How to Set Up a Miller Trust in Alabama

Why Alabama Requires a Miller Trust

Alabama is an income-cap state for Medicaid long-term care. In 2026, the monthly gross income limit is $2,982 — set at 300% of the federal Supplemental Security Income benefit rate. If your parent's monthly income exceeds this cap by even one dollar, they are ineligible for Medicaid nursing home coverage or Home and Community-Based Services waiver programs.

Alabama does not offer a medically needy spend-down pathway for long-term care. Unlike states where excess income can be "spent down" on medical bills to reach the limit, Alabama requires a legal workaround: the Qualified Income Trust, commonly called a Miller Trust.

What a Miller Trust Does

A Miller Trust is an irrevocable trust that holds the portion of your parent's income that exceeds the Medicaid cap. Each month, the excess income is deposited into a dedicated trust bank account. The trust then distributes those funds under Medicaid rules, including the recipient's personal-needs allowance, any permitted community-spouse maintenance allowance, and the patient's liability to the nursing facility or other care provider.

The trust exists solely to make your parent's "countable" income fall below the cap. It doesn't hide money or shelter assets — Medicaid knows exactly what's in it and where every dollar goes.

Step-by-Step Setup Process

Download Form 262. The Alabama Medicaid Agency publishes a state-approved Miller Trust packet — Form 262 — with the trust agreement template and instructions. You can find it on the Alabama Medicaid document library under applicant forms. Using the state template reduces the risk of rejection and can eliminate the need for an attorney.

Complete the trust agreement. The form designates the Medicaid applicant as the grantor and beneficiary. A trustee (typically the adult child or a trusted family member) is named to manage the account. The trust must name the Alabama Medicaid Agency as the remainder beneficiary — meaning any funds left in the trust at the beneficiary's death go to Medicaid to reimburse care costs.

Have the trust notarized. Both the grantor and trustee must sign in front of a notary. If your parent lacks the cognitive capacity to sign, do not assume a durable power of attorney authorizes execution of the trust; confirm with the Alabama Medicaid district office or an elder-law attorney which authority and signature they will accept.

Open a dedicated bank account. The trust must have its own checking account, titled in the name of the trust. No other funds can be commingled in this account. Shop for a bank that waives monthly fees on trust accounts — several Alabama credit unions do.

Fund the trust in the correct month. This is the step where families most often make a critical error. The trust must be funded — meaning the excess income must be physically deposited into the trust account — within the calendar month for which Medicaid coverage is sought. Medicaid cannot be retroactively approved for any month in which the trust was not active and funded.

If your parent's Social Security check is $3,200 per month, the excess $218 above the $2,982 cap must be deposited by the last day of the month. Set up an automatic transfer to avoid missing a month.

Submit the trust to the Medicaid district office. Include the signed and notarized trust agreement, a copy of the bank account statement showing the trust account is open, and the Medicaid application (Forms 204/205). The caseworker will review the trust for compliance.

Common Mistakes That Delay Approval

Missing a funding month is the most common problem. If the trust isn't funded in January, Medicaid won't cover January — even if the trust was executed in December. Retroactive coverage only applies to months where the trust was both active and funded.

Commingling funds — depositing non-income money into the trust account or using the account for personal expenses — can disqualify the trust. Keep the account strictly for the excess income deposit and Medicaid-approved distributions.

Using a non-standard trust document without the Alabama Medicaid Agency named as remainder beneficiary can cause a compliance problem. Use Form 262, or have an elder law attorney confirm that a customized trust includes this provision and meets Alabama Medicaid requirements.

When to Involve an Attorney

If your parent's income only slightly exceeds the cap and their financial situation is straightforward, Form 262 and a bank visit can handle the setup without legal fees. But if there are complex assets, multiple income sources, or a community spouse whose income needs protection, an elder law attorney can ensure the trust integrates properly with the broader Medicaid application. Attorney fees for Miller Trust drafting in Alabama range from $200 to $2,500 depending on complexity.

Our Alabama Hospital-to-Home Transition Guide includes a Miller Trust setup worksheet that walks through each step with document checklists and a month-by-month funding tracker.

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