Miller Trusts | Income Only Trust

Paul B. Bartlett, Attorney - Tucson, Arizona

Purpose of a Miller Trust | Income Only Trust

A Miller Trust solves a single problem. The problem is that the person applying for ALTCS (Medicaid) has too much income. A Miller Trust is not useful for any other purpose. If a person applying for ALTCS has more income than ALTCS allows (see Income Criteria below) a Miller Trust will enable the person to qualify for ALTCS anyway. If you are not dealing with an excess income problem, there are other trusts that may help you conserve your resources when applying for ALTCS.

Income Criteria

In Arizona, in 2018, the maximum income that a single person can have and still qualify for the ALTCS program is $2,250.00 per month.

If the single person has more than $2,250.00 income, but less than $7,134.44 per month (in Pima and Maricopa County, $6,307.74 in other Arizona Counties), the single person can do a Miller Trust. (The maximum number listed above represents the average monthly cost of care in a nursing facility as calculated by ALTCS.  The stated maximums are current through September 30, 2018.)

If a patient is married but has checks coming in his name amounting to more than $2,250.00, the ALTCS eligibility worker will average the income of both spouses to see if the patient can pass the income test of $2,250,00.

If the married patient has more than $2,250.00 income, according to the averaging technique described above, but less than $7,134.44 per month (in Pima and Maricopa County, $6,307.74 in other Arizona Counties), the single person can do a Miller Trust.

Directing Income into the Miller Trust

The term “Miller Trust” is an informal name.  The official ALTCS name is an Income Only Trust.  A more accurate name for this trust is an “Income Cap Trust”. It has also been called an “Income Assignment Trust”. This is because, after the trust is created, the patient assigns his or her right to receive social security and pension to the trust.

In the eyes of ALTCS, if the Miller Trust is receiving income, the patient is not receiving that income. This is how the patient solves the excess income problem. ALTCS no longer requires that the patient attempt to assign all income from all sources into the Miller Trust, just the excess income.

Assigning less than all income into the Miller Trust

If the patient is going to be receiving care at home, and not in an institution, it is recommended that the patient assign only so much income into the trust as will render him or her income eligible. This is because the patient incurs no share of cost obligation when he receives his care at home. Those funds then accumulate in the Miller trust which must be paid back to ALTCS upon the patient's death to reimburse the program for the patient's accumulated cost of care.

As an example, Mr. Berry receives his care at home. He has Social Security of $800 per month and a pension check from his union for $900 per month. He should assign only his social security into the trust.

Social Security always cooperates with such requests. However, some pension payers do not always cooperate with requests to assign income into a Miller Trust. Fortunately, ALTCS will consider the patient to be income eligible provided that the total of income received by the patient outside the Miller Trust does not exceed $2,250.00. In most instances, it is the Social Security alone that puts the patient over the income cap.

Even if the patient is receiving care in a nursing home or in an boarding home, ALTCS is now requiring that only the income item that puts the patient over the income cap be assigned to the Miiller trust bank account.

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. ALTCS 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. An exception to this is that a spouse can create a Miller Trust on behalf of the patient even without a power of attorney.

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. National Bank of Arizona is exceptionally cooperative in establishing these trusts.

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?

It helps to understand that an ALTCS patient without a Miller trust has to pay a share of cost to the long term care facility. ALTCS calculates that share of cost. ALTCS deducts some items fromo the required Share of Cost. The patient gets to keep a personal needs allowance. If the patient is married, and the well-spouse has too little income, the patient can share some if his income with the well-spouse. Other deductions from Share of Cost include some health insurance premiums and some professional fees.

A patient with a Miller Trust has to pay the same share of cost, calculated in the same way. If part of the Patient's income is assigned to the Miller Trust, the trustee will distribute the above described expenses out of the Miller Trust until the Miller trust income is used up every month. Then the patient must pay any portion of the spousal allowance, and health insurance premiums from income he has not assigned to the Miller Trust. Beyond these required expenses, a Miller Trust trustee is permited by statute (A.R.S. Section 36-2934.01) to pay the following expenses out of the Miller Trust:

B. For a trust that qualifies pursuant to subsection A of this section, the trustee shall not make any disbursements from the trust other than for the following:

1. Reasonable legal and professional expenses related to the trust including:

(a) Trust taxes.

(b) Trust investment fees.

(c) Reasonable professional expenses, including trustee, accounting and attorney fees related to the administration of the trust.

2. The posteligibility share of cost as computed pursuant to section 36-2932.

3. For trusts created pursuant to section 1917(d)(4)(B) of the social security act, a disbursement to the beneficiary equal to the personal needs allowance as computed pursuant to section 36-2932.

4. Health insurance premiums, medically necessary medical expenses and special medical needs of the beneficiary including:

(a) Expenses required to make the home accessible to the person.

