Ronald Fatoullah & Associates - Elder Law

Purchasing Irrevocable Funeral Arrangement - A Tool for Medicaid Planning


As part of long‐term care planning, Medicaid recipients often purchase pre‐need funeral agreements prior to applying for Medicaid. This enables an applicant to spend down his assets without Medicaid deeming the agreement to be an asset and without the eligibility issues associated with gifting. Until January 1, 1997, pre‐need funeral agreements were revocable, i.e. the Medicaid applicant could cancel the agreement and be refunded his or her money.

In 1996, the General Business Law and Social Services Law were amended to provide that if a Medicaid or Supplemental Security Income applicant/recipient (A/R) establishes a pre‐need funeral agreement on or after January 1, 1997, the agreement must be irrevocable if the asset is to be deemed unavailable for Medicaid purposes. Any funds that may remain in the irrevocable pre‐need funeral agreement after payment of all funeral and burial expenses must be paid to the social services agency. The Social Services Law and General Business Law were further amended in 2010 to require that effective on or after January 1, 2011, pre‐need funeral agreements established by an SSI or Medicaid applicant/recipient for a family member must be irrevocable.

On July 11, 2011, the New York State Department of Health issued Transmittal 11 OHIP/ADM‐4, an administrative directive clarifying the definition of "family members" as "applicant/recipient's spouse, minor and adult children (including adoptive children and step‐children), brothers, sisters, parents, adoptive parents and the spouses of those individuals as long as the marriage is in effect." Effective January 1, 2011, pre‐need funeral agreements established with assets of an A/R or a legally responsible relative for the funeral and/or burial expenses of a family member must also be irrevocable in order for the asset to be unavailable as a resource for Medicaid purposes. The money put into a trust for an irrevocable pre‐need funeral agreement must be used only for funeral and burial expenses.

The value of an irrevocable pre‐need funeral agreement is not considered an available resource of the A/R. In addition, as long as the A/R or his or her spouse is paying fair market value for the services and merchandise to be furnished pursuant to the agreement, and Medicaid will not consider payment of funds in connection with the agreement a transfer of assets.

Therefore, an A/R can purchase an irrevocable funeral agreement for his or her adult children, sibling,parent and the spouses of those individuals and the purchase will not impact nursing home Medicaid eligibility. However, this purchase must be done in the month prior to the month the A/R is seeking Medicaid coverage or earlier.

The Medicaid agency will review the irrevocable funeral agreement to confirm that the language is in accordance with the law, including ensuring that there is a disclosure statement. It is important to consult with an elder law professional who is familiar with the regulations and can help the client protect his or her assets by providing the appropriate advice.

Ronald Fatoullah is a leading authority in the fields of elder law, estate planning and special needs. He is the founder and managing attorney of Ronald Fatoullah & Associates, a law firm concentrating in elder law, Medicaid eligibility, estate planning, special needs, trusts, guardianships, & probate. He is certified as an elder law attorney by the National Elder Law Foundation, and he is the current Legal Committee Chair of the Long Island Alzheimer's
Association. This article was co-written by Stacey Meshnick, Esq. who is chair of the Medicaid department at the firm. The firm's offices are conveniently located in: Long Island, Queens, Manhattan & Brooklyn and can be reached at: 1-877-Elder Law 1-877-Estates.

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