Satisfying Medicaid’s Income Cap

Florida Medicaid provides long term care benefits to individuals who have the requisite medical necessity and who comply with Medicaid’s financial restrictions. Aside from Medicaid’s asset cap, which requires Medicaid applicants to have less than $2,000 in their name, Medicaid also has an income cap of $2,205 per month. Consequently, even if a Medicaid applicant has less than $2,000 in their name, if the applicant has monthly income exceeding $2,205 per month, such applicant remains ineligible for Medicaid. Countable sources of income include: Social Security benefits, pension benefits, long term care insurance benefits, annuity payments, IRA distributions, and net rental income from leased real estate.

Recognizing that many individuals who exceed the income cap may still merit Medicaid coverage, the federal government passed a law making it possible for individuals with too much monthly income to become eligible for Medicaid. In accordance with this law, an individual may execute a Miller Trust, also known as an “income cap trust,” which can cure an individual’s income cap problem. By transferring that part of an individual’s monthly income that exceeds $2,205 into a Miller Trust every month, Medicaid will view the individual as complying with the monthly income cap since federal law mandates that income held within a Miller Trust must be treated as exempt by Medicaid. Although this allows the individual to comply with Medicaid’s monthly income cap, the Miller Trust must contain restrictions on how the money may be used in order for it to properly cure the income cap problem. For example, an individual may only use the money within a Miller Trust to pay for medically related expenses of the Medicaid applicant. Furthermore, any money remaining in a Miller Trust upon the death of the Medicaid applicant must first go toward repaying Medicaid for money expended on behalf of the Medicaid applicant. These restrictions, along with others, must be written into the trust document and the trustee of the Miller Trust must comply with those restrictions.

Medicaid applicants who exceed the monthly income cap need an attorney to draft a proper Miller Trust, which must contain the legally mandated restrictions in order for Medicaid to treat the monthly income held by the Miller Trust as exempt. In addition to drafting the trust document, an attorney’s guidance on proper operation of the Miller Trust is also important for ensuring the trustee of the Miller Trust understands how to maintain Medicaid eligibility for the Medicaid applicant every month.