(b) The purchase and maintenance of a specially equipped vehicle titled to the trust or to the beneficiary with a lien against the vehicle held by the trust in an amount equal to the current market value of the vehicle.

(c) Durable medical equipment.

(d) Over-the-counter supplies and medications, including diapers, lotions and cleansing wipes.

(e) Personal care services that are determined to be medically necessary by the beneficiary's physician and that are provided by a person who is registered by the administration to provide the services, including a financially responsible relative of the beneficiary. Trust disbursements for personal care services provided by a financially responsible relative shall not exceed the administration's fee-for-service rate for the personal care services. For the purposes of this subdivision, "financially responsible relative" means the spouse of the beneficiary or, if the beneficiary is a child under eighteen years of age, the parent of the beneficiary.

5. Maintenance payments for the spouse or family in accordance with 42 United States Code section 1396r-5(d)(1) and (2) and section 36-2932, subsection L.

6. Guardianship and conservatorship fees for the trust beneficiary based on the fair market value of the services provided.

7. The following expenses for the benefit of the beneficiary, excluding gifts to, payments for or loans to other persons, whether these are in cash or in kind:

(a) Entertainment, educational or vocational needs or items that are consistent with the person's ability to use these items.

(b) Other expenses that are individually approved by the director.

(c) Living expenses for food, clothing and shelter. If home property or other real property is purchased by the trust it must be titled to the trust.

(d) Income taxes owed on income from trust investments or on income of the beneficiary that is assigned to the trust when an actual tax liability is established.

(e) Provision for burial expenses that is limited to one of the following methods:

(i) Purchase of a prepaid burial plan funded by an irrevocable life insurance policy, irrevocable burial account, irrevocable trust account or irrevocable escrow account.

(ii) Purchase of life insurance to fund a burial plan for the beneficiary with a face value that does not exceed one thousand five hundred dollars after allowing deductions for burial plot items as defined by the administration.

(iii) Funding a burial fund account in an amount not to exceed one thousand five hundred dollars.

(f) Travel expenses for a companion if a companion is required to enable the beneficiary to travel for nonmedical reasons.

How can the patient have a Miller Trust and still stay at home?

More ALTCS patients receive their care at home than out of their homes. The program for receiving care at home is called "HCBS" (Home and Community Based Services). When a patient resides at home on HCBS, ALTCS rules automatically increase the patient's Personal Needs Allowance to $2250 in 2018. (See section 1203.01 of the Eligibility Policy Manual.) This means that the Miller Trust trustee can and should distribute all of the patient's income to the patient, up to $2199. The patient can then spend the personal needs allowance money (if it accumulates it will count against the patient's resource eligibility). If Patient has a spouse, the trustee of the Miller trust must pay to the spouse the monthly spousal allowance as computed by ALTCS. Neither of these two types of allowances have any limitations on them in terms of the kind of expenditures that the patient or spouse can make with the money. All other money to be distributed by the trustee of the Miller trust must be spent on categories explicitely allowed by statute.A.R.S. §36-2934.01 Categories include: Trust Taxes, Trust Investment Fees, trustee, accounting and attorney fees related to trust administration, health insurance premiums, medically necessary expenditures, spousal maintenance, guardianship fees, living expenses for food, clothing and shelter and others.

When the patient dies, any money remaining in the Miller Trust must be remitted to the ALTCS program.

A Miller Trust is not for long range planning

We do not recommend that you do a Miller Trust unless you intend to apply for ALTCS soon thereafter (60-90 days). A Miller Trust is not a long range planning tool. A well elderly person should make a power of attorney that would enable another to execute a Miller Trust on his behalf.

Mr. Bartlett prepares a Miller Trust during a single client appointment in most cases. The patient typically pays the legal fees, and the payment is countable towards the patient's spend down. If you need assistance with a Miller Trust, call Mr. Bartlett at (520) 750-1061.

If you wish to see how you can order a Miller Trust | Income Only Trust online at a substantially reduced fee:

Miller Trust Timing Issues

You do not want approval of ALTCS eligibility to be slowed by submission of your Miller Trust.  For this reason, we recommend that at the time you submit your Miller Trust to the eligibility worker, you do two other things.  First, obtain from the eligibility worker a form that notifies ALTCS what you expect will be the monthly income and expenses for the trust and fill it out a and submit it immediately.  Second, if you are going to assign the patient's social security into the trust, and the patient cannot request that assignment himself, you will need to become social security representative payee through the Social Security Administration.  Request that status without delay.

You can revoke a Miller Trust | Income Only Trust

You can discontinue the use of a Miller Trust at any time.  Some people find this reassuring because they want to try out ALTCS while keeping other options open.

Use the Calculator to see if the Patient Needs a Miller Trust

If you wish to see how you can order a Miller Trust online at a substantially reduced fee:

Phone for an Appointment

  • 520-750-1061

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