Miller Trust Arizona
Purpose of Miller Trust Arizona
The term “Miller Trust Arizona” is an informal name. A more accurate name for this trust in Arizona is an “Income Only Trust”. It has also been called a “Special Treatment Trust or Qualified Income Trust.” Once the trust is created, the applicant’s trustee sets up a “Zero Balance Bank Account and assigns his or her social security and pension to the Income Only Trust.
An Income Only Trust solves a single problem. The problem is that when a person applying for ALTCS (Medicaid) has income that exceeds the income cap. The trust allows the applicant’s income to be treated as if it is below the income cap and the ALTCS application can be approved. The Income Only Trust is not used for any other purpose.
Income Criteria for Miller Trust Arizona ( Note there is a separate calculation for a Married Couple)
In Arizona, in 2023, the maximum income the applicant can have and still qualify for the ALTCS program is $2,382.00 per month.
If the applicant has more than $2,742.00 income, but less than $8,912.70.11 per month (in Pima and Maricopa County, $8,138.28 in other Arizona Counties), the applicant can use an Income Only Trust to qualify for ALTCS.
Note that if married there are two ways to calculate income.**
- Add household income together if the total is less than $ then there is no need for an Income Only Trust.
- The simple rule for married couples is: “All assets are jointly owned all income is separate”. Here the applicant’s income must be below the income cap of $2,742 but the at-home spouse or well spouse can have an unlimited income! Meaning just that $100,000 per month and more, and the spouse needing care can get approved for ALTCS benefits!
If an applicant is married but has checks coming in his name**, amounting to more than $2,742.00, the ALTCS eligibility worker will average the income of both spouses to see if the applicant can pass the income test of $2,742.00.
If the married applicant has more than $2,742.00 income, according to the averaging technique described above, but less than $7,764 per month, the married person can use an Income Only Trust to qualify for ALTCS.
**Important: Income is separate for the well or at-home spouse and there is no maximum income.
Directing Income into the Income Only Trust
In the eyes of ALTCS, if the Income Only Trust is receiving income, the applicant is no longer receiving that income. This is how an applicant solves the excess income problem.
Who can create an Income Only Trust or Miller Trust Arizona?
What if the applicant is too disabled, physically or mentally, to sign a trust? If the applicant has previously made a power of attorney for finances, the agent under that power of attorney can create the Income Only Trust. ALTCS is liberal in permitting this, even if the power of attorney does not explicitly authorize the creation of an Income Only Trust. If the applicant is too disabled to understand that he or she is creating a trust, and if the applicant has not granted a financial power to another, it will be necessary to obtain court conservatorship in order to create the Income Only Trust.
Establishing the Income Only Trust Bank Account
Once the Income Only Trust or Miller Trust Arizona is created and signed by the applicant or the applicant’s agent under the Power of Attorney, the next step is to create a bank account in the name of the trust. The tricky part is that the bank account cannot have an opening balance. Meaning it must be opened with a zero balance. Most banks hate this requirement and may not accommodate you. The National Bank of Arizona has been cooperative in establishing these trusts. We also have had success with many of the Chase banks too.
Once the bank account is opened in the name of the trust, the next step is to write social security and the pension payers and ask them to direct deposit future checks into the bank account.
How are the funds in the Income Only Trust spent?
When money begins to flow into the bank account, complex ALTCS rules govern how it is to be spent.
If all of the applicant’s income flows into the trust, the trustee may retain a personal needs allowance for the applicant. The trustee may pay the ALTCS approved Minimum Monthly Maintenance Needs Allowance to the community spouse. The trustee must pay the applicant’s share of the cost (if the applicant is not at home). The trustee cannot pay the administrative fees associated with the trust and bank fees. This must come from the applicant’s Individual Personal Needs Allowance.
When the applicant dies, any money remaining in the Income Only Trust must be remitted to the ALTCS program.
An Income Only Trust is not for long-range planning
We do not recommend that you do an Income Only Trust unless you intend to apply for ALTCS soon thereafter (60-90 days). An Income Only Trust is not a long-range planning tool. A smart step is for a well elderly person should make a power of attorney that would enable another to execute an Income Only Trust on his behalf. Most Durable Powers of Attorney’s DO NOT give the Agent (The POA) the powers to set up an Income Only Trust.
Income Only Trust Timing Issues
You do not want the approval of ALTCS eligibility to be slowed by the submission of your Income Only Trust. So be sure to fund the trust before you apply for ALTCS Benefits.
This can be done by depositing the exact amount of the Social Security or Pension to the Income Only Trust bank account. We hope you got all information about Miller Trust Arizona. You can also know about Will in Arizona from our site.
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Common Mistakes that Trustees make with the Miller Trust Arizona
Mistakes that will cause the Trust to be violated and the ALTCS claim denied.
Most of the time, these errors cause the need for a new trust document and having to open a new bank account and then re-open the ALTCS Application.
Banking Violation #1: The Trustee meets with the bank, and at that meeting, the banker tells the Trustee that if they kept a balance of $1,500 or more, there would be no monthly bank charges.
Sounds smart to keep a running balance, right. Here are the two issues. One, the account absolutely must be opened with a Zero Balance. Meaning you do not deposit any money in the account until after it is open.
Two, once the account is open, you must use the money for care expenses and unreimbursed medical expenses and the balance paid to the care home or facility.
Simply remember this is a “ZERO BALANCE ACCOUNT!”
Which leads to Banking Violation #2.
Bank Violation #2: Bank charges paid from trust funds and not used for the share of cost.
Technically, bank charges cannot be paid with income going into the trust account. This is a common violation and one that would seem difficult to avoid. As you know, bank charges are automatically withdrawn from the account.
So if they are not to come out of the income-only account or zero balance account and are automatically withdrawn, how do you avoid a violation of the Trust?
Bank charges are subtracted from the Personal Needs Allowance. Meaning, the current Personal Needs Allowance is $119.10. So if you have a $10.00 monthly fee, then they can only have $109.10.
If you, the Trustee, make a mistake and bounce a check and are charged $39.00 for the insufficient funds, then subtract that from the Personal Needs Allowance of $119.10, leaving only $80.10. Then remove the $10.00 monthly charge leaving the net amount is $70.10.
DO NOT put $39.00 into the account for the mistake that too is a Violation of the Trust! Again Remember “Income Only Account,” meaning only income goes into the account.
Funding the Trust:
Funding the Trust Violation 1: As mentioned Step 2, the Trust must be funded.
Funding the Trust Violation: Instead of funding the Trust as described in Step 2 with the exact amount of each source of income, the Trustee puts $50.00 in it or any amount other than the exact match of a source of income.
This is a trust violation and again can cause issues with the application approval and later at the annual review.
Funding the Trust Violation 2: Initially, you were/are instructed to have all income paid to the trust checking account. Letters of instruction are provided initially with the trust document and are notarized with the Trustees’ signature.
While you are waiting to have Social Security and all sources of countable income paid to the Trust like pension income or annuity payments. You must manually transfer the exact amount of the deposits to the penny into the Income-Only Trust banking account.
The Trustee was using Trust assets (income) to pay for items other than Care.
Here the ALTCS applicant is not approved yet, and the family for a family member is paying for part of the cost of the assisted living community. So the Trustee transfers the trust funds to their account and then pays the bill at the assisted living facility.
This act is incorrect and will cause a trust violation.
The correct way is to use the trust funds to pay part of the bill then use other funds to pay the balanced owed, do not put the two amounts together.
We hope you have clear understanding about Miller Trust Arizona.