Paying nursing home bills can ruin a person financially. But if you have the proper strategy, you might avoid those large bills and have Medicare pick up the tab. The solution might be a Miller Trust in Texas.
Miller Trusts are easy to establish and, more importantly, efficiently managed. They can be a home run in the right situation.
The trust intends to help an applicant meet the income threshold to receive Medicaid in Texas.
What is a Texas Miller Trust?
These trusts have a variety of names. Here are just a few:
- Income Cap Trust
- Medicaid Income Trust
- Income Only Trust
- Income Diversion Trust
- Qualified Income Trust
- Income Assignment Trust
Many states officially call the Miller Trust an Income Only Trust. But whatever you call it, the goal is still the same. It is a traditional approach to solving the financial dilemma of exceeding the required Medicaid income threshold.
The trust enables a person to assign their right to receive specified income to the trust. This income could be from pensions or social security. The goal is to reduce the applicant’s income to help someone meet the income requirements.
The Miller Trust was sanctioned back in 1990 with the case of Miller v. Ibarra. As a result of the court case, certain states that do not allow income spend-down offer Medicaid applicants the ability to establish a basic irrevocable trust to retain any excess income.
You can use the funds to pay the recipient a monthly personal needs allowance (approximately $60). You can also pay a community spouse Minimum Monthly Maintenance Needs Allowance (“MMMNA”).
From there, you can utilize leftover funds to pay the Medicaid recipient’s nursing care. The remaining difference is covered by Medicaid, as long as they qualify.
How Does a Texas Miller Trust Work?
Medicaid is a federal and state health care program for low-income individuals. But it also covers Texas residents aged 65 and over for long-term care in a nursing home or in assisted living.
Most Texas Medicaid plans are administered by Managed Care Organizations (MCOs). Medicaid in Texas for the elderly and disabled is generally called STAR+PLUS.
So let’s start with the basics. Medicaid in Texas sets an income threshold (or cap). If your income exceeds the cap, you do not qualify for nursing home care costs.
Texas is not alone in its usage of the Miller Trust. In fact, it is one of 12 states that has a qualifying income cap for Medicaid nursing home care. People who are looking to qualify for Medicaid must earn less than $2,382 in gross monthly income and have a nursing home need.
This amount is indexed and changes each year. Anybody with income over the cap can be denied coverage for any nursing home care.
The income cap results in many people who need nursing home care but get rejected by Medicare. The reason is that they make too much money to qualify for Medicaid but don’t earn enough to be able to afford the high cost of nursing home care.
To solve the issue, the Reconciliation Act of 1983 included specific provisions to assist these people in qualifying for the care they need by directing their income into a trust.
A valid Miller Trust must have the following requirements. It must:
- Be irrevocable;
- Be funded only with Social Security, pension, and other income;
- Have a provision that, upon the death of the beneficiary, Texas will receive any funds up to the assistance paid by Medicaid.
Who is Able to Set Up an Income Trust?
Anyone who is eligible for Medicaid can establish an Income Trust. But you can only use the trust if the Texas applicant resides in a long-term care arrangement.
When the person is mentally or physically disabled and has granted a power of attorney to someone else, the person holding the POA is able to set up the Miller Trust in oder to manage the cost.
If the person has not signed a POA and is determined to be too disabled to understand the trust structure or benefits, they might need to court conservatorship. One exception could be when the person is married, the spouse could be in a position to set up the Income Trust on the other spouse’s behalf.
How to Set Up a Miller Trust
Let’s face it. Most patients who need long-term nursing care will at some point become mentally or physically incapable of making proper decisions. As such, it is normally appropriate to designate a responsible party to establish a trust bank. Once the account is set up, the income sources can be deposited.
Patients can direct all income into the trust or whatever amount is required to stay below the income cap threshold.
One critical factor in allocating income to the trust is that all funds obtained from a specific source of income is required to be deposited into the bank account and not just a portion of it.
All income will be directed into the trust bank account in most cases. The trustee will set the monthly needs allowance to the amount of funds required for the patient to meet their lifestyle needs. However, this amount still cannot exceed the required income cap.
Final Thoughts
As you can see, a Texas Miller Trust can be a great option to consider. This is especially the case if you are looking for assistance from Medicare on nursing home expenses.
Make sure you carefully review your situation to determine if such a trust is appropriate for you in your situation. A qualified attorney can review your situation and help you make the best decision.
