What is a Prepaid Funeral?
A prepaid funeral contract is a legal agreement that allows a person to pay now for funeral services that will be needed sometime in the future. This contract may include the funeral, burial,cremation, and other related services. A prepaid funeral contract may be revocable or irrevocable. Irrevocable means the contract cannot be canceled. Only an irrevocable funeral contract is an exempt asset for Medicaid purposes.
Does Medicaid Pay for Funerals?
No. Medicaid itself does not pay for funerals, but it does have rules that allow you to set aside money for your own funeral, burial, or cremation without having that money “count” as part of your assets when Medicaid determines your eligibility for long-term care coverage. Medicaid allows you to put money aside, in a separate account, to pay for your funeral and burial expenses. Qualified funding vehicles, such as funeral insurance policies and trust accounts are allowed, provided they are:
- Irrevocable (and non-refundable)
- Cannot ever be used for purposes other than funeral expenses.
When the proper funding vehicles are used to prepay a funeral, the value of the prearranged funeral contract and the funding vehicle are excluded as a countable resource in determining SSI & Medicaid eligibility.
How Do I Ensure I Get a “Proper” Funding Vehicle?
Most funeral homes will tell you that they have an appropriate funding system in place, but in actuality many funeral homes do not use appropriate funding system, which you only find out when you apply for Medicaid and are denied. Our firm has certain funeral homes that we work with that do use an appropriate funding system, and we therefore refer our clients to these funeral homes.
However, even if you use a funeral home that uses an appropriate funding system, the funeral director must still fill out the forms properly, and there is significant opportunity for error in completing the forms. Accordingly, for our clients, we ensure that our office reviews the completed forms before our client signs them.
How Much Money Can I Spend on Prepaid Funeral Arrangements and Still Have it Be Protected?
Technically there is no limit on the amount of money that can be spent on Medicaid-exempt prepaid funeral arrangements, but in reality, prepaid burial arrangements typically cost between $8,000 and $12,000 per person. Prepaid cremation arrangements typically cost between $3,000 and $5,000 per person.
Does Social Security Help Pay for Funerals?
The Social Security survivors benefits program pays a special one-time lump sum amount (called the “Death Benefit”) of $255 to help pay for funeral or burial costs for anyone who had qualified for Social Security benefits. The money is paid to the surviving spouse if he or she lived in the same home as the deceased person, or to the child of the deceased person if there is no surviving spouse. Read more about the Special Lump Sum Death Benefit.
What Are the Benefits of Pre-Paying for a Funeral Prior to Your Eligibility for Medicaid?
Medicaid regulations restrict an applicant from transferring, giving away or assigning assets in order to become eligible for benefits. Improperly transferred assets may result in ineligibility. Properly allocated funds, however, are excluded from resources when Medicaid eligibility is determined.Prepaying for a funeral has other benefits, including locking in prices, relieving the burden of family members during a time of emotional stress, and ensuring that your personal wishes are carried out according to your wishes.
How can I learn more about prepaying for a funeral arrangements and other Medicaid asset protection strategies?
Click here to view a short video and read more about Medicaid Asset Protection. Call 703-691-1888 to make an appointment for a free consultation with Evan H. Farr, CELA to talk more about your specific situation.