Is There a Way to Make a Gift After Death Without Worrying About the Medicaid Five-Year Lookback?

[Newby]

Even with the Trust. It seems like it is subject to the 5y lookback. Best bet most likely is the assignment to the funeral home. We will see what Scott says.

No with a funeral trust it is day one exempt. The funeral home is paid 1st. Then any remaining money has to run through the estate. Medicaid is the 1st creditor of the estate and gets the rest of the insurance money. None of it can pass to any beneficiaries.

 

[Newby]

Scott, I remember Settlers Life having a funeral trust product where you could transfer ownership of life insurance to the trust. Do you know of any companies offering such a product where I could do that with existing policies from another company? I have several clients that are already getting assistance, with cash values that are getting close to the limit. Other than that, is assigning to a funeral home their best bet?

With existing policies you can just assign them to any funeral home. There can be no beneficiary other than the funeral home “as interests may appear” which means the funeral home can’t be paid unless they are the one performing the funeral. The estate is the contingent beneficiary.

When setting up a funeral trust you are limited to $10,000 or $15,000 in most states. But when assigning an existing policy there have never been any limits to the amount that I have run into. Also if they are buying the funeral trust policy from the funeral home where they have an actual “goods and services” document showing exactly what they are funding, they are not limited to the state’s cap on a funeral trust. In the state’s that I’ve worked with funeral homes (Indiana, Kentucky, Tennessee and Georgia) Medicaid has never had a problem with going over those amounts.