Miller Trusts (Qualified Income Trusts) in Arkansas: A Guide to the Income Cap

Qualifying for Medicaid to cover nursing home expenses in Arkansas involves passing two distinct financial tests: an asset test and an income test. Many seniors have properly spent down their savings but suddenly find their application denied because their monthly Social Security and pension checks are just slightly too high. This is a terrifying situation for families who cannot afford $7,000 a month for care but earn too much for state assistance.

For residents in Springdale, Little Rock, and Conway, the legal solution to this problem is establishing a Qualified Income Trust, commonly referred to as a Miller Trust. Properly drafting and funding this trust is a highly technical process. We strongly recommend searching our directory to find a local Arkansas elder law attorney who can create this crucial document without delaying your care.

What it Means to be an "Income Cap" State

Unlike some states that allow applicants to simply "spend down" their excess income on medical bills, Arkansas is an income cap state. The Arkansas Department of Human Services, Little Rock (DHS) strictly enforces a hard monthly income limit for institutional Medicaid. This limit is adjusted annually but generally hovers around three times the federal Supplemental Security Income (SSI) rate.

If your gross monthly income-before taxes and Medicare premiums are deducted-exceeds this cap by even a single dollar, you are flatly ineligible for long-term care Medicaid unless you utilize a specialized legal tool authorized under 42 U.S.C. § 1396p(d)(4)(B).

Setting Up the Qualified Income Trust (Miller Trust)

A Miller Trust is an irrevocable trust established using Form DCO-9938, Arkansas, Department of Human Services, The Irrevocable Income Trust, designed specifically to hold a Medicaid applicant's excess income. By directing your income into this trust, the DHS will no longer count those funds against your eligibility, allowing you to qualify for benefits.

Which Income Must Go Into the Trust?

You cannot put assets (like the sale of a house or life savings) into a Miller Trust; it is strictly for monthly income. Typically, a senior will deposit their Social Security checks, VA pensions, or private retirement pensions into the trust's designated bank account. You do not necessarily have to deposit all of your income-only enough to drop your countable income below the Arkansas state cap. However, many attorneys advise routing the entire pension check into the trust to avoid accounting errors.

Handling Bank Fees and Disbursements

Once the funds are deposited into the designated trust account, they can only be spent on very specific, state-approved expenses. The trustee can use the funds to pay the Medicaid recipient's Personal Needs Allowance, pay a community spouse's allowance, cover Medicare premiums, and pay standard bank fees for maintaining the trust account. The remainder must go directly to the nursing home as the patient's co-pay (also known as the patient liability amount).

The Mandatory Arkansas Medicaid Payback Provision

The primary catch to a Miller Trust is the federal payback provision. Because the state is allowing you to bypass the income cap, you must agree that the state gets reimbursed in the end. The trust document must explicitly state that upon the death of the Medicaid beneficiary, any funds remaining in the Miller Trust account must be paid back to the State of Arkansas, up to the total amount that Medicaid spent on the beneficiary's medical care.

In reality, because the trust is drained almost every month to pay the nursing home co-pay, there is usually very little money left in the account when the beneficiary passes away.

How Much Does it Cost to Set Up a Miller Trust?

Mistakes in the trust language can lead to instant Medicaid denial. Hiring an attorney to draft a compliant trust is an investment in securing your long-term benefits.

How Long Does the Trust Setup Take?

An experienced Arkansas elder law attorney can usually draft the Miller Trust document within 1 to 2 weeks. However, funding the trust requires taking the legal documents to a local bank to open a specialized account, which can add a few days to the process. Once the trust is signed and the bank account is opened, it is immediately effective for Medicaid purposes for that specific calendar month.

Frequently Asked Questions (FAQ)