May 2011
MEDICAID FACT SHEET:
BURIAL FUNDS
The following information is given as a guideline only.
In order to determine Medicaid eligibility, an application must be
filed with the local Department of Human Services in the area in
which you live. If you have questions, please seek the advice of
an experienced attorney to ensure that you have current
information before making a choice about your plans and
options.
Burial Funds are funds specifically set aside and clearly designated for an individual's or
his/hers spouse's burial, cremation, or other burial-related expenses. It is possible to set
aside funds to pay for your or your spouse's funeral and burial expenses and not have
these funds counted when you apply for or receive Medicaid. The funds need to be
clearly separated from your other household accounts. You may open an account at a
financial institution and request that it be designated and labeled for this purpose. The
limit on the amount of these burial fund accounts is $1,500. Because the account is
revocable, you can have access to the funds if you need to. (*Any proceeds from a life
insurance funded burial contract will be counted toward this limit in burial funds.)
Life Insurance: Whole life policy or policies with total face value of $1,500 or less are
excluded assets regardless of cash surrender value. However, if the total face value of the
life insurance policies exceeds $1,500, then the entire cash surrender value is included as
a countable asset. Term life insurance policies are never countable assets because they do
not have a cash value.
Irrevocable Burial Trusts: Medicaid recipients may choose to set aside $3,000 in an
irrevocable burial trust to help pay for their funeral and burial expenses. If you are
married, you can also set aside $3,000 for the funeral or burial expenses of your spouse.
However, this amount will reduce dollar-for-dollar the amount of excludable resources
potentially available in a burial fund (up to $1,500). These funds must be in the form of
an irrevocable burial trust, which means that you will not be able to have access to the
funds later if you want them.
Life Insurance Funded Burial Contracts: A life insurance funded burial contract
involves purchasing a life insurance policy and then (revocably or irrevocably) assigning
the proceeds or ownership of the policy to a third party, usually a funeral provider. You
make a funeral contract for goods and services prior to your death and assign a life
insurance policy to a funeral home in payment for the funeral. Proceeds from a life
insurance burial contract will reduce dollar-for-dollar the amount of excludable resources
potentially available in a burial fund.
If you irrevocably transfer ownership of the policy to a funeral home or to an
organization which will hold the policy in trust for your funeral, the cash value of the life
insurance policy will not affect your eligibility for Medicaid. The value of the life
insurance policy is not counted when determining your Medicaid eligibility because you
no longer own it, but this also means that you cannot access those funds at a later time if
you wish to do so, nor is it possible for your heirs to inherit any portion of the trust. The
contract must be specific about the cost of each item which is to be provided as part of
the funeral. You should seek the advice of an experienced attorney and/or your preferred
funeral service provider for assistance with this option.
A revocable life insurance funded burial contract will be counted as an asset (depending
on the other types and amounts of burial assets and life insurance policies the applicant
may own), and will likely affect your eligibility for Medicaid. If the face value of all life
insurance policies is $1,500 or less, the cash value will be exempted under the life
insurance exclusion. If the face value of all life insurance policies exceeds $1,500 the
cash value of a revocable life insurance funded burial contract may be exempted under
the burial fund exclusion up to $1,500 depending on what other burial arrangements the
person has.
Burial Space Items: Burial space items include, for example, caskets, headstones
(including engraving), vaults, urns, burial plots and expenses for opening and closing the
grave. Burial space items are not counted when they have been paid for or are included in
a funeral contract that has been paid for either through cash or an insurance-funded burial
trust (see above). When a funeral is being paid for through an installment contract, the
value of burial space items is not exempt until the payments for those items has been
completed.
Burial Insurance: Burial insurance is a contract whose terms preclude the use of the
proceeds for anything other than payment of the insured’s burial expenses. Burial
insurance is not available for sale in Wisconsin, but is available in other states. If you
have a burial insurance policy from another state, it is an unavailable asset if the policy
states that it is irrevocable and the policy states that all the proceeds must be used for
burial expenses.
Getting help: Ensuring that burial arrangements will not jeopardize Medicaid eligibility
can be a complex process. The final determination rests with the Department of Human
Services to which you apply. It is always wise to consider consulting with an attorney or
other experience professional before making any burial arrangements. Doing so can save
time, money, and the inconvenience of having to cash out or revise trusts or funds
because the law was misunderstood. You can contact the Wisconsin State Bar at 608257-4666 for a referral to an attorney. Ask for an attorney who is familiar with Medicaid
and burial trusts. When you reach the attorney’s office, ask for a consultation only and
find out how much this will cost. Consultations are relatively inexpensive. Remember to
bring with you any pertinent documents, such as statements of trusts; bank, retirement,
and savings accounts; other financial assets such as stocks, IRAs, and 401Ks, a funeral
contracts, life insurance policies and their cash values, and any other assets you may have
so that the attorney can review them during the consultation.
2850 Dairy Drive, Suite 100 Madison, WI 53718-6742 Telephone: (608)224-0606
Toll Free: 1-800-366-2990 Fax: (608)224-0607 www.cwag.org