Utilizing A Pre-Paid Irrevocable Funeral Contract (or Trust) To Qualify For Chronic Care Medicaid

using a pre-paid irrevocable funeral trust to qualify for medicaidWhen an individual is entering a skilled nursing facility, it may be necessary to complete an application for Chronic Care Medicaid. A skilled nursing facility may cost anywhere from $15,000.00 to $25,000 per month, which can quickly lead to the depletion of available resources. Medicaid is a need-based program that assists with the cost of care in a skilled nursing facility. To qualify for Medicaid, an individual must meet certain asset and income requirements.

In 2017, an applicant may have:

  • Assets of no more than $2,000 in liquid non-qualified assets;
  • Life Insurance policy with a face value of $1,500 or less;
  • Irrevocable pre-paid funeral trust; and

Medicaid has a five-year look-back period, which means that the local Board of Social Services (BSS) will account for all assets and transfers that were made five years prior to the date of application. Any transfers or excessive assets in the applicant’s name may lead to the individual being ineligible for the Medicaid program for a period of time. In addition, any gifts or transfers made in order to qualify for the Medicaid program will result in one month of ineligibility for every $12,718.50 gifted. It is worth noting that the ineligibility starts on the date that an applicant is admitted to the skilled nursing facility and not from the date that the gift was made. This means that if a person enters a skilled nursing facility in August, and there is a two-month penalty, it would begin to run for August and September. Medicaid would then begin to pay as of October, but the applicant would be responsible for paying for the cost of care for August and September.

When a person exceeds the number of liquid assets, one planning technique is to establish an irrevocable pre-paid funeral trust. An irrevocable pre-paid funeral trust cannot be canceled, changed, or revoked prior to death. Also, the money in the trust cannot be refunded even if the funeral costs less than the funds available. The transfer of assets for irrevocable pre-paid funerals is considered an exempt transfer for the purpose of Medicaid eligibility. It is worth noting that transfers of certain assets to a spouse, caretaker child, disabled child or sibling with an equity interest are also exempt transfers.

The experienced elder law and estate planning attorneys at the Law Offices of Hunziker, Jones, & Sweeney help seniors and their families handle all aspects of New Jersey Medicaid planning. Our New Jersey Medicaid planning lawyers can answer your questions about planning for Medicaid, and assist you along the way. For more information or to schedule a consultation, contact our New Jersey Medicaid planning lawyers at (973) 256-0456.

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