When the sun is about to set and the death of a loved one is imminent, proper planning is crucial. In most instances, it is a good idea to begin planning well in advance so that all expenses at the end will be covered and will not fall on the survivors. With our many years of experience as Medicaid planning consultants, we at Senior Planning Services would like to educate our readers on the common pitfalls to avoid in managing one’s assets for Medicaid eligibility and funeral and burial plot expenses.
The info provided in this article is based on a telephone interview with our long-time friend Mr. Scott Ferguson, CLTC, (Certified in Long Term Care) specializing in final expense matters in NJ and PA. He was very generous with his time and offered valuable information that we’d like to share below.
‘Excludable assets’. Medicaid allows for a nursing home resident to keep a minimal amount of assets while qualifying for Medicaid. This amount ranges between $1,500 and $15,000, depending on the state. In addition to these assets, certain assets are considered ‘excludable’ assets for Medicaid eligibility and do not count toward the limit.
Funeral exemptions: Every state has its own guidelines as far as the amount that may be set aside for the funeral, burial plot and other burial expenses, as well as the criteria one must meet for each one. These figures vary from state to state and sometimes even from county to county. Let us take a look at NJ and PA and use these as an example on the diverse nature of these rules and regulations.
Irrevocable trust funds. Medicaid allows funds to be set aside for certain expenses in an irrevocable trust that will not count toward the income limit. These trusts cannot be liquidated and used for any purpose other than the purpose for which they have been set up. Funeral and burial expenses are one example of this exemption and are not considered ‘countable assets’ when set up irrevocably. One can therefore set aside large sums specifically for these expenses, however, the guidelines vary from state to state.
- In Pennsylvania: If one sets up an irrevocable trust fund for funeral and burial plot expenses, depending on what part of the state they’re in, up to $18,750 can be considered an “Allowable Expenditure”. Some counties will allow only as little as $7,400, though. Part of the reason for this is that Medicaid is a joint federal and state fund, with each state (and in the larger states, each individual county) instituting regulations for their own demographic. Another reason would be the difference in price of the burial plot and services in a large city vs. a small town. Irrevocably assigning these funds can cover all funeral and burial expenses. These contracts must specify the “Goods and Services” to be provided at the time of death and the corresponding cost of each item. The actual burial plot can be purchased separately.
- In New Jersey: There is no cap on the amount one may set aside in the irrevocable fund for the funeral expenses. The cost of a traditional funeral in NJ will run anywhere between $9,000 and $13,000. Generally speaking, though, insurance companies will question a payout exceeding $15,000, so it is safe to stay within this number. The cost of the burial plot itself may vary greatly as well, depending on the location and other factors like religious affiliation. The cost of the headstone may range from about $2,000 for a small stone to $5,000 for a large stone. A flat marker stone runs from $200-$2,000.
Community spouse: If the Medicaid recipient has a spouse in the community, the total assets will be divided between the institutionalized spouse and the community spouse. So for example, if the total assets are $100,000 at the time of separation (the date of admission to the nursing home), $50,000 will be kept by the community spouse and the other $50,000 needs to be spent down to the allotted threshold varying state to state. It is important to spend down one’s assets for funeral and burial expenses AFTER the date of separation so the entire expense comes out of the nursing home residents half. This increases the portion of the community spouse and helps the spend-down process of the Medicaid spouse.
Conclusion: This is a short synopsis of some of the common end-of-life costs that one needs to be aware of and plan accordingly. Many of the resource limit and eligibility guidelines are subject to frequent change so intimate, up-to-date knowledge is required for proper planning. Remember, the more one plans in advance, the less heartache for all parties involved.
Senior Planning Services offers Medicaid planning for seniors and their families in NY, NJ, CT and PA. If you have any further questions, please don’t hesitate to reach out to us at: 1(855)S.Planning
My thanks to Senior Planning Services for providing this information. Next week I’ll be writing about Organ Donation and Full-Body Donation. Elizabeth