Has anyone dealt with funeral contracts in order to qualify for Medicaid?

Asked by

My 89 year old mom lives in her (and my) hometown in an elderly apartment receiving some state funded in home care. I live about 2 hrs away with my husband and 12 yr old daughter. (Another story if you are asking why she doesn't live with me). I speak frequently with her care manager and apt building mgr, and we all are feeling she needs more in home services. She can get more if she could qualify for Medicaid. The only asset that is preventing her from receiving Medicaid is the combined cash value of her life insurance policies. She paid into them for years so she could have a decent burial (not talking extravagant in any sense) without leaving a huge bill for her family.

Guess what, turns out that funeral estimates (scaled down version) are about $8,500. She has just under $4,000 in cash value (if she cashes in the policies). If she keeps the policies, the death benefits would actually cover the entire funeral cost, but disqualifies her for Medicaid. We are feeling now that she has to choose between getting services today vs having a funeral when the time comes. Are there any funeral providers out there that can provide what is needed to elderly people without having a one size fits all full retail priced funeral? I spoke to 4 different funeral directors and all but 1 said the family should step in and cover the rest! Well, I am the only family that has stepped in so far, so that means I need to come up with (and sign to it in writing) at least $4,500 (which I don't have), or Mom doesn't get the services she needs today through Medicaid. And that's just to cover the funeral, nevermind any other final expenses when the time comes! We will followup with the one funeral director that has mentioned trying to work with and possibly adding monthly pmts to what she has.

But, I am feeling like we're between a rock and a hard place that even preplanning may not resolve this helplessness. Has anyone had to deal with this and do you have any suggestions?

Answers 1 to 9 of 9
I would contact an eldercare attorney in your area. I had a client here in TN that we dealt with the same problem and the attorney and financial planner were able to work together and reduce the burial and qualify here for Medicaid.
Top Answer
For medicaid (NJ) I needed to do this for my Mom to qualify. I also had to prove that her Life insurance is cash only upon death (cannot be withdrawn prior). I went to funeral home and put Mom's funds in an irrevocable funeral trust. It was explained to me that the trust gains interest. I needed to spend down to qualify for medicaid, so I set it up with the max allowable in NJ $12,000.(now it's more with interest) In the medicaid agreement anything remaining in the trust balance, after all expenses paid for funeral cost will go to medicaid. Also anything remaining in Mom's accounts or life insurance would go to medicaid also. So if you can cash out now it is an asset you need to spend down anyway to qualify, and if you don't you may not qualify. I would call medicaid for your state and ask specific questions. I will find the web site link for the trust and post it. I hope this helps you.
This is very tricky business. My parents didn't have very much insurance but too much for Mediaid. I have canceled two of their policies, enough for their last wishes. I have received checks for them, today I'm meeting with their designated funeral home to discusss Pre need Trust and Pre need ins. I have a check for $700.00 and a check for &1,200.00 I only have the right intentions but less than $2,000.00 vs their medicad benefits has been very concerned about unintentionally making the wrong move.
Also, I've asked several banks about Pay On Death Accounts, they looked at me like I had 3 heads...they didn't know what I was speaking of even when described.
I could use some help with this, I have one month remaining on the value of the checks.
I was just faced with the same thing. My fathers life insurance policy was keeping him from being approved for Medi-Cal. So I had to spend down the amount. The value was $4000. I took out the full amount and purchased reasonable funeral services. The my father was approved for Medi-Cal. The one thing I want to point out. You are comparing funeral prices for today. When that time comes it will have increased. By purchasing today you lock in todays prices. There are installment plans for anything over above. You decide when you sit down with a cemetary planner. The cemetary I was dealing with had a partnership with a company called Forethought. All the arrangements are put in place, the prices locked in and an installment plan for the remainder. Look them up on the internet maybe they have some ideas on their site. Its so much better to do this when its not really happening. When that day comes its one phone call.
Pretty much the same for me. I had to cash out 2 of my parents ins policys to spend on pre-need funeral cost. The cost is locked in to todays cost. Case in point; I had been reasearching and debating what to do and how to proceed since Dec of last yr. The time came where I had to cash in the checks, the prices at the funeral home had increased but since they had been working with me all along, the honored the Dec price and locked me in.
I'm so releived to have that burden off of my back. Theres just so much to do, imgaine having to do this all at the time of need.
The key is NCV - no cash value on whatever you do whether it's a funeral policy, burial policy, life insurance.

It's my experience that the burial guys understand what needs to be done when it comes to asset reduction. But the insurance guys don't .

Life insurance is sticky - whole policies are not a good idea because they have a cash value. The elder will have to cash it in before Medicaid will pay even if that is their only asset. It's really sad but that's the way the regulations are written.

Now you can change the ownership of the whole life policy but that needs to be done by an attorney and it's sticky to do. If the policy is large you might want to look into doing this.

Term life is different - some states require that they be the beneficiary of it, other states ignore term life policies. Each state Medicaid is different

My mom has 2 term policies:
1 is for funeral expenses and is between her and the funeral home with NCV
the other is a traditional POD term life policy with a value that is under the state
(TX) insurance ceiling for value ($ 1,500). Both of these passed her Medicaid review.But my aunt had 2 whole life policies that were going to be an issue for estate tax, so 1 got cashed out and used for spend-down and the other got an ownership transfer. Not only was it good for her estate tax but also got her able for Medicaid. Again these are sticky and a good attorney is needed to do it right.

