Understanding Miller Trusts and How They Work

Takeaways

• A Miller trust lets people whose income is over their state’s cap qualify for Medicaid long-term care.

• The trust is irrevocable and must be managed carefully to avoid impacting Medicaid eligibility.

• Rules vary by state, so consider talking with an elder law attorney before setting one up.

Many older adults discover they need assistance with basic, everyday tasks as they age. Receiving help with these activities of daily living (ADLs) falls under the category of long-term care (LTC) — and the cost of this care is rising.

To pay for long-term care, many older adults turn to Medicaid. However, because of Medicaid’s strict limits on income and assets, many older adults fail to qualify. 

Still, there are some ways applicants can garner eligibility, despite Medicaid's strict rules. A Miller trust is a special kind of trust that helps people with higher incomes qualify for Medicaid.

The Problem a Miller Trust Solves

Medicaid can pay for nursing home care and for home and community-based services. But in many states, referred to as income-cap states, a person’s monthly income cannot exceed a set limit. If it does, the applicant is ineligible for Medicaid assistance.

Nearly all of these states base their limit on 300 percent of the federal Supplemental Security Income benefit rate. This equals $2,982 a month for an individual in 2026. For 2027, the amount will increase to $3,087 per month. 

The result is a coverage gap. An applicant whose income exceeds the threshold may be ineligible for Medicaid, yet remain unable to afford the cost of care.

A remedy emerged in 1990 when a federal court in Colorado decided Miller v. Ibarra, which led to the creation of Miller trusts. Federal law now recognizes these arrangements, commonly referred to as Qualified Income Trusts (QITs).

How a Miller Trust Works

The person who needs to qualify for Medicaid to pay for LTC sets up a Miller trust. Since a Miller trust is irrevocable, the trust beneficiary can’t undo it or take the money back freely.

Income placed in the trust no longer counts toward the income limit cap. Each month, the beneficiary generally must deposit their excess income into the trust. That way, the rest of their income remains under the Medicaid limit. 

Even though the trust beneficiary doesn’t have direct access to the money in the trust, it isn’t completely out of reach. The money still exists for their benefit. A trustee, often a family member, uses it for approved purposes. Typically, that means:

• A small personal needs allowance

• Some costs for a spouse at home

• Health insurance premiums

• The person’s share of the cost of care

A Miller trust only applies to the income test. The person still has to meet Medicaid’s limits on savings and other assets, as well as require nursing-home-level care.

When the beneficiary dies, any money left in the trust first goes to the state (up to the total Medicaid paid) to repay what Medicaid spent on their care. 

Where Miller Trusts Are Helpful

Miller trusts are required in income-cap states when an applicant’s income exceeds the cap. Around half of states are income-cap states. Others let people “spend down” extra income on medical bills instead, so no trust is needed. 

Advantages of a Miller Trust

Creating a Miller trust has a few advantages.

• It can open the door to care. For people just over the income cap, it may be the only way to qualify for Medicaid-covered LTC.

• Using a Miller Trust is not a loophole, but a recognized legal tool under federal law.

• The trustee can still use the money for the beneficiary's benefit.

Disadvantages to Consider

Before creating a Miller trust, it is a good idea to consider any potential disadvantages that may affect you.

• Since the trust is irrevocable, you can’t simply change your mind after you set it up.

• It must be managed correctly. A missed deposit, an improper payment, or a mistake in the paperwork can cost you your Medicaid coverage. Someone has to manage the trust bank account and keep records.

• Each state has its own requirements for the trust document, so a generic form may not work.

• Creating a Miller Trust can be costly. Most people need a lawyer, which means legal fees.

• A Miller Trust does not protect money from being reclaimed by the state. Any money left over after the beneficiary dies goes to the state first, up to what Medicaid paid.

Summary and Additional Reading

A Miller trust can be a lifeline for someone whose income is slightly too high for Medicaid but too low to pay for care. The rules are strict and mistakes can be costly, so it’s wise to talk with an elder law attorney or a state Medicaid office before setting up a Miller trust.

For additional reading on issues related to long-term care and Medicaid, check out the following articles:

• The Effects of Family Caregiving on Older Adults

• Support for Family Caregiving Gains Momentum

• Unpaid Family Caregiving Is Worth a Six-Figure Salary

• What You Should Know About Long-Term Care