Purchasing an irrevocable funeral trust allows an applicant to pay in advance for an expensive item which they or their family will have to pay for eventually and by doing so they reduce their countable assets and can qualify for Medicaid. An irrevocable funeral trust, because it is a trust and irrevocable, is not counted as an asset by Medicaid. Nor does its purchase violate the 60-month asset transfer rule.
Step 1 - Begin and complete the process before applying for Medicaid.
Step 2 - Determine if and by how much the Medicaid applicant's resources are over the Medicaid asset limit in their state. Both Massachusetts and Rhode Island do not limit the value of funeral trusts. Any amount of money set aside must be used in its entirety for the final expenses of the individual.
Step 3 - Determine approximately how much the funeral will cost. One does not want to over-fund their funeral trust as proceeds remaining are subject to recovery by the state Medicaid office.
Step 4 - Make absolutely certain the funeral trust one is purchasing will not be considered a countable asset by Medicaid. Remember than Life Insurance Irrevocable Trusts are not taxable. Bank Trusts are always taxable, Ask your funeral director if the growth on the trust is taxable to the individual and will they receive a 1099.
Step 5 - In some states, a funeral director will be required to justify that goods and services are in line with typical funeral costs. Any funeral director can provide this service.
Step 6 - Maintain the Irrevocable Funeral Trust paperwork and apply for Medicaid.