As sumlerc said it's so good to do all this in advance of need.
Something I forgot to include, my experience has been that when it comes to insurance documents, it is really hard for the Medicaid caseworker to evaluate them. This is especially true if the policy is old - from the 1950-1970's - as those tend to be a whole binder of pages with tiny print. The caseworker has zero time to look at a document to determine if it's good for Medicaid so if it's not simple it will get a red flag. You don't want that.

If the policy could have any cash value you really want to get it either transferred ownership or cashed-in before the Medicaid application.

Newer policies state on the front page if it is a TERM or WHOLE-LIFE, so those are much easier for the caseworker to figure out.

My mom bought her term policy in the 50's when $ 1,000 face value was actually real money. Now she has outlived her term policy, so she gets an annual dividend - last year's was under $ 50.00 and it get's put back into the policy. But it counts as income.......

Her caseworker just couldn't understand what was going on, couldn't figure out which box to check (term or whole life), couldn't understand why the original face value was different from the EOY statement and it stalled her application. The fact that we are talking about something that is less than $ 50 a year didn't matter, that something that was about $ 4.00 in income per month which was still below the $ 2,020 monthly asset maximum didn't matter, the fact that the money was payable only after death didn't matter....it was all about which box to check off.

Did a notarized statement to clear that hurdle. Because her policy was so small, I didn't bother to transfer ownership as it never occurred to me that there would ever be an issue over such a low value policy. Live and learn.

I will say this, it is really hard for anyone to find out about insurance policies as they do not come on "radar" until after death. So transferring ownership of whole life policies while the elder is alive is something to consider. Now you do have to assume payments but if doing that qualifies them for Medicaid it's a good thing. People have been transferring life insurance for years to avoid estate taxes.

My mom has 28.000 in bank the caseworker said to spend down her money to get her into a nursing home. Legally what can you spend it on? Funeral expenses and her stone for her grave we will do. Should you share the money with kids and granchil
dren?
PAN - Please, please do NOT gift or give any funds to kids or grandkids as doing that will incur a transfer penalty for the gifting.All the $ should and must be spent on her and her needs and her care.

Medicaid requires the caseworker to go through the applicant's financials - which means you have to provide bank statements, etc for months or years. My mom's review was 3 years and 6 months of all banking and other financials. So any gifting would have been seen and she would have a transfer penalty. The transfer penalty is super sticky to deal with in that although mom would qualify for Medicaid (because she has spent down her $); she will be ineligible for Medicaid to pay for the NH till the transfer penalty period is done. Someone will have to private pay for that period of time and it's not likley you can ask or get the $ back from the grandkids to do that......

What we did for my mom as far as spend down was:
dental work - this is expensive and not covered under Medicaid. For my mom, this was easily 10K spent just for dental
funeral and burial - these need to be NCV policies - NO CASH VALUE. The funeral home can do these and seem to understand how to do this to be Medicaid acceptable. Most states have limits on these policies, so you need to ask about that. Full coverage for both funeral and burial for a traditional one seem to run about 8K.
new & extra pairs of glasses - this too has iffy coverage under Medicaid. Stuff gets lost all the time in the NH, so really 4 pairs of glasses can make sense. I'd let mom have 1 pair and keep the others at your home
hearing aids - these are expensive and the better and more comfortable ones are not covered under Medicaid, so if they need hearing aids, that's an easy way to spend some $$
walker - the simple U shaped walker are the ones paid for by Medicaid. If mom is still walking, you might want to spend her $ on a nice and more modern walker. I got my mom a super duper Hugo walker with a seat and storage area. they aren't expensive but nicer and more comfortable than the Medicaid metal walkers.
extra clothes & shoes - If I had only known how the NH laundry destroys and wears out clothes, I would have bought lots & lots of extra clothing for my mom and just stored it till she needed items replaced. NH laundry is super hot and needs to be to disinfected, so clothing shrinks and elastic gives out. Same on shoes - they go missing all the time.
assets - they are allowed to have about 2K in assets in their bank account. Find out what the asset limit is in your state and she can have that. I keep about $ 1,800.00 in my mom's checking account - and the account is done POD. POD means pay on death, so the account doesn't go to probate or get frozen upon her death. It goes to me as I am the POD recipient - most have this done to pay for whatever death costs come up that are not covered by the prepaid funeral policy.
- SS clawback. Another thing, in the $ 1,800 that my mom keeps in her bank account, I make sure that there is always enough to pay out the amount that she gets from social security monthly. My mom's SS check gets direct deposited into this account (I pay her NH by check from this account). SS will do a clawback from their account for the last month paid, so you want to make sure there is enough $ to cover that full amount.
- term life policy. Most states allow for them to have a very, very small term life policy. You need to ask the caseworker if your state does and what the limit is.
It has to be a term policy with NO CASH VALUE.

Again, please do not gift any $$. WHen they apply for Medicaid, they sign off for the state to have an all access pass to all their financial information. So if they own or co-own any real property (land, house, cars), that information will be in the state system and will show up as an asset. You have to provide for front & back copies of all their banking for months or even years. The state can ask for documentation for what checks were spent on or why. Good luck and get organized!

Share your answer

Please enter your Answer

Ask a Question

Reach thousands of elder care experts and family caregivers
Get answers in 10 minutes or less
Receive personalized caregiving advice and support