Congress created the Miller Trust as a way around restrictive Medicaid/income rules. This is the second of a three-part series on the Miller Trust and ways to avoid mistakes that result in denied Medicaid applications for long-term care.

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We’ve previously discussed some basic rules regarding the establishment of a Miller Trust. Here we’ll share some common problems regarding income deposited to a Miller Trust account.

4 troublesome situations and ways they could have been avoided:

Situation #1. When a person sets up a Miller Trust, the best practice is to establish a new account with no existing money in it. Only income should be deposited in that account. We have seen situations where applicants used an existing account, but did not pull out previous deposits first. The result of this is a non-compliant account. Even if they leave in a few dollars, that money is not considered “income.” In one particular situation, an applicant used an existing account to hold Miller Trust income. But to keep the account open, the bank would not allow all existing money in the account to be withdrawn. In this situation, DHS required a letter from the bank stating that at least $1 had to remain in the account so that the account could remain open to receive the income of the institutionalized spouse. Don’t count on the “$1 bank letter.” This was simply an accommodation in this particular case. Again, the best way to set up a Miller Trust is with a brand new account with shiny new income.

Situation #2. It is very common for both spouses to have income such as Social Security checks or pension income being deposited into a common account. With a Miller trust account, this is not allowed. The income of the community spouse cannot be deposited into the trust account. Only the income of the institutionalized spouse should be deposited here. Otherwise, the account will have been funded with money that is not allowed, which will result in a denial or an overpayment.

Situation #3. All income of the institutionalized person must be deposited in the trust account each month. We have seen situations where the attorney-in-fact, acting under power of attorney for the Medicaid applicant, did not deposit all income monthly into the Miller Trust. Not doing so will result in a denial or even a closure of the Medicaid case when this discrepancy is discovered.

Situation #4. If joint payments are received, such as rent payments or royalty payments, husband and wife are to divide the income with half being deposited into the Miller Trust account. If the money can’t be split at the source, all income should be deposited in another account and a check for half written to the trust.

Next month we will wrap up with a few stories regarding allowable expenditures and ways you can stay out of Miller Trust ‘hot water.’

The information provided on this blog is intended as general information only for a broad audience. It is not intended as legal advice and should not be acted upon as such. If any reader has questions or concerns about any matter mentioned herein, he/she should contact an Elder Law Attorney or other appropriate professional. If any reader has questions or suggestions about a future topic area that he/she would like to see discussed, please contact the author at doug@arkelderlaw.com.