In Arizona, there is a cap on the amount of
income that a beneficiary can receive and still qualify for long-term
care benefits through the Arizona Long Term Care System
(ALTCS). The cap, which is 300% of the Federal Benefit
Rate, is adjusted annually, and in 2017 it is $2,025. (See
details regarding the eligibility guidelines on our
Long-Term Planning page.)
The good news is that, in the vast majority
of cases, whenever the aggregate income received by the ALTCS
beneficiary exceeds that amount, eligibility can still be
maintained by re-directing some or all of that income to an
“income trust” (sometimes called an income-only trust,
qualifying income trust, qualified income trust or Miller Trust, a name taken from a court case that gave rise to
While income payable to
the ALTCS beneficiary counts toward the maximum income allowed,
any income that is made payable to an income trust is excluded
from that income calculation. This can make an individual whose
income exceeds the cap by, in effect, reducing the amount of
income payable to that beneficiary.
The beneficiary has a choice of whether to
redirect all or merely some of the income to the income trust,
but all of the income from any one source must be redirected.
For example, an individual with monthly Social Security income
of $874 and a monthly pension of $1,500 (totaling $2,374) would be over the
limit. By redirecting to an income trust the Social Security income
or the monthly pension or both , the
individual would be under the income cap. Redirecting income
simply means having a source of income directly deposited into a
checking account titled in the name of the trust.
All of the applicant’s income, including any
income deposited into the trust account, is counted in
determining the individual’s share of cost, which is the portion
of medical expenses that remain the applicant’s responsibility.
In order to use an income only trust,
specific rules must be followed. Here are some of those rules:
No other resources may be used to
establish or augment this type of trust. If can be composed only
of income to the individual, from any source.
The trust must be established by
the ALTCS applicant, the applicant’s spouse or the applicant’s
representative (including a guardian, the agent under a power of
attorney, or a court).
Once the trust is established, the
income and interest earned by the trust can accumulate and will
not be counted as a resource.
The account must be opened with a
$0 balance or have been established with all or a portion of the
applicant’s current monthly income.
In determining income eligibility,
income is excluded only when deposited into the trust account,
either manually or by direct deposit, in the month in which the
income was received. (Income that was received in a prior month
is a resource in subsequent months and cannot be deposited into
When an individual has spent part
of the income for the month before establishing a trust account,
the remainder of the income may be deposited into the account.
However, only the amount of income actually deposited into the
trust account can be excluded when determining financial
The full amount of any source of
income assigned must be deposited into the trust account.
Either the trust document or the
Schedule A must list the applicant’s gross income from that
The only disbursements allowed
from the trust are to the care facility for the recipient’s
share of cost, and back to the recipient for his personal needs
allowance (which in 2017 is $110.25). Disbursements are not
allowable for payment of taxes (the applicant must terminate all
tax withholdings and submit proof of that request along with the
trust) or insurance (health or life) premiums from the income
that goes into the trust.
There is a maximum amount that an
applicant can earn even if he or she does use a Miller Trust to make
some of it non-countable. The total amount of the individual’s
countable non-trust income and the income assigned to the trust
(excluding interest and dividends earned by the trust corpus and
added to the principal) must not exceed the “private pay rate”
that is set for the geographic area in which the applicant
lives. As of October 1, 2016, that amount is $6,905.11 for
Maricopa, Pima and Pinal counties, and $5,667.81 for all other
counties in Arizona.
(As was mentioned above, more
details about the eligibility guidelines are available on
our ALTCS and Long-Term Planning page.)
Once the recipient has passed away, AHCCCS
is allowed to receive the amounts remaining in the trust at that
time, as reimbursement for the cost of services that have been
As you can see, ALTCS eligibility is
complicated, and advice from an attorney who frequently works in
this area of the law is highly recommended. At Frazer Ryan, we
work hard to say up to date on the law and on methods to ensure
that all eligible individuals are properly prepared to
for ALTCS. We encourage you to give us a call to discuss your
particular situation with us.