When we discuss countable and non-countable assets as it pertains to Medicaid qualification for nursing home care, funeral and burial contracts are also taken into consideration.
Let’s recap from our prior post on countable assets:
Bank Accounts
- Up to $1500 may be placed in a bank account, revocable account, trust, or other arrangement.
- If designated as a burial fund, it will be excluded from the applicant’s countable assets.
- This exclusion must be reduced by the amount of any irrevocable burial funds as described in the next section, and the face value of any life insurance policy whose cash value is excluded.
- For a married couple, the $1500 exclusion applies to each spouse.
Pre-Paid Funeral/Burial
Under federal law, you are permitted to set aside money in an irrevocable pre-paid burial and funeral account established with a funeral home or in an irrevocable trust earmarked only for payment of your funeral and burial expenses (or that of your spouse, if any).
- Such amount of money will be excluded from your countable assets when you apply for Medicaid.
- While federal law does not specify a limit to this amount, many states do impose limits to prevent people from taking advantage of this “loophole.”
- In Pennsylvania, for example, the limit depends on the county you live in, and the amounts vary from around $10,000 to $19,000.
With a funeral home:
- The money must be placed in an escrow account or trust account by the funeral home.
- Some states require that the contract specifically state that any funds not ultimately used for funeral and burial expenses of the applicant (or spouse, if any) must be paid to the state if the applicant was on Medicaid.
Important: Do not put more into such an account than you actually need for these expenses.
Having any sort of pre-arranged “deal” with the funeral home to pay the excess to family is illegal.
Burial Insurance
- Any amount of life insurance earmarked for burial expenses of the applicant or spouse (“burial insurance”), where the proceeds can only be used for burial expenses, is an excluded asset.
- The face value of such a policy is not counted as part of the $1500 life insurance exemption.
Burial Spaces
- Unlike the above categories, burial spaces are entirely exempt.
Frequently Asked Questions
What funeral and burial assets are excluded from Medicaid eligibility?
Funeral and burial assets that are excluded include up to $1,500 in a designated burial fund, irrevocable pre-paid burial and funeral contracts, burial insurance policies earmarked solely for funeral costs, and burial spaces. These exclusions help applicants reduce their countable assets when applying for Medicaid.
Can I set aside more than $1,500 for burial expenses?
Yes. While $1,500 is the maximum for a general burial fund, you may set aside additional funds in an irrevocable pre-paid funeral contract or trust. There’s no federal cap on these accounts, but individual states like Pennsylvania may impose limits ranging from about $10,000 to $19,000 depending on the county.
Does the $1,500 burial fund exclusion apply to both spouses?
Yes. In the case of a married couple, each spouse may claim a $1,500 exclusion for burial funds separately, allowing for a combined total of $3,000 to be excluded from Medicaid countable assets under this category.
What happens if I overfund a pre-paid funeral account?
Overfunding a funeral account can disqualify you from Medicaid eligibility. Any amount not used for burial expenses must be reimbursed to the state if the applicant received Medicaid. Setting up any arrangement to redirect excess funds to family members is considered illegal.
Are burial spaces always exempt from Medicaid asset limits?
Yes. Burial spaces, such as plots, vaults, and caskets, are fully exempt from being counted as assets under Medicaid rules, regardless of their value or who purchased them.