by Michael Kling | December 11, 2014
Lately, we have received several inquires about Medicaid planning and the use of a “Miller Trust” to qualify for nursing home benefits. Since this seems weighing on people’s minds, we wanted to address the concept and provide you with some important information about Medicaid planning. Because we can’t tell you everything about Medicaid in one article, we will focus on some basics of an individual qualifying for Medicaid’s long-term care coverage—which means gaining entry into a nursing home to most applicants.
You should understand that to qualify for nursing home services, the applicant must meet both medical need and financial requirements. Typically, any person who requires skilled nursing care is mentally impaired due to Alzheimer’s or dementia, or is unable to care for him/herself will medically qualify. The moment someone applies for Medicaid, the State takes a “snapshot” of the applicant’s income and assets to determine whether the applicant financially qualifies for services. Nevada is an “income cap” state, which means that applicants will be disqualified from receiving Medicaid if their income exceeds the state-determined “cap.” For 2014, Nevada’s income cap is $2,163.00 monthly. Nevada’s 2014 asset limit, or “Individual Resource Allowance,” totals $2,000.00. (Just remember, we are focused on income limits for purposes of discussing a Miller Trust).
When an applicant’s income exceeds the monthly cap, but is insufficient to pay for nursing home care, that person falls into a difficult gap. This is when we hear the term “Miller Trust” popping up—it is an informal name for a trust that is used to receive and hold excess income, thereby lowering the Medicaid applicant’s countable income to meet the eligibility threshold. This type of trust is also referred to as an “Income Cap Trust.”
It is also important to know that Medicaid uses a broad definition of “income” and will count Social Security income, defined benefit pension payments, alimony, income from immediate or annuitized annuities, as well as looking at all typical sources of income. Basically, if the applicant’s name is on the income check, all or part of that income will be attributed to the applicant. To reduce an applicant’s countable income, payments are assigned to the Miller/Income Cap Trust, taking them out of the applicant’s control.
When establishing a Miller/Income Cap Trust, the applicant’s income goes into the trust. There are limitations on how the trustee may distribute the income within the trust, which include: paying for the institutionalized person’s personal needs allowance; paying the nursing home for the patient’s payment amount; and paying the community spouse (if applicable) to increase the maximum monthly maintenance needs allowance. Upon the Medicaid beneficiary’s death, any assets remaining within the trust are paid directly to the State to repay Medicaid costs.
The fact that Medicaid benefits are not truly free is often not thought of, but should be remembered. Even when an applicant qualifies for benefits, Medicaid programs require beneficiaries to contribute most of their income as a co-payment for services. Fortunately, there are a number of tools that can reduce income and protect assets for those needing Medicaid assistance. Proper planning is essential, however, to avoid leaving income and assets exposed and to prevent penalties caused by transfers within the 5-year look-back period. Please call our office for a consultation to discuss Medicaid planning options if you are facing these difficult issues in your life.