Cremation is a choice many ponder for personal reasons based on reduced cost, fears about burial, consideration for the environment or to simplify arrangements. Medicaid covers neither funeral expenses nor the cost of a cremation or burial. However, Medicaid services and Social Security do provide alternative forms of support.
How Medicaid Services Can Ease the Financial Burden
Rules established under Medicaid enable recipients to earmark funds for their own funeral and burial. Under these rules, such funds are excluded from the accounting of assets recorded when determining eligibility for benefits. Medicaid recipients are permitted to set aside money in a separate account or prepay a funeral home. Any interest earned on the burial fund does not count as a resource. Burial plot owners need not be concerned about the plot value jeopardizing their qualification for Medicaid. The parameters around the amount of money and manner of keeping the money separate from other funds varies from one state to another.
Medicaid Coverage Varies By State
When a Medicaid applicant’s income exceeds the cap set to qualify for Medicaid, spending down assets is a way to bring the financial situation in line with program acceptance requirements. As an example of how states may administer the Medicaid death benefit, Connecticut Medicaid applicants are entitled to put aside money to pay for their burial/funeral expenses as part of the spend-down process by contracting with a funeral home. However, the funeral home must be a member of the Connecticut Funeral Directors Association.
To remove funds laid aside for funeral expenses from the assets counted toward eligibility for Medicaid, the state offers three options. One is to sign an irrevocable contract with a funeral home, meaning it cannot be canceled or cashed in, only transferred to a different licensed funeral home. Irrevocable trusts can be funded in advance up to $8,000. The second choice is to enter into a revocable contract for an unlimited amount, in which case it can be canceled as long as the funds are returned to the state upon cancellation. The third scenario is to buy one or more personal life insurance policies with a combined death benefit not to exceed $1,500.
Social Security One-Time Death Benefit
The Social Security Administration death benefit is $255, paid to the surviving spouse, generally if the spouse was residing in the same household as the deceased. The benefit may go to the children of the deceased if they are the only surviving family members. This nominal sum has been capped since 1954 and has not increased since, despite numerous attempts by legislators to change it.
Survivors cannot report a death or apply for benefits online. They can call their local Social Security office, but usually the funeral home reports the death to the SSA if the home has the social security number.
Planning funerals and forms of final disposition is an unpleasant but necessary conversation. It is important that your family understands your preferences. Have this difficult conversation now so everyone is aware of how they can respect your wishes later.