No matter how well we plan for the unexpected, there are events that happen as we age that can create a strain on vital financial resources. Seniors who suddenly find themselves or a loved one needing a costly medical procedure or a move to a nursing home may panic at the prospect of depleting their estate assets to pay the bills.

Once they see the financial obligations of long-term care, they begin to realize that they may need to find a way to protect the estate without losing their Medicaid eligibility. For Kentucky residents, getting the right information can be challenging, but discovering the best option for your situation is essential.

How do I qualify for Medicaid?

Because Medicaid is administered at the state level, the minimum qualifying income level varies as well as the options available to individuals if they exceed that minimum. The federal Medicaid monthly income cap in 2020 was $2,382 with a $2,000 asset limit for a single applicant, and $4,764 with a $4,000 asset limit for a couple.

Seniors who are eligible for Medicaid may have monthly income through Social Security or pension that exceeds the maximum limit of each state. For example, Social Security or pension checks totaling $2,500 would put them over that limit. Unfortunately, many people who have worked their entire lives will have income sources that would bar them from qualifying without the mechanism of a qualifying interest trust (QIT).

What is a Miller trust?

A Miller Trust is a type of QIT available to seniors that protects their surplus income while allowing them to qualify for Medicaid. With this type of trust, income in excess of a set limit goes into this trust in order to maintain the recipient’s Medicaid eligibility. Some requirements for the Miller income-diversion trust are:

  • The trust must be irrevocable and created in Kentucky for the benefit of the individual.
  • The trust may accept only pension, Social Security and other income, and must be at least the total countable income above the special income standard, which in Kentucky is $2,022 per month.
  • The funds in the trust are not available income to determine Medicaid eligibility but are available to pay toward medical care.

Because the state will collect as many estate assets as possible to pay back Medicaid expenses at death, divesting early is advisable. For example, gifting as much as $14,000 a year to heirs will diminish the estate. It is important to plan ahead, though, as there is a look-back period in which the state will determine if the grantor purposely divested the estate.