Funeral Planning & Medicaid: Spend Down Rules
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| Making the decision to enter long-term care at a nursing facility is not an easy decision. You have all the heavy emotional toll on the family, as well as the very high cost of care. |
So, you and your family may be wondering..."How can we preserve as many assets as possible before our life savings are drained by nursing home costs?"
Fortunately, you can set aside or "spend down" some of your assets in very specific ways to that they are excluded-and thus sheltered-from the total assets considered to qualify for Medicaid. Prepaid funeral and burial space plans for yourself and your spouse are one way to protect and preserve some of your assets.
For this quarter's End of Life Chats articles, we are going to be explaining Funeral Planning & Medicaid from the Funeral Directors Life Insurance Company brochure-Funeral Planning & Medicaid.
Please be aware that Medicaid rules vary greatly from state and state & constantly change. Ohio uses their own rules to establish eligibility for Medicaid and are different from the Social Security Administration's Supplemental Security Income guideline.
Who Qualifies for Medicaid?
Eligibility tends to vary for those who qualify, but generally, seniors aged 65 or older, families living in poverty, pregnant women and disabled individuals can qualify depending on the assets held. The limit on how many assets and how much income a person is allowed are determined at the state level. If your assets are more than allowed, you will be required to either spend them down or move them into types of assets that are considered exempt before Medicaid coverage is approved. Depending on the transfer of assets, this may need to be done up to 5 years before your application is made to Medicaid, so planning ahead, if at all possible, is extremely helpful.
Non-Exempt Assets
Non-exempt assets are those that Medicaid considers as part of your accessible, countable assets when you apply for assistance. Non-exempt assets will be considered as available to you to use toward paying the cost of your care. This includes money and a variety of real and personal property which can be valued and turned into cash. These include (but are not limited to):
- Cash
- Checking and saving accounts
- CDs, stocks, bonds, or mutual funds
- Retirement accounts including IRAs, 401(k)s, 403(b)s
- Prepaid funeral contracts that are not irrevocable (can be canceled)
- Trusts (depending on how they are set up and your access to them)
- Property other than the primary residence
- Jewelry and valuable art or collections
- More than one vehicle, boats, RVs, etc.
- Cash surrender of life insurance with a face value of $1,500 or more
Exempt Assets
Exempt assets are assets that are protected, at least for the time-being, from being included in your non-exempt or countable assets. This is not an exhaustive list, but indicates the types of assets that are generally excluded. Rules will vary from state to state, but generally exempt assets include:
- Your principal residence (subject to equity limits in some states) if you, your spouse, or dependent child still live in the house, or if you intend to return to the house
- Personal property and effects, such as furnishings, belongings, appliances, and household goods. Some states place a cap on the allowable amount.
- Life insurance with a cash value up to $1,500. Term life insurance is generally excluded as an asset.
- A designated revocable account for burial funds with a value of up to $1,500 per spouse. Other burial funds and cash surrender value from life insurance will reduce this amount.
- One wedding and engagement ring
- An irrevocable contract for burial space items (with no limitation on the amount) for you and your immediate family members including your spouse, your children (including adoptive and stepchildren), their spouses, your siblings and their spouses, and your parents. Burial space items include caskets, urns, vaults, burial plots, cremation niches, headstones, opening and closing of the grave, and perpetual care. Burial space items are counted as separate from burial funds.
- A larger irrevocable prearranged funeral contract for you and your spouse that includes funeral service costs such as transportation of the body, embalming, cremation, flowers, clothing, services of the funeral director and staff, etc.
- One automobile (in some cases there is a limit on the market value) for spouse or child if used to visit the person who is ill
- A married couple can keep considerably more if one spouse is still well and does not need Medicaid (in most cases, half the assets up to a certain amount)
To get a copy of the FDLIC brochure Funeral Planning & Medicaid: Spend Down Rules, you can click here.
