How to Set Up a Miller Trust in Indiana: Step-by-Step Guide for Families

Your parent's Social Security and pension add up to $3,400 a month. Indiana's Medicaid income cap for long-term care is $2,982. That $418 difference means an outright denial — unless you set up a Miller Trust.

Indiana is strictly an "income cap" state. Unlike states that let applicants spend excess income on medical bills to qualify, Indiana draws a hard line: if gross monthly income exceeds $2,982 (300% of the Federal Benefit Rate in 2026) by even one dollar, the application is rejected. A Qualified Income Trust — commonly called a Miller Trust — is the only legal workaround.

What a Miller Trust Does

A Miller Trust is an irrevocable trust that receives the specific income sources pushing your parent over the $2,982 cap. By routing that excess income through the trust account, your parent's "countable" income drops below the limit, satisfying the financial eligibility requirement.

The trust doesn't shelter money or protect assets. Every dollar deposited into it gets distributed according to a strict hierarchy set by the state — your parent doesn't get to keep the excess.

Step-by-Step Setup

1. Draft the Trust Document

The Miller Trust must be:

• Irrevocable — it cannot be modified or revoked once signed
• Funded only with the applicant's income — no personal assets, savings, or third-party funds can be deposited
• Name the State of Indiana as the primary remainder beneficiary — upon the applicant's death, any remaining trust balance goes to the state to reimburse Medicaid costs, up to the total amount of assistance paid

The trust can be established by the applicant, an attorney-in-fact under a valid financial Power of Attorney, or a court-appointed guardian. Many elder law attorneys in Indiana charge $500–$1,500 for the drafting, though the document follows a standard template recognized by the FSSA Division of Family Resources.

2. Open a Dedicated Bank Account

The trustee opens a separate bank account using the applicant's Social Security number. This account must be used exclusively for trust transactions — no personal deposits or withdrawals outside the prescribed disbursement order.

3. Redirect the Right Income Sources

Each month, the specific income sources that push your parent over the $2,982 cap must be deposited directly into the trust account. You don't need to deposit all income — only the amount that causes the excess. For example, if your parent receives $2,200 in Social Security and $1,200 from a pension ($3,400 total), redirect the pension into the trust.

4. Follow the Disbursement Order

Funds in the Miller Trust can only be spent in this specific order:

1. Personal Needs Allowance — $52 per month for institutional care (or up to $2,982 for HCBS waiver recipients)
2. Spousal Maintenance Needs Allowance — if the community spouse's income falls below the minimum ($2,643.75, rising to $2,705 on July 1, 2026)
3. Health insurance premiums and medical bills — Medicare premiums, supplemental insurance, outstanding medical expenses
4. Patient liability — the remaining balance goes directly to the nursing facility or waiver care providers

5. Submit the Trust with the Medicaid Application

Include a copy of the executed trust document and proof of the dedicated bank account when filing State Form 55390 through the FSSA Benefits Portal. The DFR caseworker will verify the trust meets all requirements before approving eligibility.

Common Mistakes That Trigger Denial

Missing a monthly deposit. If even one month's excess income isn't deposited into the trust account, your parent's income exceeds the cap for that month and Medicaid eligibility is retroactively denied for that period.

Depositing assets instead of income. The trust can only hold income — Social Security, pensions, VA benefits, annuity payments. Transferring savings or investment proceeds into the trust violates its terms.

Naming the wrong remainder beneficiary. The State of Indiana must be the primary beneficiary. Some families mistakenly name a child or spouse, which invalidates the trust entirely.

Setting it up too late. The trust must be established and funded before the Medicaid application is approved. If you wait until after filing, the DFR will deny the application and you'll need to refile after the trust is in place.

What It Costs

Beyond attorney fees for drafting ($500–$1,500), ongoing costs are minimal — just the bank account maintenance. The trust doesn't require annual tax filings separate from the applicant's personal return since income flows through it rather than accumulating.

Who Needs One

Any Indiana Medicaid long-term care applicant whose gross monthly income exceeds $2,982. "Gross" means before any deductions — taxes, Medicare premiums, and insurance aren't subtracted first. Social Security, pensions, VA benefits, annuity distributions, and any other recurring income all count.

If your parent's income is below the cap, a Miller Trust isn't needed. If it's above, there's no alternative — Indiana doesn't offer a medically needy pathway.

The Indiana Medicaid Long-Term Care & Asset Protection Guide includes a Miller Trust checklist, disbursement tracking worksheet, and the complete list of income sources the DFR counts toward the $2,982 cap.

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