Search for Elder Law Attorneys

Prepaid Funeral Arrangements - An Important Part of Medicaid Planning

Medicaid is a needs based program. As long as an individual has money available to him, he is expected to use that money to pay for his medical and/or nursing home care. Medicaid applicants must spend down their available assets until they reach a qualifying level ($1,500 for a single person/roughly $21,000 - $92,000 for a married couple).

Certain assets are considered exempt under the Medicaid rules. These include:
household contents
one automobile for the spouse at home
life insurance with a face value of $1,500 or less
burial spaces for immediate family
property used in business or trade
the home, if a spouse or other qualified dependent resides there
life estates that cannot be transferred or sold
irrevocable burial contracts

THE IMPORTANCE OF A PREPAID BURIAL

Prepaying a burial may not be a timely investment in many cases since it returns no interest or dividends, but purchasing an irrevocable burial plan is an important part of the Medicaid spend down. Although its not a pleasant thing to think about, every one of us will eventually die. If all our funds are spent on nursing home care or other items, it will be up to family and friends to pay for our final arrangements.

WHAT TO BUY

Make sure the burial plan you purchase includes everything that may be needed. The more you prepay with money that will otherwise need to go to nursing home care, the less your loved ones will need to provide at the end.

Consider purchasing or setting aside funds for: funeral arrangements, casket, grave liners, opening & closing of graves, flowers, gratuities, limousines, police escort, obituaries, hair styling, makeup, clothing, burial plots, crypts, headstones, including placement and engraving, and expenses of the wake.

TIME IT RIGHT

The community spouse of a nursing home Medicaid applicant is permitted to keep one half of their countable assets (with a minimum and a maximum) as of the date of separation (the date the institutionalized spouse is no longer living in the home). The institutionalized spouse must then spend down his half to $1,500. The more assets the couple has on the date of separation, the more the community spouse will get to keep (up to the maximum). Therefore, it is advisable to purchase the prepaid burial arrangements for both spouses after the date of separation out of the institutionalized spouse's exempt assets, but before the institutionalized spouse is spent down to $1,500. Timing is not as important for single individuals.

PAY IN FULL

If you are spending down for Medicaid qualification, do not purchase on time or on credit. To qualify for Medicaid, the money must be completely out of the applicant's hands. Once on Medicaid, the applicant is only permitted to keep $40 per month ($90 for qualified veterans or their widows). This monthly allowance is for personal needs like haircuts and hand cream. If a Medicaid applicant has been making timed payments on a burial plan, now is the time to pay it off completely, before the money is exhausted on nursing home care.

BE SURE IT'S IRREVOCABLE

Medicaid requires prepaid funeral arrangements to be irrevocable. In other words, the family can't later opt for lesser services and get a cash refund. If the funeral is over paid, the refund goes to the state. The Medicaid intake worker will require that the burial contract actually have the word irrevocable written on it.

ASSIGNING LIFE INSURANCE POLICIES

Many people purchase life insurance to pay for their funerals. A whole life policy will have a cash value that is usually considered available for Medicaid purposes because the owner of the policy could cash it in and spend the money. The cash value of the policy is always less than the death value.

Some people choose to assign the insurance policy to the funeral home rather than cashing it in and paying for the funeral outright. If you do this, be sure:

the face value of the policy is enough to cover the cost of the arrangements.

the face value is not in excess of the cost of the arrangements as the overage would go to the state.

assign the ownership of the policy to the funeral home rather than just change the beneficiary. Remember, if the applicant still owns the policy, the cash value may be in excess of the Medicaid qualifying amount.

Paperwork to assign ownership must be delivered to the insurance company. The Medicaid intake worker will want to see verification from the company that the funeral home now owns the policy.

The purchase of a prepaid burial is just part of a complete long term care plan. A qualified elder law attorney can help design and implement a plan for clients to qualify for Medicaid while preserving as many assets as possible under the law.


Prepared By:
Marta J. Williger
Attorney at Law
37 South Main Street
P.O. Box 368
Munroe Falls, Ohio 44262
(330) 686-7777