New Jersey Medicaid recently began permitting the use of Miller trusts (aka Qualified Income Trusts). People with incomes above the Medicaid income limit (currently $2,199) can use a Miller trust to qualify for Medicaid in a nursing home, assisted living facility or in the community with home care aides.
While Miller trusts are an excellent development that will help a lot of New Jerseyans afford long term care, there are still some significant flaws to work out in the State’s plan. One of the biggest is that Medicaid’s rules effectively do not allow a trustee to take a fee.
New Jersey’s Miller Trust template lists on page 4 the order of permitted trust disbursements. In theory, the trustee (the person managing the trust) is permitted to take a fee of 6% of monthly trust income. E.g., if the beneficiary (the person who needs long term care) assigned $1,000 of income the trust each month, the trustee is entitled to a fee of 6%, or $60 per month.
However, the trustee can only take a fee after the beneficiary’s other required monthly expenses are paid, including the beneficiary’s share of the long term care cost. For people in a nursing home or assisted living facility, the share of cost will almost always exceed the monthly income, leaving no money to pay the trustee. This means that in practice, if the beneficiary is in a facility, the trustee will not be paid a trustee fee.
That’s fine for people who have family members willing to serve as trustee. A child or spouse can usually be expected to serve without taking a fee. But what about people who don’t have family members available to serve? A Miller trust must be managed by a trustee, but if you don’t have close family members and can’t hire someone, who would take on that responsibility for free?
It’s certainly a gap in the Miller trust rules. Banks and businesses won’t serve as trustee without a fee, and I don’t think non-profits will be willing to take on that role for free either. The only answer in this situation may be that facilities (nursing homes and assisted living facilities) will have to serve as trustee. They certainly have a vested interest in seeing the beneficiary’s income get paid out, since the bulk of it will go to them. There exists some inherent conflict of interest, but the Miller trust rules are very rigid. Administering the trust should be pretty mechanical, which minimizes the conflict. In cases where no one else is available to serve as trustee, I think facilities will have to fill that role.
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