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If you are approaching the golden age, you may want to consider the cost of funeral arrangements for yourself that can also include your spouse, children, and siblings. By planning now, you can save yourself considerable sums of money and relieve your family of the financial– and some of emotional –stress involved in your funeral. One way to do this is to purchase a prepaid funeral contract that locks in the price for the time when you no longer walk on this earth. It can also be a tool for validly reducing your assets in order to qualify for Medicaid.
If you are low income, you may qualify for Medicaid or be close to eligibility. Medicaid is a health insurance program jointly administered by the state and federal government. In order to qualify, your countable assets may not exceed $2000.00. If your countable or non-exempt assets put you above the Medicaid asset threshold, you could use these assets to purchase a prepaid funeral contract while legitimately paying down your assets so as to qualify for Medicaid.
Countable or Non-Exempt Assets
As indicated, countable (non-exempt) assets are considered in determining your Medicaid eligibility. These include:
- Funds in your checking or savings accounts
- Retirement accounts (IRA, 401(k), etc.)
- Real property other than your principal residence
- Life insurance policy with cash surrender value
- More than one vehicle, boat, RV
- Revocable prepaid funeral contracts
- Certain trusts depending on their structure
Any of these items of property are counted towards your Medicaid eligibility. As you may have noticed from this list, a revocable pre-paid funeral contract is considered non-exempt if its value exceeds $1,500.00, which is relatively paltry. Revocable means that you may cancel the contract at any time.
Exempt Assets (Not Counted for Medicaid Eligibility)
However, there are considerable assets that you may possess that are not countable or considered exempt, which includes an irrevocable prepaid funeral plan. These assets include:
- Principal residence up to $840,000.00 in equity if you or your spouse or dependent child lives there
- Personal property
- A savings account specifically designated as a “Burial Account” with assets up to $1,500.00 per spouse
- An irrevocable burial plot that may include your spouse and children, parents, siblings and their spouses
- An irrevocable funeral insurance trust for you and your spouse that includes funeral home services, embalming, cremation, flowers, police escort, casket, etc.
- One vehicle
There are complex rules that you do have to consider if you wish to qualify for Medicaid, especially how you structure your assets. Contact an elder law attorney who can counsel you and ensure you do not experience delays or encounter other obstacles.
Paying Down Assets
Paying down assets refers to converting or even eliminating or selling assets so as to comply with the Medicaid eligibility standards. There is a 5-year look-back rule, however, so that if you plan on selling off vehicles, boats, or real property, it must be done more than 5-years before you become eligible. Otherwise, this will delay your receipt of Medicaid benefits.
One method of paying down assets is by purchasing the prepaid irrevocable funeral insurance trust. Since funeral expenses can be considerable, you could purchase a plan that substantially reduces your countable assets and that provides for your funeral as well as that of your spouse, children, siblings, and their spouses.
Any pre-paid funeral insurance trust should first be reviewed by your estate planning lawyer in conjunction with a licensed funeral director. You will want to be certain that all items and services you want are included in the plan and that there are no hidden expenses. Further, discuss with your lawyer about how you can pay down assets or transfer assets that complies with Medicaid rules.
Contact Estate Planning Lawyer Patricia Bloom-McDonald
Everyone should be somewhat familiar with elder law as they approach 65, especially as these laws affect eligibility for Medicaid and Social Security, or any other law affecting the elderly. Patricia Bloom-McDonald is an estate planning lawyer who has been working with the elderly and their families for decades.
Contact Attorney Bloom-McDonald if you have any questions regarding elder law or if you want an estate planning lawyer to review your estate plan or funeral plan.