Medicaid Questions
How much money can I give away?
This is a very popular question, and the simple answer is that you can give away as much as you want. This is American and as long as you are not giving away money to defraud a known creditor, you can give money to whomever you wish, however because of the way that medicaid looks at gifting, you will suffer a penalty when you give away property. For this reason, you should consider the medicaid implications whenever you decide to give away your property.
Because of the way Medicaid views gifts, "give away" means actually giving away an asset, such as giving your children your house, or selling it to them below market value; but it also applies to removing someone's name from an account. For example, if a mother takes her name off of an account that was her money, but had both her and her daughter's name on it, medicaid considers that a gift. Also, if parents add a child's name to their home, Medicaid considers that a gift of one half of the value of the house. Selling a house to a child for less than its fair market value is considered a gift in the amount of the difference between the sale price and the fair market value of the house. For example, if a parent has a house valued at $150,000 and they sell it to their child for $100,000, Medicaid considers this a gift of $50,000.
So, the answer is yes, you can give away all that you want. However, Medicaid will penalize you for the gift in terms of when you will qualify for Medicaid.
What is a Miller Trust?
Some states have a Medicaid rule that says that if your income is above a certain level, then you will not be qualified for Medicaid. In 2009, that limit was $2022. The Miller Trust was created because the cost of a nursing facility will be greater than the Medicaid income limit. The average nursing home cost in Arkansas in 2009 was $4384. Therefore, if your income is $2050 per month, then you are over the income limit to qualify for Medicaid, but you do not have enough to pay for a nursing facility. So, if your resources are below the limit of $2000, then you would be in trouble.
A guy named Miller was in this exact situation. His income was higher than the income limit to qualify for Medicaid, but he did not make enough money to pay for the nursing facility. He went to court and won his case, stating that something had to be done. Hence, the name is “Miller Trust.”
When a Miller Trust is created, the technical name for the trust is an Irrevocable Income Only Trust. You cannot put resources in there in order to qualify for Medicaid, only income. Once the Miller Trust is created and you put money into this account, it is irrevocable. This means that you no longer have free control of the money in the Miller Trust. The state of Arkansas DHS department must approve all expenses paid out of the Miller Trust account. You can get your money out of the Miller Trust account, but you must have the permission of the state to have access to the money. Therefore, since you do not have access to the money except for the way the state of Arkansas tells you to, it is as if you have no income. Therefore, since you now have no income, you are now qualified for Medicaid.
There are some issues with the miller trust. Normally when the person is in the facility, all of their income goes to the facility and no money builds up in the Miller Trust account. However, if the person goes into the hospital or stays on rehabilitation for a period of time, Medicare then pays the bills and the money does not come out of the Miller Trust account. So, when the money in the Miller Trust account builds up above the penalty divisor ($4348 for 2009), then you will be disqualified for payment for the facility but only until your money in the Miller Trust is back down below the divisor amount.
How much income can the well spouse keep?
This question refers to the situation where one spouse is living in a nursing facility, and the other spouse is not. The federal government does not one the well spouse do be broke. In 2010, the Medicaid minimal income limit is $1,822.00. This means that the well spouse will be able to keep all of their income regardless of how high it may be. However, if that income is below the limit then they get to keep enough of the spouse’s income (who is in the facility) to get them up to that amount. For example, if the husband is in the facility and he makes $1,500/month, and the wife has an income of $500/month, then the wife can keep $1,322 of the husband’s income to help her get to the minimal income. There are many situations where only a few dollars, or no money at all, will go to the facility each month because the well spouse gets to keep it for themselves to help them meet the Medicaid income limit. Remember, they also get to keep one half of all resources if it falls within the asset guideline.
There are also times when the well spouse gets to keep more than the Medicaid income limit each month. This happens when the monthly expenses for housing are above the amount that DHS thinks is normal. They will attribute $271 for utilities and $547 for shelter. If your shelter cost is above this, as with a Condo monthly dues payment or a mortgage, then Medicaid will allow the well spouse to keep more than the minimum income to help make that payment.
When do I need a Miller Trust?
You need a miller trust when your income is above your state’s Medicaid eligibility limit for that year.
One point that many people miss, including nursing home supervisors, is that the amount of money deposited into your account by Social Security is not necessarily your total income. What is deposited is your total income after the Medicare premium is deducted. So for 2009, you would have needed to add $94.60 to what is deposited to get the actual income that will be counted by DHS. We have seen this become a problem many times for clients who come into our offices after they have gotten bad advice from other people.
The problem in this situation is that DHS has a very firm rule that if you need a Miller Trust and your income does not go into your Miller Trust account, you will be disqualified for that month, and they will not budge on this, you will be disqualified. Many times, it takes 3-6 months for DHS to process an application, so if they get to the end of that process and you have been disqualified the whole time because of this rule, there will be a huge financial burden that someone is going to have to cover. Usually it is either the family or the nursing facility. So, if you need a Miller Trust, be sure to look at the total gross income to make sure that you will avoid this situation.