Miller Trust in Arizona: Top 10 Strategies to Qualify [Step by Step]

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Paul Sundin, CPA

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Miller Trusts can be complex to set up but relatively easy to administer. It can work great in the right situation. 

The trust’s goal is to ensure that an applicant can meet the income requirements to receive Medicaid in Arizona, also known as “ALTCS.” 

What is a Miller Trust?

The trust goes by many different names. Here are just a few:

  • Income Only Trust
  • Income Cap Trust
  • Income Assignment Trust

ALTCS officially calls the Miller Trust Account an Income Only Trust. But the result is the same. It is a common approach to solving the dilemma of exceeding the Medicaid income limit. 

The trust allows a person to assign their right to receive income, such as social security and pensions, to the trust. The ultimate goal is to help someone who is applying to ALTCS meet the program’s income requirements. 

When the applicant’s income exceeds the ALTCS monthly income limit but cannot pay for nursing home care, this can be a great option to consider.

How Does an Arizona Miller Trust Work?

So let’s start at the beginning. ALTCS sets an income cap (or threshold) if you earn more than the cap, you automatically do not qualify for nursing home benefits.

For 2021, the limit for a single person is $2,382. The income cap is calculated for married couples by adding the couple’s combined income and dividing it by two.

If you exceed the threshold, then ALTCS will automatically deny your application. This is where a Miller Trust can come to the rescue.

The applicant can stay below the income threshold by directing some (or possibly all) of their income into the Miller Trust. The income must be deposited directly into an account in the name of the trust rather than the applicant’s checking account.

The limits noted above are what we would consider the floor. But there is also a ceiling you need to be aware of. ALTCS sets a monthly ceiling of the following:

  • $6,905 (Pima and Maricopa Counties) 
  • $5,667 (all other Arizona counties)

The ALTCS ceiling numbers represent the average monthly care cost in a nursing facility.

So what happens when you are above the floor but below the ceiling? You can establish a Miller Trust that allows you to direct excess income into a trust in order to qualify.

Who Can Set Up an Income Trust?

As long as you are eligible for Medicaid (no matter your age), you can set up an Income Trust Account. However, you can only use the trust if the ALTCS applicant resides (or will be residing) in long-term care living arrangement.

If an applicant becomes physically or mentally disabled and has previously granted a power of attorney, the agent can establish a Miller Trust to manage the cost.

If the person has not granted a power of attorney to anyone and is rendered too disabled to understand how the trust functions, they would then need to obtain court conservatorship. The one exception is that if the applicant is married, the spouse would create the Income Trust on the patient’s behalf.

How to Establish a Miller Trust

Since most patients who require long-term care will eventually become physically or mentally incapable of making decisions, it is usually best to designate a responsible trustee and set up a bank account in the trust name. Once you set up the account, you can deposit the income sources.

ALTCS patients can either direct all of their income to the trust or whatever is necessary for them to stay below the income cap.

An essential factor in directing the income to the trust is that all of the money derived from an identified source of income is required to be directly deposited into the account, not just a portion of it.

Typically, applicants will forward all income to the trust account. The trustee can then set the monthly needs allowance to the amount of funds necessary for the patient to meet their lifestyle. However, this amount cannot exceed the income cap.

A few things to consider:

  • The income trust account cannot receive a contribution that is not the redirected income. You may not open up a bank account with an opening deposit.
  • The following are a list of excluded income sources defined by Medicaid:
    • Vocational rehabilitation
    • Income Tax Refunds
    • VA Aid and Attendance
    • VA reduced pension
    • Specific Types of Annuity Payments
    • Agent Orange Payments

How to Direct Income into the Arizona Miller Trust

Previously, when you set up a Miller Trust to qualify for ALTCS, patients would assign all income from all relevant sources into the trust. But this is not the case these days. 

ALTCS now requires you to assign only the excess income. Most people will simply just redirect their social security income or pension to the Miller Trust Account.

For example, let’s assume that you have a monthly pension of $2,300 and $900 from social security. Your total monthly income is $3,200. Assuming that both amounts are currently directly deposited into your checking account, you could elect to have the social security amount directly deposited into your Miller Trust Account. As such, your monthly income would be just $2,300 (below the income threshold).

How the Income Trust Funds are Spent

Share of Cost

The goal of ALTCS is to help patients that cannot afford long-term medical care. But in some situations, the amount will not cover the required amount. This remaining expense portion is the patient’s financial responsibility and is commonly called the share of cost.

A Miller Trust can benefit the trustee by using the account funds to pay the remaining balance due prior to requiring the patient to pay anything from their personal funds.

Share of cost will only be applicable when the patient physically resides in a nursing facility, and the patient will be using home or community-based services (HCBS). Generally, there is no share of the cost, but this can vary depending on your situation.

HCBS will cover health or personal care provided in the patient’s home by a personal care assistant, skilled nurse, or even the patient’s spouse. If the patient is in an adult day care or behavioral health facility, this would also be considered HCBS and have no share of cost.

Personal Needs & Community Spouse Allowances

Before paying the ALTCS member’s share of the cost, an income trust may also pay a small personal allowance to the patient. If the person is married, the trust can also pay a personal allowance for the spouse.

Note that the spouse is called the community spouse, and the amount that can be dispursed to them is called the Minimum Monthly Maintenance Needs Allowance (“MMMNA”). Under current law, the minimum income that a community spouse may receive under MMMNA is $2,002, and the maximum is $3,022.

Miller Trust Arizona Payback Provision

Once the person stops receiving support from ALTCS (typically from death), Arizona prioritizes the care expenses they paid for on behalf of the beneficiary. Any excess funds will be disbursed to the named beneficiaries.

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Estate CPA

Gilbert, AZ