Case Study: My 84 year old father, Calvin, can no longer live independently due to physical limitations related to aging and needs to move to assisted living due to the recent death of my step-mother who was his primary caregiver. He has very little in the bank and does not have enough social security and pension income to cover the cost of assisted living out-of-pocket. We applied for ALTCS benefits and have been told he needs an Income Only Trust to qualify for ALTCS. What is an Income Only Trust? How does an Income Only Trust work?

An Income Only Trust (also known as a Miller Trust) is the “fix” when someone earns too much monthly income to meet ALTCS’ income limit but still not enough to pay for their own long term care expenses. If an applicant has more than $2,382.00 (married couple $4,764.00) in fixed monthly income (2021 ALTCS income limits) but still earns less than the private pay rate established in the applicant’s residential geographic area in Arizona ($7,204.78 a month if they live in Maricopa, Pima, or Pinal county, or $6,491.92 a month if they live in any other county), the applicant can use an “Income-Only Trust” to meet income criteria. 

An Income Only Trust is a separate trust agreement that must be established in accordance with 42 U.S.C. 1396p(d)(4)(B). There will be a checking account titled to the Income Only Trust and all or a portion of the ALTCS applicant’s income will be direct deposited to the IOT account. The ALTCS Manual lays out specific rules for how the income assigned to the Income Only Trust must be distributed from the Trust on a monthly basis.  It is critical that the Income Only Trust be established, funded, and administered in accordance with ALTCS rules, otherwise the applicant still may not be eligible for ALTCS benefits. In most instances, all the income deposited will be distributed from the IOT account each month leaving a zero balance. However, in some instances funds may accumulate in the IOT account. In the event there are any funds remaining in the IOT account at the ALTCS recipient’s death the remaining funds shall be paid to AHCCCS to reimburse AHCCCS for the cost of ALTCS services rendered to the ALTCS recipient.  

Let’s say Calvin receives $3,000.00 per month in fixed income, but his assisting living costs $4,500.00 per month. Without an Income Only Trust Calvin will never qualify for ALTCS benefits. However, assuming Calvin otherwise meets medical and resource criteria, with an Income Only Trust Calvin will qualify for ALTCS benefits. This is simply a legal tool created under federal law to allow persons who earn too much but also not enough to qualify for Medicaid long term care benefits (known as ALTCS in Arizona).

Each month the Trustee of the IOT will disburse approximately $120/month to Calvin’s personal checking account (personal needs allowance), pay allowed out of pocket medical expenses (e.g., insurance premiums, doctor office co-pays, prescription costs, hearing aids, dental visits, etc.) and the balance remaining will be paid directly to his assisting living community as his “room and board” expense.  ALTCS then pays the assisted living community directly for the outstanding balance due for Calvin’s cost of residency.  As Calvin’s assisted living expenses increase over time due to his increasing needs ALTCS will pay more, not Calvin. 

If you or someone you know needs an Income Only Trust we can help. Please call our office at 480-922-1010 or email info@bivenslaw.com to schedule your consultation to learn how we can help you.