Trusts and ALTCS Eligibility: What Families Should Know

ALTCS has both income limits and asset limits that an applicant must meet to qualify for benefits. When an applicant's income or assets present an eligibility question, some families explore whether legal planning tools — including certain types of trusts — could affect how AHCCCS evaluates those resources. However, trust planning in the context of Medicaid eligibility is not a straightforward workaround. AHCCCS has specific rules about how different types of trusts are treated for eligibility purposes. Whether a trust has any effect on ALTCS eligibility, has no effect, or actually creates problems for an ALTCS applicant depends on the type of trust, when it was created, how it is funded, who benefits from it, and whether it meets AHCCCS's precise legal requirements. Families should not assume that creating any trust will resolve an ALTCS eligibility issue. Only a qualified elder law attorney can evaluate whether a specific trust approach may be appropriate for a specific individual's situation.

AHCCCS recognizes a specific category called Special Treatment Trusts — trusts that may be evaluated differently for ALTCS eligibility purposes when they meet the applicable federal and state requirements. These are distinct from general estate planning trusts and revocable living trusts, which are typically treated differently under AHCCCS rules. As described in AHCCCS policy (including DE-819 and applicable federal Medicaid law under 42 U.S.C. § 1396p), the Special Treatment Trust types relevant to ALTCS include: 1. Income-Only Trust (Miller Trust) — for applicants whose gross monthly income exceeds the ALTCS income limit. 2. Trust for an Individual Under Age 65 with a Disability — for applicants with a disability who are under age 65 and whose own assets fund the trust. 3. Pooled Trust — administered by a qualifying nonprofit organization for individuals with disabilities. Each type has distinct eligibility conditions, funding requirements, permitted uses, and AHCCCS review requirements. None of them guarantees ALTCS eligibility. All must meet precise legal requirements and be reviewed by AHCCCS. A qualified elder law attorney should be consulted before any action is taken.

Arizona is an "income cap" state for ALTCS eligibility purposes. This means that if an applicant's gross monthly income exceeds the ALTCS income limit (which AHCCCS adjusts periodically), they are generally not eligible for ALTCS — even if they have minimal assets — unless a specific qualifying trust is in place. AHCCCS rules, consistent with federal Medicaid law, recognize a legal mechanism commonly called an Income-Only Trust or Miller Trust. When structured correctly and accepted by AHCCCS, an Income-Only Trust may allow an over-income applicant to address the income cap requirement. Key points families should understand about Income-Only Trusts: • An Income-Only Trust is designed for applicants whose income exceeds the ALTCS income limit. It is not a general asset-protection device. • Only the customer's (applicant's) own income may be deposited into an Income-Only Trust. Income from other sources or other individuals may not be deposited. • The trust must meet precise legal requirements under both federal Medicaid law and AHCCCS rules. A trust that does not meet those requirements will not achieve the intended result. • The trust document must be properly drafted by a qualified attorney. It is not a document families should attempt to prepare on their own using templates or online forms. • Income placed into an Income-Only Trust may not count toward the income cap for ALTCS eligibility purposes — however, those funds may still count toward the member's ALTCS Share of Cost (the portion the member is expected to contribute toward their care costs). Consult a qualified attorney for guidance on how this applies in a specific situation. • AHCCCS must typically be named as a remainder beneficiary for amounts up to the total Medicaid benefits paid on behalf of the member. • Improper deposits into, or distributions from, an Income-Only Trust can affect eligibility or Share of Cost obligations. • AHCCCS reviews Income-Only Trusts as part of the ALTCS application and ongoing eligibility process. Acceptance is not automatic. For current income limits and the official income cap threshold, see the ALTCS Income Limits page. For questions about whether an Income-Only Trust is applicable to a specific situation, consult a qualified elder law attorney.

Federal Medicaid law (42 U.S.C. § 1396p) and AHCCCS rules recognize a specific type of trust for individuals who are under age 65 and have a disability, funded with the individual's own assets. AHCCCS refers to this type of trust in its Special Treatment Trust policy (DE-819). Key conditions that generally apply under federal law and AHCCCS rules: • The trust must be established for the sole benefit of the individual. • The individual must be under age 65 at the time the trust is established and funded. Funding or adding assets to this type of trust after the individual turns age 65 may be treated by AHCCCS as a transfer of assets and could affect eligibility. • The trust must be funded with the disabled individual's own assets — for example, from an inheritance, personal injury settlement, or other personal funds. • The trust may be established by the individual themselves, a parent, grandparent, legal guardian, or a court, consistent with applicable federal requirements. Families should confirm the current AHCCCS requirements with a qualified elder law attorney, as rules may change. • AHCCCS must typically be named as a remainder beneficiary for amounts up to the total Medicaid benefits paid on the individual's behalf. • Trust distributions must comply with AHCCCS rules. Improper distributions can affect eligibility. • AHCCCS reviews these trusts individually. Meeting the general conditions does not guarantee eligibility. A note on broader trust terminology: You may encounter the terms "Special Needs Trust" or "Supplemental Needs Trust" in other contexts — including estate planning and general disability planning. These are broader categories of legal planning tools. Not all trusts called "Special Needs Trusts" meet the specific AHCCCS Special Treatment Trust requirements described above. Whether a specific trust document qualifies under AHCCCS rules requires evaluation by AHCCCS and guidance from a qualified elder law attorney. Consult a qualified elder law attorney before establishing, funding, or modifying any trust in connection with ALTCS eligibility.

