Determining how to pay for quality long-term-care can be very stressful for elders and their family members. Medicaid has been an important source of assistance for those who need these services but have limited assets and income.
Qualifying for Medicaid requires meeting specific financial limitations. If an applicant’s assets and income exceed the eligibility threshold, they will need to go through the spend-down process in order to qualify. Assets including your primary home and certain personal items are exempt but most other liquid assets are not (including Life Insurance policies). The general rule concerning life insurance is the cash value in a policy will be included in calculating whether the total resources of the Medicaid applicant or recipient are within the required limits.
Fortunately, funeral and cemetery costs are exempt. A person can prearrange and prefund their funeral plans by meeting with a funeral home’s licensed prearrangement counselor. This pre-arrangement meeting allows you to make personal selections regarding the type of service and merchandise you would like for final arrangements. These selections are identified in the Statement of Funeral Goods and Services. Once your selections are made, you can fund your arrangement through a life insurance policy set up by the pre-arrangement counselor who is also a licensed life insurance agent. Unlike Whole-Life or Term policies where you can choose and change the beneficiary at any time, these policies irrevocably assign the policy ownership, through the funeral home, to a trust. Once an irrevocable assignment of the policy is executed, the cash value is $0. As a result, the insurance coverage will not be counted as a resource in determining eligibility for Medicaid.
Pre-planning and prefunding have several other benefits. They guarantee the price of the services and merchandise selected no matter how long you live. For example, a $10,000 arrangement today could cost nearly $15,000 just 10 years later. It also eliminates the need for family members to determine who is responsible for, or capable of, paying for your services.
Rich Buchanan is the Pre-Arrangement Counselor for Spicer-Mullikin Funeral Homes & Crematory with locations in New Castle, Newark, Middletown and Delaware City in Delaware. If you have additional questions, contact Rich at Rich@spicermullikin.com or (302) 368-9500