Do I need a Miller Trust for excess income

I recently spoke with Emily, a woman who’d carefully planned for her mother’s long-term care needs. Her mother had qualified for Medicaid, but an unexpected pension increase pushed her over the income limit. Emily had spent weeks navigating the paperwork, only to be told her mother’s benefits were at risk, and she was facing a potential $10,000 bill for the months of overpayment. This is a common crisis, and thankfully, often avoidable with proper planning.

What is a Miller Trust and Why Might I Need One?

A Miller Trust, also known as a Qualified Income Trust (QIT), is a specific type of irrevocable trust designed to help individuals qualify for Medicaid while having income that exceeds the program’s limits. Medicaid has strict income rules, and any income above those limits can disqualify an applicant. A Miller Trust allows the applicant to divert that excess income into the trust, making them appear financially eligible. It’s crucial to understand this is not an asset protection tool; the funds remain available for the beneficiary’s care, but they are considered unavailable for Medicaid eligibility purposes.

How Does a Miller Trust Work in Practice?

The trust must be irrevocable, meaning you cannot easily change its terms once it’s established. Income diverted into the trust is generally used to pay for the beneficiary’s care expenses. Here’s where my CPA background becomes exceptionally valuable. Because the trust is used for healthcare costs, we can strategically document those payments to maximize the step-up in basis for any inherited property. We also carefully assess capital gains implications and ensure proper valuation, which is often a complex process. Without this dual expertise, you risk missing significant tax benefits.

AB 2016, Small Estate Affidavits, and the Miller Trust Connection

It’s important to differentiate how a Miller Trust fits into the broader estate planning picture. The Petition for Succession under AB 2016 (Probate Code § 13151) streamlines the transfer of a primary residence up to $750,000 for deaths on or after April 1, 2025. However, this process is separate from income qualification. If the decedent had excess income during life, a Miller Trust would have been considered independently of AB 2016. The Small Estate Affidavit (for property < $69,625) is even more limited in scope and doesn't address income concerns at all. Furthermore, remember that to qualify for the AB 2016 Petition, the decedent's other non-real estate assets typically need to remain below the $208,850 Small Estate limit.

Digital Assets and the Importance of RUFADAA

Planning doesn’t stop with tangible assets. With the increasing prevalence of digital accounts, it’s crucial to address access to those assets as well. Without specific RUFADAA language (Probate Code § 870) in your Trust or Will, service providers like Coinbase and Google can legally deny your executor access to your digital assets. This can complicate the administration of the trust and delay essential payments.

What Happens if I Don’t Establish a Miller Trust When Needed?

The consequences of not addressing excess income can be severe. If your income exceeds the Medicaid limit, you may be required to pay back any benefits received during the period of ineligibility, as Emily’s mother was facing. Alternatively, you may be denied benefits altogether. If combined ‘probate assets’ (excluding the AB 2016 residence) exceed $208,850 (the threshold effective April 1, 2025), they are subject to formal probate; a Will alone does not allow you to bypass this limit. This can quickly deplete your resources and compromise your long-term care plan.

After 35+ years as both an Estate Planning Attorney and CPA in Escondido, California, I’ve seen firsthand the importance of proactive planning. A Miller Trust is a powerful tool, but it’s not a one-size-fits-all solution. It requires careful consideration of your individual circumstances and a thorough understanding of the complex regulations governing Medicaid eligibility.

What makes a California will legally enforceable when it matters most?

In California, a last will and testament operates within a probate system that emphasizes intent, clarity, and procedural compliance. When properly drafted, a will does more than distribute property—it creates legally enforceable instructions that guide courts, fiduciaries, and beneficiaries through administration with fewer disputes and less uncertainty.

• Leadership: Define executor responsibilities clearly.
• Protection: Establish guardian nominations for minors.
• Location: Confirm residency rules.

For California residents, understanding how intent, authority, and compliance interact is one of the most effective ways to protect family harmony and estate integrity. A will that anticipates probate scrutiny is far more likely to be honored as written and far less likely to become the source of unnecessary conflict.

Resources for Asset Management & Transfer

• Property Tax Reassessment: California State Board of Equalization (Prop 19)
  This page details the “Base Year Value Transfer” rules. It explains that heirs can only avoid a property tax reassessment if the inherited home becomes their primary residence and a claim is filed within one year of the date of death.
• Real Estate Probate (AB 2016): California Probate Code § 13151 (Petition for Succession)
  The specific statute for the AB 2016 process. It outlines the requirements for using a court-approved “Petition” (not an affidavit) to transfer a primary residence worth $750,000 or less (gross value) for deaths occurring after April 1, 2025.
• Small Estate Affidavit: California Probate Code § 13100 (Personal Property)
  Access the statutory language for the “Small Estate Affidavit.” This procedure is strictly for Personal Property (cash, stocks, vehicles) and is limited to estates with a total value of $208,850 or less (effective April 1, 2025).
• Federal Estate Tax: IRS Estate Tax Guidelines
  The authoritative federal resource for estate valuation. It reflects the 2026 exemption increase to $15 million per person established by the One Big Beautiful Bill Act (OBBBA), which is critical for high-net-worth asset planning.
• Unclaimed Assets: California State Controller – Unclaimed Property
  The primary portal for executors and heirs to search for “lost” assets—such as forgotten bank accounts, uncashed dividends, and insurance benefits—that have been remitted to the State of California for safekeeping.
• Business/LLC Compliance: FinCEN – Beneficial Ownership Information (BOI)
  The official portal for corporate transparency reporting. While many domestic U.S. LLCs received exemptions in 2025, executors managing foreign-registered entities or specific non-exempt structures must still consult this resource to ensure compliance.