Miller Trusts - "Qualifying Income Trusts"

Establishing a Miller Trust

Why establish a Miller Trust?

Normally, a person sets up the trust because they don’t have enough money or medical insurance to cover their medical needs but they still have too much income to qualify for Medicaid. For some people, it’s an easy decision to make. If you have $500 of medical bills every month and your monthly income is only $20 over the limit to qualify for Medicaid, it’s well worth setting up the trust and giving up some control over your income in order to have those medical bills covered by Medicaid.  But if your income is a lot higher than the Medicaid limit, then it might not be worth setting up the trust just to qualify for Medicaid, especially if your medical expenses are very low.

So, the first thing you need to decide is if a Miller Trust will help you.  Some things to consider are:

1. Will Medicaid pay the particular bill you’re worrying about? 

2. Are your medical bills high enough to warrant the trust?

3. Can you meet your non-medical expenses and survive on the living allowance you would receive from the Trust?

Remember, Medicaid generally only pays medical related expenses.  Medicaid won’t help you pay your rent, buy food, or pay off credit cards.  Also, using a Miller Trust to qualify for Medicaid means you will no longer have access to all of your income – you will get a living allowance, with the rest of your income going into the trust.  This is described in more detail in the section, “How Does a Miller Trust Work?”

Who Can Establish  Miller Trust

Anyone who is otherwise eligible for Medicaid can establish a trust.  The age of the person doesn’t matter, and the person doesn’t have to be disabled – if the only reason a person is not eligible for Medicaid is that their income is too high, that person can establish a trust.

If someone has a Power of Attorney in place, the agent can establish a trust on behalf of that person.  Likewise, if a conservator or full guardian has been appointed, the guardian/conservator can set up the trust.

The person applying for Medicaid is called the “beneficiary” of the trust.  A “trustee” is named to manage the trust.  A person cannot be both the beneficiary and the trustee of his or her trust – the trustee must be someone else, or sometimes a business.

How is a Miller Trust Established?

There are a number of steps that need to be taken in order to establish a miller trust.  A checklist is provided below in the list of “other resources”.  But, the trust document itself needs to be prepared by an attorney. 

Registration with the Court

Once the trust document is prepared, it needs to be signed by both the trust beneficiary and the trustee.  The trustee also needs to complete a one page court registration form and file this with the court system.  The form can be found here:

http://www.courtrecords.alaska.gov/webdocs/forms/p-200.pdf

Get a Tax ID

The trustee must also set up a bank account in the name of the trust.  For tax purposes, the trustee must also obtain a new EIN (Employer Identification Number) in the name of the trust, because the trust is considered a separate tax entity. This number is like a social security number for the trust. Do not use the SSN of the trustee or the beneficiary.  

An EIN can be obtained directly from the IRS via its website:

https://sa.www4.irs.gov/modiein/individual/index.jsp

If the trustee doesn’t have access to a computer, he or she may be able to obtain assistance from the bank where the trust account will be set up.

Set up a Bank Account

The bank account for the trust is set up with a name such as “The Kathy Smith Irrevocable Income Trust.” Once a separate bank account is set up, the beneficiary’s regular monthly income is deposited into the trust account. Please note, this account does not replace any personal account the beneficiary has. The beneficiary should maintain a personal account because that account will receive a monthly living allowance from the trust account. This is discussed further in the section “How Does a Miller Trust Work?”

Replacing a Trustee

If a trustee needs to be replaced for some reason, such as death, incapacity, or failure to perform the duties, a new trustee can be appointed by filing papers with the court system. A new trust does not need to be set up.