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I just answered willie's question. And Worried's comment made me think.

Medicaid allows you to take assets and prepay a funeral during the application period which is irrevokable. So, I don't see the problem in cashing in the Funeral plan ur parents have now and taking the proceeds and using it on an irrevokable trust funeral plan. I was able to set up a prepaid funeral with the Funeral director during the application period. It was how I spent down Moms money.

I really think u need to sit down with a caseworker and run this by them. I cashed in an insurance policy and used that money for Moms funeral. I had to give Medicaid a copy. I have found that no two caseworkers give you ALL the info.
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Ask Medicaid, the whole idea that you can prepay for a funeral is correct, revocable means that someone can change that asset and use it for something besides the funeral. But your social worker should be able to tell you if you can make it irrevocable or if you need to cash it in.
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It was my understanding from reading on the forum that prepaying for a funeral is an acceptable spend down before applying for medicaid

https://www.agingcare.com/articles/what-you-need-to-know-about-advance-funeral-planning-medicaid-159766.htm

So why couldn't the money in the trust be used that way?
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JoAnn29 Jul 2, 2019
When u set up a funeral prepay, its irrevocable. So Medicaid cannot touch it. I did this because Medicaid OKd it. I was within the lookback period.
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Probably not at this point. You may have to cash it in for their care. Really though, it stipulates that its for their funerals right? I might contest it. This question should be aimed at Medicaid.
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worriedinCali Jul 2, 2019
There’s nothing to contest because it’s revocable and therefore an asset. Doesn’t matter that it’s for funeral plans. It needs to be irrevocable in order for Medicaid to not count it as an asset. And unfortunately OP you cannot make the funeral trust irrevocable in order to qualify for Medicaid, I mean you can, but your parents will have to self-pay for a period of time before Medicaid kicks in. You can’t take assets and place them in an irrevocable trust during the lookback period and then qualify for Medicaid, you will be penalized and have to self-pay for awhile.
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