Medicaid spend-down using funeral trustsBlog added by Michael ODell on August 12, 2014
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Michael ODell

Elkhorn, WI

Joined: November 03, 2010

Funeral trusts can be a wonderful way to help your senior client who is in a nursing home qualify for Medicaid sooner rather than later. Many seniors can enter a private nursing home, paying $8,000 per month. In most states, the senior has to spend down to $2,000 to apply for Medicaid.

In this case, Mary Jones enters a nursing home, and she has $70,000 in a money market account. All other assets are depleted. She is spending $8,000 per month. What options does she have, if any?

There are actually two options:

1. Do nothing and spend $8,000 per month until her $70,000 is completely gone, then apply for Medicaid. [Warning: Her family will probably have to come up with $10,000 for funeral expenses.]

2. Mary Jones could purchase a funeral trust for her funeral expenses. Then, since she has six children, she can fund six funeral trusts for her children to cover burial spaces. If you look in the federal guidelines, an institutionalized person can fund burial spaces for immediate family members. Most people don't know this with Medicaid planning.

Example: Mary buys the funeral trust for $10,000. *(Funeral trusts are Medicaid-exempt.) Mary buys funeral trusts for her six children at $10,000 each. This allows Mary to qualify for Medicaid immediately since her funds are spent. The funeral trusts on her children are Medicaid-exempt immediately, too. There is one factor that must be completed with immediate family members: A goods and service agreement from a funeral home must be completed. When you complete these documents,each funeral trust is Medicaid-exempt.

See also: Funeral trusts: Help clients plan and pay for their funerals while they're alive
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