Medicaid Fact Sheet: Burial funds

Patricia Hafermann  Benefit Specialist

The following information is given as a guideline only. In order to determine Medicaid eligibility, an application must be filed with the local Department of Human Services in the area in which you live. If you have questions, please seek the advice of an experienced attorney to ensure that you have current information before making a choice about your plans and options. Burial Funds are funds specifically set aside and clearly designated for an individual’s or his/her spouse’s burial, cremation, or other burialrelated expenses. It is possible to set aside funds to pay for you or your spouse’s funeral and burial expenses and not have these funds counted when you apply for or receive Medicaid. The funds need to be clearly separated from your other household accounts. You may open an account at a financial institution and request that it be designated and labeled for this purpose. The limit on the amount of these burial fund accounts is $1,500. Because the account is revocable, you can have access to the funds if you need to. (*Any proceeds from a life insurance funded burial contract will be counted toward this limit in burial funds.)

Life Insurance: Whole life policy or policies with total face value of $1,500 or less are excluded assets regardless of cash surrender value. However, if the total face value of the life insurance policies exceeds $1,500, then the entire cash surrender value is included as a countable asset. Term life insurance policies are never countable assets because they do not have a cash value.

Irrevocable Burial Trusts: Medicaid recipients may choose to set aside $3,000 in an irrevocable burial trust to help pay for their funeral and burial expenses. If you are married, you can also set aside $3,000 for the funeral or burial expenses of your spouse. However, this amount will reduce dollar-fordollar the amount of excludable resources potentially available in a burial fund (up to $1,500). These funds must be in the form of an irrevocable burial trust, which means that you will not be able to have access to the funds later if you want them.

Beginning Feb. 1, 2012, any friends or family members of any individual receiving EBD Medicaid may contribute up to a total of $1,500 in excess of the current $3,000 limit without the individual losing eligibility for medical assistance.

Life Insurance Funded Burial Contracts: A life insurance-funded burial contract involves purchasing a life insurance policy and then (revocable or irrevocably) assigning the proceeds or ownership of the policy to a third party, usually a funeral provider. You make a funeral contract for goods and services prior to your death and assign a life insurance policy to a funeral home in payment for the funeral. Proceeds from a life insurance burial contract will reduce dollar-for-dollar the amount of excludable resources potentially available in a burial fund.

If you irrevocably transfer ownership of the policy to a funeral home or to an organization that will hold the policy in trust for your funeral, the cash value of the life insurance policy will not affect your eligibility for Medicaid. The value of the life insurance policy is not counted when determining your Medicaid eligibility because you no longer own it, but this also means that you cannot access those funds at a later time if you wish to do so, nor is it possible for your heirs to inherit any portion of the trust. The contract must be specific about the cost of each item that is to be provided as part of the funeral. You should seek the advice of an experienced attorney and/or your preferred funeral service provider for assistance with this option.

A revocable life insurance-funded burial contract will be counted as an asset (depending on the other types and amounts of burial assets and life insurance policies the applicant may own), and will likely affect your eligibility for Medicaid. If the face value of all life insurance policies is $1,500 or less, the cash value will be exempted under the life insurance exclusion. If the face value of all life insurance policies exceeds $1,500, the cash value of a revocable life insurance-funded burial contract may be exempted under the burial fund exclusion up to $1,500 depending on what other burial arrangements the person has.

Burial Space Items: Burial space items include, for example, caskets, headstones (including engraving), vaults, urns, burial plots and expenses for opening and closing the grave. Burial space items are not counted when they have been paid for or are included in a funeral contract that has been paid for either through cash or an insurance-funded burial trust (see above). When a funeral is being paid for through an installment contract, the value of burial space items is not exempt until the payments for those items has been completed.

Burial Insurance: Burial insurance is a contract whose terms preclude the use of the proceeds for anything other than payment of the insured’s burial expenses. Burial insurance is not available in/for sale in Wisconsin, but is available in other states. If you have a burial insurance policy from another state, it is an unavailable asset if the policy states that it is irrevocable and the policy states that all the proceeds must be used for burial expenses.

Getting Help: Ensuring that burial arrangements will not jeopardize Medicaid eligibility can be a complex process. The final determination rests with the Department of Human Services to which you apply. It is always wise to consider consulting with an attorney or other experienced professional before making any burial arrangements. You can contact the Wisconsin State Bar at 800-362-9082 (toll-free) or 608-257-4666 (Dane County) for a referral to an attorney who is familiar with Medicaid and burial trusts. When you reach the attorney’s office, ask for a consultation only and find out how much this will cost. Remember to bring with you any pertinent documents, such as statements of trusts; bank, retirement, and savings accounts; other financial assets such as stocks, IRAs, and 401Ks, all funeral contracts, life insurance policies and their cash values, and any other assets you may have.

If you have any additional questions, you may call Pat Hafermann, elderly benefits specialist with the Aging and Disability Resource Center, at (920) 467-4076.

Resource: Published with permission from the Legal Services Team at the Greater Wisconsin Agency on Aging Resources’ Elder Law & Advocacy Center

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