Do I need a Miller Trust for excess income

I recently spoke with Emily, a woman frantic because her mother’s Medi-Cal benefits were in jeopardy. Emily’s mother had entered a skilled nursing facility, and while her assets were below the limit for qualification, the fixed income from a life insurance annuity was pushing her over. She’d received a notice from the county threatening to terminate coverage, potentially leaving her with a $10,000+ monthly bill. Emily had discovered a “Miller Trust” mentioned online but didn’t understand if it applied to her situation, or even if it was legitimate. These situations are incredibly stressful, and unfortunately, all too common.

What is a Miller Trust and Why is it Used?

A Miller Trust, officially known as a Qualified Income Trust (QIT), is an irrevocable trust designed specifically to help individuals qualify for Medi-Cal while having income that exceeds the program’s limits. As a CPA with over 35 years of experience in estate planning, I’ve seen countless clients navigate this complex issue. Medi-Cal looks at both assets and income. While most people focus on reducing asset levels, excessive monthly income is a frequent disqualifier. The Miller Trust allows you to shelter that excess income so you can still meet the financial requirements for long-term care coverage.

How Does a Miller Trust Work?

The basic concept is simple: excess monthly income is deposited into the Miller Trust, not held directly by the applicant. Medi-Cal then treats the funds in the trust as if they don’t belong to the applicant, allowing them to qualify for benefits. However, it’s not a free pass. The funds in the trust must be used solely for the benefit of the applicant – things like medical expenses not covered by Medi-Cal, personal needs, and even room and board in the skilled nursing facility. There are strict rules about how the funds can be spent, and detailed record-keeping is essential. Improperly managed trusts can result in penalties and disqualification.

Is a Miller Trust Right for Everyone?

Not necessarily. A Miller Trust is most beneficial when a person has income that exceeds Medi-Cal’s allowable limits, even if their assets are otherwise low enough to qualify. If Emily’s mother had relatively few assets but a substantial, consistent income stream from the annuity, a Miller Trust was a viable solution. However, if the excess income is only temporary, or if the person has sufficient assets to cover the costs, a trust might not be necessary. It’s also important to remember that setting up and maintaining a Miller Trust involves legal fees and administrative work.

The CPA Advantage: Beyond Just Income

As both an attorney and a CPA, I bring a unique perspective to these cases. While a simple trust might address the income issue, understanding the tax implications is crucial. For example, the ‘step-up in basis’ for inherited assets can significantly impact capital gains taxes. Proper valuation of assets is also key to maximizing benefits and minimizing future tax liabilities. Simply addressing the income side without considering the overall financial picture can be a mistake.

Important Changes for 2025/2026

It’s critical to be aware of upcoming changes to estate planning laws. For deaths on or after April 1, 2025, a primary residence valued up to $750,000 may qualify for a “Petition for Succession” under AB 2016 (Probate Code § 13151), a simpler process than traditional probate. However, this is a Petition requiring a Judge’s Order, not an Affidavit. Furthermore, to qualify, the decedent’s non-real estate assets typically can’t exceed $208,850. Also, the OBBBA permanently increased the Federal Estate Tax Exemption to $15 million per person effective Jan 1, 2026, which affects high-net-worth individuals and planning strategies.

Protecting Digital Assets and Business Interests

Don’t overlook digital assets. 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. Similarly, if you own a Limited Liability Company (LLC), be aware of the FinCEN 2025 Exemption. As of March 2025, domestic U.S. LLCs are exempt from mandatory BOI reporting under the Corporate Transparency Act; however, executors managing foreign-registered entities must still file updates within 30 days to avoid fines of $500/day.

How do California courts decide whether a will reflects true intent or creates ambiguity?

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.

To create a valid document, you must ensure the signer has testamentary capacity, strictly follow will legal requirements, and ensure you are correctly identifying the will maker to prevent identity disputes.

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.