Prepaying For Your Funeral and Medicaid "Spend down"

Prepaying For Your Funeral and Medicaid “Spend down”

My last several articles have talked about preplanning your funeral and why you would want to do that as a gift to your family.  The more you can plan things ahead of time, the easier it will be for your family at the time of your death.  But what happens if you have not taken the time to make an intentional plan and then you or your spouse ends up having to go to a nursing home? 

This can be an overwhelming and stressful time for you and your family.  All of a sudden, you are forced to make some important financial decisions that you had never even considered.  How are you going to pay for the long term nursing home care?  Have you purchased long-term care insurance?  Will you qualify for Medicaid to pay for the nursing home?  Because of medical expenses or nursing home care, many families find that the last six months of a person’s life are often the most expensive period of their lives.  Any nest egg that you have managed to save can be gone in a hurry if you have to pay for long term nursing home care.

When you have to put your loved one in the nursing home, you may find yourself going to the Department of Human Services (DHS) to apply for Medicaid to pay for their long term nursing home care. They have forms called “Assets Declaration” and “Initial Asset Assessment” (IAA) that will need to be filled out, listing all of your countable assets.  Some people choose to have an attorney that specializes in elder law help them fill out these forms. 

There are strict guidelines that need to be met before you will qualify for Medicaid.  If you are single person, you will need to “spend down” your countable assets to $2000.00.  If you have a spouse who is going to live independently, you will be allowed to keep some of your income and assets to support that spouse. Medicaid assumes that half of your “Initial Asset Assessment” (IAA) belongs to your spouse and that amount is called the “Protected Spouse Amount”. This amount changes every year and the maximum protected amount is currently $119,220. The spouse in the nursing home will need to “spend down” their half to $2000, but the assets of the spouse still living at home will be protected up to the “Protected Spouse Amount.”  You can see that this may be a little confusing.  That is why so many people will seek help from an Elder Law Attorney or a Medicaid Specialist when applying for Medicaid for nursing home care.

Fortunately, there is a way to protect some of your assets, so that everything is not gone by the time you die.  One thing that you can do is prepay the funeral expenses for you and your spouse and make those policies Irrevocable.  Then those funds are not counted as an asset. If you purchase a prepaid funeral policy from the funeral home, the State of Michigan places a limit on the amount that can be funded. This amount increases every year and is currently $10,540.  In addition to that amount, you can add another $2000 that would need to be approved and certified Irrevocable by DHS and finally, an unlimited amount can be placed into a “Burial Space Exclusion”.  “Burial Space Exclusion” items would be anything directly connected to the burial, such as the casket, vault, headstones, markers, grave opening and closing, etc. When you meet with the funeral home, they can give you more guidance on the best way to handle your situation.  There are also other items that some of your “spend down” money can be used for.  You will need to check with your attorney or a Medicaid Specialist to be sure that you are doing things correctly.

If you have any questions regarding prepaying your funerals to help with the Medicaid “spend down”, give me a call at the Anderson-Marry Funeral Home at (517) 265-3312, and I will be glad to schedule a time to meet with you.

Sharon Rickaby, CPC

Certified Preplanning Consultant

Anderson-Marry Funeral Home, Adrian

Anderson-Rudd Funeral Home, Blissfield