When planning for long-term care, many individuals worry about affording nursing home or assisted living costs while preserving their assets. Medicaid helps cover these expenses, but strict income and asset limits determine eligibility. One effective strategy to qualify for Medicaid in Pennsylvania involves purchasing a pre-paid funeral arrangement as part of a Medicaid spend-down.
What Is a Medicaid Spend-Down?
Medicaid enforces financial eligibility requirements, limiting applicants’ income and assets. If assets exceed the allowable limit, individuals must “spend down” excess funds in ways that comply with Medicaid rules before qualifying. A spend-down means using excess assets on non-countable expenses rather than giving money away, which could trigger Medicaid’s look-back period and result in penalties.
How a Pre-Paid Funeral Arrangement Helps with Medicaid Eligibility
A permissible spend-down strategy in Pennsylvania involves purchasing an irrevocable pre-paid funeral arrangement. Medicaid excludes these plans from countable assets if they meet specific criteria:
- The arrangement must be irrevocable, meaning it cannot be canceled, and funds cannot be refunded to the purchaser.
- It must cover legitimate funeral and burial expenses, such as caskets, vaults, cemetery plots, and related services.
- The plan should be purchased through a reputable funeral provider or funeral home.
Using excess assets to purchase an irrevocable pre-paid funeral plan reduces countable assets without violating Medicaid’s gifting rules. This strategy allows individuals to protect their financial resources while maintaining Medicaid eligibility.
Additional Benefits of a Pre-Paid Funeral Plan
Beyond Medicaid eligibility, pre-paying for a funeral offers several advantages:
- Peace of Mind: Covers funeral expenses, easing the financial and emotional burden on loved ones.
- Cost Control: Locks in current prices for funeral services, protecting against inflation.
- Customizable Plans: Allows individuals to arrange their own funeral, ensuring their wishes are honored.
Avoiding Pitfalls
While pre-paid funeral plans serve as a valuable Medicaid planning tool, structuring them correctly is crucial for Medicaid compliance. A revocable funeral plan (one that allows refunds) or an improperly structured agreement may still count as an asset, potentially jeopardizing Medicaid eligibility.
To ensure compliance, individuals should consult with Sechler Law Firm or another experienced elder law attorney familiar with Pennsylvania’s Medicaid rules. Proper guidance helps create a spend-down strategy that aligns with legal and financial goals.
Conclusion
Using a pre-paid funeral arrangement is a strategic way to complete a Medicaid spend-down and gain eligibility in Pennsylvania. Planning ahead with an irrevocable arrangement reduces countable assets in a Medicaid-compliant manner while ensuring final expenses are covered. For personalized guidance on Medicaid planning and spend-down strategies, call us at 724-841-1393 to schedule a consultation. We also encourage you to register for our Three Secrets to Protect Your Legacy Workshop, where you can learn more about estate planning and Medicaid. Register HERE for a Workshop.
