At our firm, we also help individuals and families with Medicaid Planning.  When applying for public benefits programs, such as Medicaid, there are financial income and asset limits.  When an individual is over the asset limit for Medicaid, one way to spend down their money may be for the individual to pre-pay their funeral costs.

In addition to reducing your assets to qualify for Medicaid, pre-paying for your funeral can also ease the burden on your family following your death and make sure your wishes are carried out. But pre-paid funeral plans come with risks, so you need to exercise care when purchasing a plan.

Each year, consumers lose money when funeral homes go out of business before the need for the funeral arises. If the funeral home mismanages your funds, there may be no way to recover them. In addition, customers are not always entitled to refunds if they change their minds, and some funeral homes sell policies that require additional payments or that can’t be transferred if the customer moves.

If you decide to go ahead with a pre-paid funeral plan, the following are things to consider:

  • Shop around. Prices among funeral homes can vary greatly, so it is a good idea to check with a few different ones before settling on the one you want. The Federal Trade Commission’s Funeral Rule requires all funeral homes to supply customers with a general price list that details prices for all possible goods or services. The rule also stipulates what kinds of misrepresentations are prohibited and explains what items consumers cannot be required to purchase, among other things.
  • Make sure you have a reputable funeral home. There have been cases of unscrupulous funeral providers taking advantage of customers, so make sure you choose a funeral home with a solid reputation.
  • Read the contract carefully. Before signing, it is important to know what you are agreeing to. Can you cancel the plan and get a refund? Is the plan transferrable if you move to another area? Are you paying just for merchandise or for funeral services as well? If prices for funeral merchandise and services rise, will your estate be responsible for paying additional costs?
  • Find out where your money goes. The pre-paid plan should provide information on what the funeral home will do with the money you pay them. Some states have protections in place to make sure the money is safeguarded, but other states offer no protections. Is the money put into a trust account? What happens to the interest income? Is there a plan if the funeral home goes out of business? What happens to any money left over?
  • Make sure the plan won’t affect Medicaid benefits. If you are buying the policy as part of Medicaid planning, you must purchase an irrevocable plan, which means you cannot cancel or change it once it is bought.

Once you have purchased a plan, be sure to tell your family about the plan you have made and let them know where the documents are filed. If your family is not aware that you have obtained a plan, then the plan is useless.