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How to Spend Down for Medicaid with Prepaid Funeral Expenses

Are Prepaid Funeral Arrangements Exempt Assets for purposes of Medicaid Planning?

Yes, funeral expenses are typically exempt assets for purposes of Long-Term Care Medicaid Spend Down, but only if done in a particularized way that complies with state regulation.

In Missouri, effective August 28, 2009, participants have four options for pre-need burial contracts. Most funeral directors are very well versed in such options, and can walk a family member or loved one through prepaid funeral contracts and ensure Medicaid eligibility.

Joint Accounts: If the contract entered into by the Medicaid applicant provides that all payments are to be deposited in a joint account under the joint names and joint control of the purchaser and seller, then the purchaser may request withdrawal of the burial funds held in the joint account at any time. When such request is made the seller must cooperate in making the joint withdrawal, but may keep a fee of up to 15% of the funds that were paid.

Trust Accounts with Funeral Home: If the contract provides that all payments are to be deposited into a trust account by the provider, the purchaser may request to withdraw the funds at any time. When such a request is made the seller may keep a fee of up to 15% of the funds that were paid.

Both types of accounts listed above can be revocable or irrevocable. If revocable, 85% of the value will be a countable resource and considered for the CSV exemption. If irrevocable, the face value or the amount of the policy paid in thus far, will not be a countable resource, but will be considered for the CSV exemption.

Personal Funeral Trust Account (PFT): Each participant can set up an individual PFT account to pay for his/her future burial expenses. These funds do not have to be connected to a specific funeral service provider, but are restricted to be used for burial or funeral expenses. Funds up to $9999.99 in an irrevocable PFT account are not a countable asset. Funds are restricted to be used only for the burial, funeral, preparation of the body, or other final disposition of the person whose funds were deposited into the account, which funds set aside ncludes burial plot, burial space, cremation, embalming, and other funeral costs related to the disposition of the body and other related final expenses.

Irrevocable prepaid funeral plans that are funded by a life insurance policy. When a life insurance policy is assigned to fund an irrevocable pre-need burial contract, the Medicaid rules do NOT consider the current cash value (CSV) an available resource. Eligibility requirements allow the full amount of death proceeds to be used on

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