A prepaid funeral fund may seem morbid or distasteful to some. But for people who need long term care, a prepaid funeral trust may be an attractive way to put money to use that would otherwise be lost.
Long term care in a nursing home, assisted living facility or with home care aides, can cost more than $10,000 per month. Medicaid will pay for long term care, but only if applicants have less than $2,000 in resources (assets that are available to pay for food or shelter).
Money in an irrevocable account in the New Jersey prepaid funeral trust fund does not count towards Medicaid’s $2,000 resource limit. In other words, money put towards a prepaid funeral will not disqualify you from Medicaid or SSI, making it a very useful planning option.
There are a few catches. First, to qualify for Medicaid, the prepaid funeral account must be irrevocable. That means you can’t take money out after you’ve put it in. Second, any remainder left after the funeral goes to Medicaid. You use it or lose it, so it doesn’t pay to overfund the account.
Still, it’s better to put money to use in a prepaid funeral than to lose it to long term care costs.
The human mortality rate remains stubbornly fixed at 100%. Sooner or later everyone will need a funeral, and the cost can easily reach $10,000 or more. Once you go on Medicaid you can’t have more than $2,000, so if a Medicaid beneficiary dies without a prepaid funeral, it falls on family members to pay the funeral cost. That’s why prepaid funerals are important. And since there are few restrictions, prepaid funerals are a useful and versatile tool for Medicaid planning.
To learn more about creating a prepaid funeral account, you can visit the NJ Funeral Directors Association or talk with a funeral home of your choice. To learn more about Medicaid planning and long term care, call or email us at FriedmanLaw.