A Pooled Trust is a type of trust established and managed by a qualifying nonprofit organization, in which the assets of multiple beneficiaries are pooled for investment purposes while being held in individual sub-accounts for each beneficiary. Federal Medicaid law (42 U.S.C. § 1396p) recognizes pooled trusts in connection with Medicaid eligibility under specific conditions, and AHCCCS evaluates them as part of its Special Treatment Trust policy. Key conditions that generally apply: • The pooled trust must be established and administered by a qualifying nonprofit association. • The individual sub-account must be established for the sole benefit of the disabled individual. • The trust may be established by the individual themselves, a parent, grandparent, legal guardian, or a court, consistent with applicable federal requirements. • There are disability and other eligibility requirements under federal law that affect who may use a pooled trust in connection with Medicaid eligibility. • Depending on the trust terms and applicable AHCCCS rules, remaining funds upon the beneficiary's death may be retained by the nonprofit or paid to AHCCCS as a remainder beneficiary. • Funding a pooled trust or adding assets after age 65 may be reviewed by AHCCCS as a transfer and could affect eligibility. Families should not assume that age-65 restrictions apply only to other trust types — consult a qualified elder law attorney. • AHCCCS reviews pooled trust accounts individually. Participation in a pooled trust does not automatically establish ALTCS eligibility. Consult a qualified elder law attorney before participating in any pooled trust in connection with ALTCS planning.

Families sometimes hope that establishing a trust will resolve an ALTCS eligibility issue. It is important to understand the limitations: No trust guarantees ALTCS eligibility. AHCCCS reviews each trust individually to determine whether it meets applicable legal requirements and how it affects the applicant's countable income and assets. Improperly structured trusts can cause harm. A trust that does not meet AHCCCS's specific requirements may not achieve the intended effect. In some cases, an improper trust arrangement may be treated as a disqualifying transfer of assets, resulting in a period of ineligibility. Timing and age matter. AHCCCS applies a look-back period for certain asset transfers. Actions taken too close to an ALTCS application, or in a way that does not meet legal requirements, can result in periods of ineligibility. Funding or adding to certain trust types after age 65 may also be reviewed as a transfer. Trust violations affect eligibility and Share of Cost. Improper deposits into or distributions from a Special Treatment Trust — including depositing income that does not belong to the applicant into an Income-Only Trust, or making distributions that do not comply with AHCCCS rules — can affect ALTCS eligibility or the member's Share of Cost obligations. Trust rules change. Federal Medicaid law, Arizona state rules, and AHCCCS policies are subject to legislative and regulatory change. A strategy that applied in prior years may not apply in the same way today. Every situation is different. Trust planning outcomes depend on the individual's income, assets, age, disability status, health needs, family structure, and the timing of any planning steps. SeniorVue strongly echoes AHCCCS's guidance: please speak with a qualified elder law attorney licensed in Arizona before creating, funding, modifying, or terminating any trust in connection with ALTCS eligibility.

If an applicant has established or benefits from a trust, AHCCCS will review the trust as part of the ALTCS application and eligibility process. Families should be prepared to provide: • A complete copy of the trust document • Documentation of trust assets, account balances, and funding history • Information about who established the trust and when • Information about who benefits from the trust • Information about any distributions made from the trust AHCCCS will determine how the trust and its assets or income are treated for eligibility purposes based on the trust terms and applicable federal and state Medicaid law. This review and determination is conducted by AHCCCS — not by SeniorVue or any third party. For information about the overall ALTCS application process, see the How to Apply for ALTCS page. For ALTCS income and asset limits, see the Income Limits and Asset Limits pages. To contact AHCCCS directly about a specific situation, see the ALTCS Contact Information page.

AHCCCS Special Treatment Trust documents must meet precise requirements under federal Medicaid law (42 U.S.C. § 1396p), Arizona state law, and current AHCCCS rules and policy (including DE-819). Small errors in trust terms — including how income is defined, who may deposit funds, what distributions are permitted, how the remainder beneficiary provision is written, or how age requirements are addressed — can determine whether AHCCCS accepts or rejects the trust for eligibility purposes. For these reasons: • Do not rely on generic online trust templates or legal document websites for ALTCS-related planning. • Do not assume that a trust prepared for a different purpose — such as general estate planning — will work for ALTCS Special Treatment Trust purposes without attorney review. • Do not take action based solely on the experience of another family, as eligibility rules and individual circumstances differ. • Do consult a qualified elder law attorney licensed in Arizona with specific experience in Medicaid and ALTCS planning. The State Bar of Arizona (azbar.org) has a lawyer referral service that may help families find attorneys with relevant experience. AHCCCS does not endorse or recommend specific attorneys, and neither does SeniorVue. For general ALTCS program information, visit azahcccs.gov or contact AHCCCS at (888) 621-6880. See the ALTCS Eligibility overview for a summary of the general financial and medical eligibility requirements. Return to the ALTCS main page for a full overview of the program.