Common Misconceptions About Miller Trusts

Jun 8, 2024 | Trusts

In today’s society, misconceptions abound. Consider the following: 

Some misconceptions are relatively harmless—you didn’t need to know the shelf life of Twinkies, practically speaking. However, letting others linger can have a negative impact. Those that pertain to your long-term planning and financial well-being are especially important to clarify. 

It’s in this spirit that we look at one particular misconception in elder law and estate planning that deserves addressing: Miller Trusts

What is a Miller Trust? 

A Miller Trust—also known as a Qualified Income Trust (QIT)—is a legal tool that can help you qualify for Medicaid when you make too much money to get help with high nursing home costs but not enough to pay for them without financial assistance. 

Unlike standard asset protection trusts, these irrevocable trusts act as specialized bank accounts into which you (the beneficiary) deposit active income each month for a trustee to pay for medical expenses and some personal needs. 

You’ve probably heard of these trusts if you’re planning for healthcare in your golden years. But how familiar are you with their ins and outs? 

Let’s look at four common myths about how Miller Trusts work and what you can use them for so you can make informed decisions about your finances and health as you age.

1. Miller Trusts can protect assets from Medicaid

One of the most common misconceptions about Miller Trusts is that they can protect assets from being reclaimed by Medicaid after the beneficiary passes away. However, the very nature of a Miller Trust makes this statement inaccurate.

Since a Miller Trust only manages qualified income placed into it, it doesn’t protect your assets from estate recovery. In fact, you can void your trust and lose benefits if you try.

That’s why it’s so important to work with an elder law attorney with experience in estate planning and Medicaid planning when planning for the future. They can help you to exercise other legal strategies to protect your assets from high nursing home costs and Medicaid estate recovery, such as:

  • Medicaid Asset Protection Trusts (MAPT): MAPTs are specifically designed to protect assets like your home and other assets from estate recovery while allowing you to qualify for Medicaid.
  • Irrevocable trusts: You no longer own assets once you place them into an irrevocable trust, which means they’re not considered when applying for Medicaid. That means that Medicaid estate recovery typically doesn’t affect them since you don’t own them. An estate planning attorney will help you set up and fund them well before Medicaid’s five-year lookback period.
  • Spousal transfers: Medicaid rules generally allow for unlimited asset transfers between spouses. An estate attorney can help you structure them to protect assets when one spouse needs long-term care.
  • Personal Residence Trusts and Life Estates: These trusts allow you to transfer the title of your home to your heirs while retaining the right to live there for the rest of your life. This may potentially protect your home from being considered for Medicaid eligibility and estate recovery.

2. They’re only for Medicaid

It’s true that Miller Trusts are primarily used to help you qualify for Medicaid, and you can’t use them to pay non-medical bills like rent and utilities. However, many mistakenly believe they can’t be used for anything else. 

A trustee can use the money from a Miller Trust for various other purposes, including:

  • Paying medical bills not covered by Medicaid
  • Paying Medicare premiums
  • Distributing funds to cover court-ordered guardian fees
  • Paying the beneficiary a personal needs allowance (PNA)
  • Paying a monthly maintenance needs allowance to a non-applicant spouse with little to no income

3. They affect all income

Does all your income have to go into the Miller Trust? No! Only income that exceeds Medicaid’s income cap goes into the trust for eligibility. 

Furthermore, you can only fund your Miller Trust with active income sources such as:

  • Wages
  • SSI payments
  • Social Security benefits
  • Pensions
  • IRAs

That means it doesn’t affect other sources of income such as:

  • Some annuity payments
  • Income tax refunds
  • Financial aid from the Veterans Administration (VA)
  • Vocational rehabilitation

(In fact, funding your trust with these sources can actually invalidate it and cause you to lose Medicaid eligibility.)

4. They’re easy to set up on your own

Most states don’t require a professional to establish a Miller Trust, but that doesn’t mean it’s a good DIY project. There are a lot of intricacies involved and it’s easy to make small mistakes that could spell disaster for your long-term plans. 

For example, many people make the mistake of trying to “round off” how much income they put into the trust. They may also deposit funds other than qualifying income. These kinds of mistakes can void the entire trust, causing you to lose thousands of dollars of financial aid for high nursing home costs. 

Similarly, not depositing eligible income by the last business day of the month could cause you to lose Medicaid eligibility altogether. Each state also has different rules governing Miller Trusts, so advice you may find online or hear from others may be incorrect for your state.

That’s why working with a Texas Medicaid planning attorney is vital. They have a deep knowledge of the state’s rules surrounding Miller Trusts and how to properly set up and fund them, including deadlines, acceptable sources, and correct amounts.  

They’ll also help you to qualify for Medicaid faster, structure your income and assets to save as much money as possible, and maintain compliance so you don’t have to stress about it.

Set up your Miller Trust the right way with an experienced elder law attorney

A Miller Trust can help you get financial help for the care you need as you age, but only when set up and maintained correctly. By understanding the truth behind these common myths, you can avoid some of the common pitfalls.

Here at the law firm of Shann M. Chaudhry Esq., Attorney at Law PLLC, we understand the nuances of Miller Trusts in Texas. Our team of compassionate, experienced Medicaid planning attorneys and elder law attorneys are here to help you plan for your financial and healthcare needs as you reach your golden years. 

Contact our offices today to schedule your affordable consultation and see how we can help you make an ironclad plan for your future.

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