Miller Trusts for Texas Medicaid Planning

Long-term care, whether in a nursing home or assisted living facility, is incredibly expensive. According to the most recent estimates, the monthly cost of a private room in a Texas nursing home can easily reach $6,400 or higher. For many, this is an unsustainable expense. However, because Medicare does not generally cover the cost of long-term care, individuals are left with limited options, including applying for Medicaid, buying long-term care insurance, or paying out-of-pocket. By allowing you to transfer certain income streams into an irrevocable trust, a Miller Trust offers another alternative. At McCulloch & Miller, PLLC, our Houston estate planning lawyers have extensive experience helping individuals and families protect their assets while planning for the Medicaid application process.

As of 2022, you can only have a gross income of up to $2,523 per month to be eligible for Texas Medicaid benefits. However, just because an individual has a gross income that exceeds this figure doesn’t mean they can afford long-term care. This income limit puts a large number of Texans in a difficult spot because, on one hand, they make too much money to qualify for Medicaid. On the other hand, they do not earn enough money to cover the costs of long-term care out of pocket.

A Miller Trust, also commonly referred to as a Qualified Income Trust, is a type of trust which allows you to transfer income directly into the trust. As a result, any income redirected into a Miller Trust is not countable for the purposes of Medicaid eligibility.

The first step to opening a Miller Trust is identifying all income in excess of the monthly Medicaid gross income limit. Once you determine the sources of excess income, an estate planning attorney will draw up a trust document. To qualify as a Miller Trust, the document should meet the following requirements:

• The trust must be irrevocable; and
• The trust must contain a reversionary clause, transferring all remaining assets, up to the amount of Medicaid benefits received, to the State of Texas.

In addition, a Miller Trust can only be funded through a pension, Social Security benefits and other sources of income; assets cannot be transferred into a Miller Trust. In most cases, the beneficiary of the trust should not be the creator of the trust. This is because if the beneficiary failed to comply with the trust’s requirements, they could lose their Medicaid eligibility.

Further, under Texas law, a Miller Trust must require the trustee to make the following distributions:

• A monthly personal needs allowance to the beneficiary;
• Any court-ordered guardianship fees;
• A sum sufficient to give the beneficiary’s spouse a minimum monthly maintenance needs allowance; and
• From the remaining funds, the cost of medical assistance provided to the beneficiary.

Once the trust document is complete, you then open a checking account and assign all excess income to the trust. Notably, Texas law requires that the entirety of an income stream be deposited into a Miller trust, meaning you cannot deposit only the excess portion of an income stream. However, individuals are free to direct only certain income streams into a Miller Trust. Any money assigned to a Miller Trust is not countable for the purposes of Medicaid eligibility.

Upon the death of the beneficiary, the money in a Miller Trust is used to reimburse the state for all benefits paid on the beneficiary’s behalf. In the unlikely event there are additional funds remaining in a Miller Trust, those funds must go back to the state to cover those Medicaid benefits paid on the beneficiary’s behalf.

If you are looking for a way to pay for long-term care in Texas, it is important you consult with an experienced Houston Medicaid crisis and pre-planning attorney. At McCulloch & Miller, PLLC, we have more than 35 years of experience helping our clients plan for their future, whatever it holds. To learn more, and to schedule a consultation with a Houston estate planning attorney at McCulloch & Miller, PLLC, call 713-333-8900 today or complete our online contact form.