Jon Alan Enochs

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Irrevocable Funeral Trusts and Medicaid Eligibility for Long-Term Care

If you are concerned that the cost of skilled nursing care or other long-term care will exhaust your savings and saddle your heirs with your funeral and burial expenses, then you may want to consider adding an Irrevocable Funeral Trust (IFT) to your estate plan. With an IFT, you can ensure that your funeral and burial costs will be met without jeopardizing valuable public assistance which can be essential to covering the costs of long-term care.

Irrevocable Funeral Trust Explained

The settlor of the trust creates the trust and funds it with sufficient assets to cover the costs of the funeral and burial expenses which the settlor expects his or her estate to incur. Transferring assets to an IFT is an eligible expense that can be used to spend down one’s assets toward acquiring Medicaid eligibility. Moreover, legal title to these assets passes from the settlor to the trust, so whatever funds are placed in the trust will avoid probate as well. When the settlor dies, the funds in the trust are there to cover funeral and burial expenses, even if the deceased’s estate has been depleted by the costs of long-term care.

In some states, the amount which can be placed into the trust is a fixed percentage over the average cost of the funeral in the state or in a particular county, regardless of how much the funeral actually costs. Any funds remaining devolve to the estate and can be distributed to heirs and beneficiaries in accordance with other terms of the estate plan.

Funds from the IFT can be used for:

  • Services provided by the funeral director and staff, such as embalming and preparation of the deceased for viewing or burial, and cremation if requested;
  • Use of the funeral home facilities and staff for the funeral or memorial service, including viewing and visitation periods;
  • All cemetery expenses, including burial plot and marker, interment in a vault or crypt, grave opening and closing, and the performance of a graveside service;
  • Cost of a casket or urn;
  • Transportation of the deceased from funeral home to grave site; and
  • Other miscellaneous expenses, such as flowers, reception, clothing for the deceased, death certificate, and honoraria for musicians and clergy performing at the service.

Do I Need an Irrevocable Funeral Trust?

Since the IFT is viewed as a valuable tool for obtaining or maintaining Medicaid eligibility, people with sufficient assets who are not likely to need Medicaid may consider investing the money in other ways to pay for their funeral, such as through life insurance or other investments with a higher rate of return. However, even people of relatively high net worth may find themselves in a worsened financial condition if they encounter a prolonged illness or hospitalization, and those who enter into long-term care may still have many years of quality living ahead of them. An IFT is another tool in the estate planner’s arsenal, and it is probably worth discussing with your attorney when creating or updating your estate plan, and particularly if entering long-term care and needing to spend down your assets to attain eligibility for Medicaid.

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