Though it may be an uncomfortable conversation, it’s a good idea to talk to your family about final arrangements. Understanding your personal choices makes it easier for family members to carry out your wishes, including your preference for a burial or cremation.
Medicare Benefits Solutions
Sep 18, 2021
In addition to cultural, religious and time reasons for choosing cremation, cost is a big factor. The American Council on Aging (ACOA) advises that the average cost of a funeral in the U.S. in 2020 is about $9,000. This is more than double the cost of a typical cremation, which can range anywhere between $800 and $4,000, according to the Cremation Institute.
Medicaid is a program funded jointly by the federal and state governments to help defray health care costs for people with limited funds and resources. In order to qualify for Medicaid, your financial assets and resources cannot exceed a certain level.
The Medicaid program does not provide benefits to cover the cost of funeral, burial, cremation or memorial services. However, the program helps in a different way. Money set aside for funeral and burial expenses are not counted toward your asset limitation.
The states establish rules on how these funds need to be reserved and separated from non-burial expenses. If you follow these rules, Medicare will exclude these funds from the calculation of your total assets.
In all but two states (Michigan and New York), funds you put into an irrevocable funeral trust (IFT) would not count as an asset for purposes of determining your eligibility for Medicaid. Irrevocable means the money put in the trust is not refundable. The trust cannot be changed or canceled.
For purposes of Medicare eligibility, the funds no longer belong to you as they are earmarked for funeral, burial, memorial or other final expenses. Some states require a Goods and Services Form where these expenses would be itemized. Most states insist that the state be named as a residual beneficiary of the IFT. In that case, the state is entitled to any money left over after the itemized expenses are paid.
The advantage of an IFT versus a prepaid funeral contract is that the IFT does not restrict you to using a particular funeral home. However, some people prefer to make prepaid arrangements with a funeral home and lock in the price. This prepaid contract is also known as a pre-need contract.
Michigan and New York, the only states that do not lower countable assets based on an IFT, do allow for an irrevocable pre-need contract. A cremation contract is one type of a pre-need contract.
Some states offer special programs to cover burial or cremation costs if you are indigent and your estate cannot cover these expenses. To find out if this is applicable in your state, search the internet for [your state name] Medicaid funeral expenses.
For example, in Connecticut, the Department of Social Services will pay up to $1,200, reduced by funds available from certain sources, such as an IFT or life insurance policy. In Colorado, the Department of Human Services helps low-income residents by paying up to $1,500 to the cremation or burial service provider.
Your primary resource for Medicaid is medicaid.gov. If you are dually eligible and need to check Medicare coverage as well, medicare.gov is where you can find extensive information on Medicare insurance. Note that Medicare coverage does not include benefits for burial or cremation. If you get your Medicare insurance through a Medicare Advantage plan, you can check any extra benefits with your plan administrator.
To read more about irrevocable funeral trusts, visit the ACOA at medicaidplanningassistance.org/irrevocable-funeral-trust/#. The Cremation Association of North America, at cremationassociation.org/general/recommended_links.asp, offers cremation information and recommended links for additional resources.
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