A qualified income trust, often called a Miller Trust, is an irrevocable trust that holds the portion of your monthly income that would otherwise disqualify you from Medicaid long-term care benefits. It exists for one reason: in states that cap Medicaid income eligibility, your gross income has to sit at or below the cap, and this trust is the only legal way to redirect income above that line while still qualifying. For 2026, the cap in income-cap states is $2,982 per month, which is 300% of the federal SSI benefit rate of $994.1Social Security Administration. SSI Federal Payment Amounts for 20262Centers for Medicare and Medicaid Services. 2026 SSI and Spousal Impoverishment Standards
Do You Actually Need One
Before anything else, confirm your state’s approach. Roughly two-thirds of states are income-cap states and enforce the $2,982 ceiling strictly. One dollar over, and you’re ineligible unless a qualified income trust holds the excess. The remaining states follow a medically needy framework, which lets applicants spend down excess income on medical bills to qualify. If you live in a medically needy state, you do not need this trust, and setting one up solves a problem you don’t have. Your state Medicaid office can tell you which category applies.
The same cap applies to Medicaid home and community-based services (HCBS) waiver programs in income-cap states, not only nursing home coverage. If your income is over the cap and you want Medicaid to pay for in-home aides, adult day care, or similar services, you’ll need the trust for those waivers too.2Centers for Medicare and Medicaid Services. 2026 SSI and Spousal Impoverishment Standards
What Federal Law Requires
The authority for this trust is a single federal statute, 42 U.S.C. § 1396p(d)(4)(B). Medicaid normally treats a trust you create as a countable resource that would wipe out your eligibility. This statute carves out an exception, but only if three conditions are all met.3Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets
The trust can hold only your income. Social Security, pensions, annuities, veterans’ benefits, and similar periodic payments go in. Savings, proceeds from selling property, or any other type of asset do not. Depositing the wrong kind of money breaks the exception.
The state must be named as the first beneficiary at your death, with the right to recover what Medicaid spent on your care from any funds remaining in the trust before anything passes to family.
The trust must be irrevocable. You cannot undo it or pull the money back. A separate provision of the same statute, § 1396p(d)(3)(A), treats a revocable trust’s contents as your available resources, so a revocable trust would simply push you back over the limit.4Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets – Section: (d)(3)(A)
Federal law also requires income-cap states to make Medicaid available to people in a medical institution for at least 30 consecutive days whose income doesn’t exceed the special income level, meaning the 300% cap.5Office of the Law Revision Counsel. 42 USC 1396a – State Plans for Medical Assistance
How Much of Your Income Goes Into the Trust
States handle this two different ways, and you have to know which applies to you. Some states require you to deposit only the amount above the cap. If your gross monthly income is $3,200 in 2026, that’s $218 into the trust. Other states require you to deposit your entire monthly income into the trust account, with the trustee then paying out everything according to Medicaid’s rules. Guessing wrong is a common way to create an eligibility problem. Confirm the method with your Medicaid caseworker before the first deposit.
Setting Up the Trust
You’ll need to choose a trustee who will manage the trust account, make the deposits, and pay out the distributions each month. This is usually an adult child, a spouse, or another relative, though you can hire a professional trustee. Gather proof of every income source showing the gross monthly amount: Social Security award letters, pension and annuity statements, and any veterans’ benefits documentation.
Most state Medicaid agencies publish a template or approved form for the trust document, and using it matters because the language has to satisfy both federal law and your state’s specific rules. If your state doesn’t provide a template, or if your situation is complicated by multiple income sources or a spouse remaining at home, an attorney who handles Medicaid planning can draft one. Legal fees generally run from several hundred to a few thousand dollars depending on complexity and location.
You and the trustee sign the document in front of a notary. The trustee then takes the signed original to a bank or credit union and opens a dedicated checking account titled in the trust’s name, such as “The Jane Smith Qualified Income Trust,” so it stays clearly separate from personal accounts.
The EIN Question at the Bank
A qualified income trust is a grantor trust for tax purposes, which means the account uses your Social Security number. The IRS directs that grantor trusts of this type should not get a separate Employer Identification Number. Some bank staff aren’t familiar with Miller Trusts and may push for an EIN anyway. Bringing a copy of the trust document, along with your state’s Medicaid guidance if you have it, usually clears this up. Because the account has to run near zero every month, pick one with no minimum balance requirement and no monthly fees. Once the account is open, send copies of the signed trust and proof of the account to your state Medicaid agency so benefits can start.
Where the Money Goes Each Month
Every dollar in has to go out, in a specific order. The trustee doesn’t have discretion to spend the money freely.
- A personal needs allowance for the Medicaid recipient covering things like clothing, haircuts, and phone service. The federal floor is $30 a month, and many states set a higher figure.
- A spousal maintenance allowance, if there’s a spouse living at home, to help cover housing and basic living costs. In 2026, this allowance has a federal minimum of $2,643.75 per month and a maximum of $4,066.50, with the actual amount depending on the spouse’s own income and housing expenses.2Centers for Medicare and Medicaid Services. 2026 SSI and Spousal Impoverishment Standards
- Health insurance premiums, including Medicare Part B and Medicare supplement policies.
- Patient responsibility to the nursing home or care facility. Whatever is left after the categories above goes directly to the facility as your share of the cost, and Medicaid pays the rest.
If care is being provided at home under a waiver program rather than in a facility, there’s no patient-responsibility payment to a nursing home, and more of the income typically flows to the recipient’s own living costs or the spouse’s needs. The trust structure, the income-only rule, and the state payback obligation are the same either way.
The account has to be drawn down to near zero each month. Medicaid’s resource limit for a single individual is typically $2,000, and a trust balance that climbs above that line can be counted as a resource and knock out your eligibility. The trust is a pass-through. It isn’t a savings vehicle.
Taxes
Because this is a grantor trust, the IRS treats the income inside it as yours. Your Social Security, pension, and other payments are still reported on your personal Form 1040 exactly as they would be without the trust. The trust files no separate return and gets no EIN. The money’s path changes; your tax picture doesn’t.
What Happens at Death
When the beneficiary dies, the state is the first payee from whatever remains in the trust account, up to the total Medicaid spent on that person’s care.3Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets Because the account should be drained each month, the balance at death is usually small, and the state’s recovery from the trust itself is usually modest.
One point families often get wrong: the trust’s payback clause is not the full extent of what Medicaid can recover. State Medicaid estate recovery programs can also pursue other assets in the deceased person’s estate under separate authority. The trust handles its own balance. Estate recovery handles everything else.
Mistakes That Cost You Coverage
Missed or late deposits are the most common failure. If the required income doesn’t land in the trust account in the month it’s received, Medicaid can treat your income as over the cap for that month and suspend benefits. Some states treat a late deposit as a transfer of assets, which triggers a penalty period during which Medicaid pays nothing for your care.
Spending trust funds outside the permitted categories, whether paying down a credit card, giving gifts, or lending money to a relative, is treated as an improper transfer of assets. Penalty periods are calculated by dividing the improperly transferred amount by the average monthly cost of nursing home care in your state, so a $10,000 misstep can mean months with no Medicaid coverage.
Letting the trust balance accumulate is the third trap. The trustee has to distribute everything each month. A balance that drifts above the $2,000 resource line can end eligibility even if every other rule has been followed. The role isn’t complicated, but it has to be done every month, on time, the same way.