is created and signed by the patient or the patient’s agent under Power of Attorney, the next step is to create a bank account in the name of the trust. The tricky part is that the bank account cannot have an opening balance. Most banks hate this requirement and may not accommodate you. Once the bank account is opened in the name of the trust, the next step is to write social security and the pension payers and ask them to direct deposit future checks into the bank account.

How are the funds in the Miller Trust spent?

When money begins to flow into the bank account, complex Medicaid rules govern how it is to be spent.

If all of the patient’s income flows into the trust, as we often recommend the trustee may retain a personal needs allowance for the patient. The trustee may pay the Medicaid approved Minimum Monthly Maintenance Needs Allowance to the community spouse. The trustee may and must pay the patient’s share of cost to the nursing home, or the "patient liability" or "cost share."

When the patient dies, any money remaining in the Miller Trust must be remitted to the Medicaid program. As you can see, however, there should never be any money of significance left in the Miller Trust. Income goes in, then it goes out.