Oregon Income Cap Trust (Miller Trust): How It Works and When You Need One

Oregon is an income-cap state for Medicaid long-term care eligibility. If your monthly income exceeds $2,982 (2026 limit), you are disqualified from Medicaid nursing home and home-and-community-based waiver services — even if your medical expenses consume every dollar you earn.

The income cap trust, Oregon's term for a Miller Trust, is the only legal mechanism to restore eligibility when income exceeds this threshold. Without it, families face the full cost of long-term care out of pocket: $10,000 to $15,000 per month for nursing home care in Oregon.

Why Oregon Requires This Trust

Most states use a "medically needy" pathway that allows applicants to spend down excess income on medical bills and qualify for Medicaid once their remaining income falls below the limit. Oregon does not offer this pathway for long-term care services.

Instead, Oregon draws a hard line: if your gross monthly income from all sources — Social Security, pensions, retirement account distributions, rental income — exceeds $2,982, you cannot qualify. The income cap trust exists because this rigid threshold would otherwise disqualify thousands of seniors whose income barely exceeds the limit but whose care costs far exceed their income.

How the Income Cap Trust Works

The trust is an irrevocable trust with a dedicated bank account. Each month, the applicant's income that exceeds $2,982 is deposited into this trust account. The income flowing through the trust is not counted toward the Medicaid income eligibility determination.

In practice, most Oregon elder law attorneys structure it so that all of the applicant's income flows through the trust account each month, not just the excess. The trustee then distributes the income according to Medicaid's allowed uses:

1. Personal needs allowance — $74.61 per month (2026) returned to the Medicaid recipient
2. Spouse's income allowance — if the community spouse's income is below the minimum monthly maintenance needs allowance ($2,555 per month in 2026), the difference comes from the trust
3. Medical expenses — health insurance premiums and uncovered medical costs
4. Patient liability — the remaining balance goes to the nursing facility or care provider as the recipient's share of cost

Setting Up the Trust

The income cap trust must be established before or simultaneously with the Medicaid application. Key requirements:

Irrevocable. Once created, the trust cannot be modified or revoked. This is what makes the income "unavailable" to the applicant under Medicaid's rules.

State payback provision. The trust document must name the State of Oregon (specifically, the Department of Human Services) as the primary remainder beneficiary. When the Medicaid recipient dies, any funds remaining in the trust account go first to repay the state for Medicaid benefits provided.

Separate bank account. The trust requires its own bank account, titled in the trust's name. The applicant's income sources must be redirected to deposit into this account.

Trustee. A family member, friend, or professional fiduciary serves as trustee. The trustee manages the monthly deposits and distributions. The Medicaid recipient cannot serve as their own trustee.

The Asset Limit: A Separate Hurdle

The income cap trust solves the income problem, but Medicaid eligibility also requires meeting Oregon's asset limit: $2,000 in countable assets for a single applicant.

Countable assets include bank accounts, investments, and — importantly in Oregon — retirement accounts. IRAs and 401(k)s are counted as available assets, which surprises many applicants who assume retirement funds are protected.

The primary home is exempt only if the applicant's spouse, a child under 21, or a blind/disabled child resides there, or if the applicant's home equity is $752,000 or less.

Monthly Administration

The trustee's job is straightforward but ongoing:

1. Deposit all of the recipient's income into the trust bank account
2. Distribute the personal needs allowance to the recipient
3. Distribute any spousal income allowance
4. Pay approved medical expenses
5. Pay the remaining balance to the care facility
6. Keep detailed records of every transaction

Oregon's ODHS may audit the trust account. Clean, consistent monthly records prevent eligibility disruptions.

What Happens When the Recipient Dies

Upon the Medicaid recipient's death, the trustee must:

1. Pay any remaining care facility charges
2. Reimburse the State of Oregon for Medicaid benefits provided (the payback provision)
3. Distribute any remaining funds to the beneficiaries named in the trust (after the state payback)

In practice, the trust account rarely has significant funds remaining because income is distributed monthly to care providers. But the state payback provision is mandatory — it cannot be negotiated away.

The Bigger Picture: Oregon's Medicaid Estate Recovery

The income cap trust is just one piece of Oregon's Medicaid planning puzzle. After the recipient's death, ODHS also pursues estate recovery under ORS 416.350, targeting the "augmented estate" — including assets in revocable trusts, joint tenancies, and Transfer-on-Death Deeds.

Families who set up an income cap trust but don't address the broader estate recovery exposure may preserve Medicaid eligibility during the recipient's lifetime only to lose the family home or other assets after death.

Next Steps

The income cap trust requires careful coordination with other estate planning documents — power of attorney, advance directive, and asset titling. The Oregon Basic Estate Planning Kit includes a Medicaid recovery protection worksheet and asset inventory that maps which assets are exposed to Oregon's augmented estate recovery rules.

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