Prepaid Funeral Expense Trusts - Protecting Assets from Medicaid Spenddown

Do you want to work your entire life, only to see your retirement funds devastated by healthcare costs? There is no question that the cost of healthcare is going up, along with the cost of everything else.  With thousands of Baby Boomers aging into retirement every day for the next 20 years, the social support structure in place to supplement medical care will feel an even greater strain than it already does.  It is more important than ever to plan for your potential future healthcare costs, and, most importantly, safeguard your hard-earned assets against Medicaid spend down.

1. What is Medicaid?- Medicaid is a state and federally funded health insurance program intended for those people with low income and a dire need for medical care.  The program provides funds for hospital and doctor visits, prescriptions, nursing home care as well as other care that may not be covered by Medicare or Medicare supplement policies.  The cost of Medicaid is paid directly to health care providers
2. Who Qualifies for Medicaid?- Eligibility requirements vary slightly for the groups that qualify: this includes those ages 65 or older, Families in Poverty, Pregnant Women and the Disabled.  Each state has its' own limit on how much income and assets a person can have. For adults in NJ income limits are between 133% and 185% of the Federal Poverty Level.  If you are taking SSI Income: the limit is $2,000 for an individual, $3,000 for couples.  If your assets are more than allowed, you will be required to either spend them down or move some assets into types of assets that are considered exempt.                                                                                                                                           Countable assets, or those vulnerable to Medicaid spend down, are, not limited to, property other than your principal residence, stocks, bonds, CDs, annuities, and cash surrender of life insurance with a face value of $1,500 or more.                                                                                                       Excludable resources, or those assets safe from Medicaid spend down, include, but are not limited to, your principal residence, life insurance cash value up to  $1,500, burial spaces, burial funds not exceeding $1,500*, one automobile (market value under $4,500) and one wedding and engagement ring.                                                                                                                                    *Important* Moving or transferring assets incorrectly can result in a penalty period or total ineligibility for Medicaid.  States can look back at transfers of up to 60 months (5 years) before you apply for coverage. Always speak to a qualified advisor before spending down or transferring assets to qualify for Medicaid.*

One Simple Way To Protect Your Assets - Prepay Your Funeral Expenses

If prepared properly, prepaying your funeral can be a lawful way to reduce your assets and help you become eligible for health care assistance at the time you need it.  This is accomplished by purchasing a life insurance policy that has been designed to cover final expenses.  Ownership of the policy is then irrevocably assigned to a trust that will pay out at time of passing, or possibly directly to a funeral service provider of your choosing.

Taking this step both alleviates the burden of final expenses on your heirs at the time of your passing, and ensures that there will be sufficient funds to provide the kind of services you would like for yourself, in remembrance.

There are many benefits to structuring your final expense plan this way.  By irrevocably assigning the policy to the trust, the added benefits include:

1. Eligibility - the Trust will exclude the policy as an asset to qualify for Medicaid and Supplemental Social Security Income (SSI).
2. Easily paid to heirs - the policy is paid to the Trust, which pays for your final expenses; any excess funds go to your estate.
3. Protects funds - funds for final expenses are not vulnerable to creditors or collections, such as nursing homes, doctors, hospitals, etc.
4. Peace of mind - death proceeds avoid probate costs and delays when used for final expenses.
5. Growth - the benefit will INCREASE over time with simple growth.
6. Savings- these benefits are received income tax-free, ref. IRS Code Sec 101(a).

If you would like to find out more information about Funeral Expense Trusts and Funeral Estate Trusts to protect your hard-earned money in the future, call Family Focus Financial Today! 


Why not knock out three birds with one stone and take care of your Final Expenses, protect some of your assets, and make your time of passing a time to grieve and remember your life, without a financial burden on your loved ones.  What are you waiting for?


Ashley