Funeral planning is never on the top of anyone’s to-do list; however, many seniors are unaware that prepaying for their funeral arrangements is one of the expenses that Medicaid allows as part of spend-down. The Department of Human Services recognizes that Medicaid asset requirements ($2,000 in many states) don’t leave beneficiaries with the available funds to have their end-of-life wishes honored without becoming a burden to others. Setting up a prepaid funeral also has the added benefit of locking into current rates even if the price goes up.

There are detailed criteria that need to be met in order for this arrangement to be approved by Medicaid. It is important to have your prepaid funeral contract set up by a funeral director that is well-versed in these laws since eligibility criteria are constantly changing and are different from state to state. It’s worth noting that interest earned on your prepaid funeral account is not counted as an asset when establishing eligibility.

Most states require that the contract be non-returnable, or irrevocable. In this way, Medicaid is certain that the funds will only be used for their intended purpose. Some states also have rules on the kind of expenses that can be included. Other laws apply to the technical details of the contract, such as who is listed as the owner and beneficiary. This is set up in order to assure that any remaining funds left over after all funeral expenses are paid for will revert back to Medicaid.

It is important to mention that there are ways to have a life insurance policy set up to pay for the funeral. When you apply for Medicaid, you are required to surrender life insurance policies that exceed the asset limit for eligibility (certain policies may be exempt, read our article about life insurance policies and Medicaid here). However, in some circumstances, a policy can be signed over to a funeral home so that the death benefit (which is greater than the surrender value) will be paid out directly to the funeral home before the funeral. Any remaining funds will be returned to the state in which Medicaid was received.

Below is a breakdown of the criteria required for a Medicaid-approved prepaid funeral in the states of NY, NJ, PA, CT, MA and RI.

This information is not intended as legal advice and should be used as a handy reference.

New York and New Jersey:

In NJ and NY, Medicaid requires that all prepaid funeral contracts be irrevocable. A list of goods and services detailing the items pre-purchased must be submitted with the application. There is no maximum spending amount; however, there are criteria for allowable purchases, and the contract must list the respective state as the beneficiary.

Pennsylvania:

The laws involving prepaid funerals in PA are more detailed. The contract must be irrevocable; however, a list of goods and services is not needed. The maximum expense allowance changes each year and is different in each county (find the allowances for you county here). The state of PA must also be listed as the beneficiary in the contract.

Connecticut:

In CT as well, a prepaid funeral contract must be irrevocable. The maximum expense allowance is $10,000; however, additional funds can be put aside in a revocable burial trust account (for specific burial space expenses).

Rhode Island and Massachusetts:

In both RI and MA, a prepaid funeral contract must be irrevocable. There is no maximum expense allowance however, the contract total needs to match the list of goods and services. You can also open a burial account which is a checking account with an opening balance of $1,500. This is exempt from your asset limit and can be used towards burial expenses.

Senior Planning Services can guide you on setting up a prepaid funeral if it is in your best financial interest. We are here to assist you with all your questions during this overwhelming time of your life. SPS can handle all the details of your Medicaid application leaving you with peace of mind and your approval in hand.

Contact us at  (732) 961-8430 for a free consultation.