What is Medicaid Exclusion for Funeral Plans in New York?

The Medicaid exclusion for funeral plans in New York allows an applicant to spend down excess assets towards the applicant's funeral plan expenses.

To qualify for Medicaid, an individual must demonstrate financial need. Those who are considered in need have limited assets and income, making it difficult for them to afford long-term care expenses. If an individual's assets exceed Medicaid's permissible limit, they have the option to spend down their assets on approved expenses, which include funeral arrangements. In the state of New York, a single Medicaid applicant must have non-exempt assets not exceeding $31,175, while a married couple applying together should have non-exempt assets no greater than $42,312. When an applicant's assets surpass the specified limit, they can spend the excess on allowable costs without breaching the 5-year lookback period.

Funeral Costs as an Exempt Asset

When determining Medicaid eligibility, funeral plans are considered exempt assets, along with the individual's primary residence, a single vehicle, personal belongings, household items, and burial plots. In the state of New York, individuals can set aside up to $1,500 in revocable burial funds without affecting their asset limit. Alternatively, those seeking to prepay their funeral expenses can purchase an irrevocable pre-need funeral plan without any spending limitations while still maintaining their Medicaid eligibility.

Ways to Prepay Funeral Expenses to Meet Medicaid Eligibility

There are two options for prepaying funeral expenses to meet Medicaid eligibility requirements.

The first is to establish a dedicated bank account specifically for funeral costs. In 2024, individuals can allocate up to $1,500 in this account, which must be explicitly designated as a funeral or burial fund. These funds are restricted to expenses such as a casket, urn, burial plot, headstone, and funeral services, and cannot be used for transportation, lodging, or food. After the funeral, any remaining balance will be returned to the estate and may be subject to Medicaid's estate recovery program.

Alternatively, individuals can opt to enter into an irrevocable pre-need funeral agreement with a funeral home, which offers no restrictions on the amount that can be spent. This comprehensive contract outlines the specific services to be rendered, the manner in which they will be provided, and the corresponding expenses. Upon signing, the agreement becomes binding and cannot be modified, canceled, or revoked. The funds paid in advance are exempt from asset calculations when assessing Medicaid eligibility and can be established without violating Medicaid's five-year look-back period. The agreement may encompass a wide range of services, such as embalming, cremation, visitation, and a memorial service. To ensure compliance with Medicaid guidelines, a detailed itemization of goods and services is essential. In the event of any remaining funds after the funeral, they are remitted to the local county Social Services Department to support burials for those in financial hardship.

Prepaying funeral expenses can be a useful strategy for individuals seeking Medicaid eligibility in New York. By setting aside funds in a designated bank account or signing an irrevocable pre-need funeral contract with a funeral home, applicants can spend down their excess assets without violating Medicaid's rules. These options provide peace of mind, ensuring that funeral arrangements are taken care of while also meeting the financial requirements for Medicaid coverage. Should you need assistance in Medicaid planning, the Law Offices of Albert Goodwin are here for you. We are located in Midtown Manhattan, New York, NY. Call us at 212-233-1233 or email [email protected] to schedule a consultation.