Funeral Trusts

[theinuranceguy]

Hey Newby Let me just address the last paragraph, again, I am no expert...

YOu Said, "Any money paid into an irrevocable funeral trust will never go to beneficiaries (if they've been on Medicaid.) All excess money from a funeral trust MUST go to Medicaid or their estate (which Medicaid is the first creditor in line for the estate.) An irrevocable trust (that is NOT a funeral trust) may be a good way to do what you are saying but probably not for 85 year olds because it would have to be in force for 5-years or more before they apply for Medicaid to protect anything. Only an irrevocable funeral trust is immediately protected. "

At least in OH, when someone is spending down assets they are required to show where money is going. They must spend down assets by buying clothes or whatever, but it has to be for that person only. They cant just give away money. An irrevocable funeral trust is a way of spending down the assets that is sheltered from Medicaid.

Also for the 85 year old, I did mean a irrevocable funeral trust, tucking money away there will make it easy to pass along wealth after the insured passes away. And yes the irrevocable funeral trust is immediately protected.

But what I am saying, is if you cannot find a funeral home that will guarantee your policy, then interest rate is going to be the selling point. The funeral trust I have does pay 2%... But I have seen some funeral trusts at as little as 1%.

Newby, what are some pre-need policies you would recommend for agents to market, I am looking especially for the highest interest rate?

 

[Newby]

I thought you meant leaving money to beneficiaries that was over and above the funeral cost.

Hey Newby Let me just address the last paragraph, again, I am no expert...

YOu Said, "Any money paid into an irrevocable funeral trust will never go to beneficiaries (if they've been on Medicaid.) All excess money from a funeral trust MUST go to Medicaid or their estate (which Medicaid is the first creditor in line for the estate.) An irrevocable trust (that is NOT a funeral trust) may be a good way to do what you are saying but probably not for 85 year olds because it would have to be in force for 5-years or more before they apply for Medicaid to protect anything. Only an irrevocable funeral trust is immediately protected. "

At least in OH, when someone is spending down assets they are required to show where money is going. They must spend down assets by buying clothes or whatever, but it has to be for that person only. They cant just give away money. An irrevocable funeral trust is a way of spending down the assets that is sheltered from Medicaid.

Also for the 85 year old, I did mean a irrevocable funeral trust, tucking money away there will make it easy to pass along wealth after the insured passes away. And yes the irrevocable funeral trust is immediately protected.

But what I am saying, is if you cannot find a funeral home that will guarantee your policy, then interest rate is going to be the selling point. The funeral trust I have does pay 2%... But I have seen some funeral trusts at as little as 1%.

Newby, what are some pre-need policies you would recommend for agents to market, I am looking especially for the highest interest rate?

 

[DanBran]

Thanks for the great info guys very informative.

 

[Newby]

I've been getting several calls from around the country on these again from consumers as well as agents. I'm going to address a few points here that I keep repeating because this seems to be the thread that they find on searches.

1. Be VERY careful of any agent or FMO that is telling you it is OK to do Funeral Trusts on the kids of the person going on Medicaid. Medicaid is going broke and they are cracking down hard on people who GAME the system. I recently had a call from a man in Kentucky that was "advised" by a "Financial Planner" and an attorney working together to set up $15,000 Irrevocable Funeral Trusts on his mother and also himself and 3 siblings out of mom's money to get her assets spent down.
The mother qualified for Medicaid 4-months later except for one problem...the state of Kentucky does not immediately exempt Irrevocable Funeral Trusts except for the person who is approved for Medicaid within 30-days of the trust being set up. Mom's was fine but the family had to pay back the other four. And the insurance company wouldn't give them the money back because as far as they were concerned IT WAS IRREVOCABLE. The man ended up having to pull $60,000 out of his retirement money to pay Medicaid back. The agent and attorney did make out like bandits though.

2. SHOP the GROWTH RATE! Some of these "marketers" are selling Funeral Trusts and only giving 1 or 2% SIMPLE interest. This allows them to pocket a larger commission. You can easily find 3 to 4% growth Funeral Trusts. That makes a huge difference in the end.

3. Get a WRITTEN price guarantee. That price guarantee comes at no additional cost to you and makes a huge difference if the person lives for several years after setting up the trust. It's standard in the industry to have a FULL WRITTEN price guarantee. Demand it or get a different advisor.

4. Funeral Trusts do NOT have to be paid in one single payment. Most allow you to pay over two or three years with a same as cash payoff. There is an insurance death benefit built in. If you do not need to qualify for Medicaid immediately, I recommend taking advantage of multi-pay plans with same as cash options.

5. A Funeral Trust through a funeral home is generally BETTER for the consumer than one separate from the funeral home. Slick marketers try to play up on people's fears of a funeral home owner running off with someone's money or not letting them transfer to a different funeral home. This is just hype designed to separate YOU from your money.
While there are a few cases through the years of crooked funeral home owners ripping off consumers, there are many more cases of crooked attorneys and crooked insurance agents embezzling clients money.
It's very easy to prevent it from happening to you. You make the check for ANY funeral trust directly to the insurance company (NOT the attorney, NOT the insurance agent, Not the Funeral Home, NOT the financial advisor.) Then within 3-weeks you make sure you have received an insurance policy from the insurance company. That way even if the attorney, insurance agent, funeral director or financial advisor you are working with IS a crook, they can not access your money. The guy trying to sell you a funeral trust separate from the funeral home is WAY more likely to be a crook than the Funeral Home owner is.

6. ALL Funeral Trusts are easily transferred to ANY funeral Home you want. You are NEVER limited to using the funeral home you bought the funeral trust from. Pushy marketers will tell you their funeral trust can be used anywhere but the same trust sold by a funeral home can not. That is a lie to try to separate you from your money. You can preplan at any funeral home and transfer the trust to any other funeral home any time you want. Your Funeral Trust NEVER obligates you to just the funeral home you bought it from.

7. The same companies that the marketing companies are selling funeral trust through (usually NGL, Unity, and FDLIC) are the same companies that that the funeral homes sell. There is NO difference except if you buy it through the funeral home you generally get MUCH better growth, a 100% price guarantee and are dealing with someone that knows what they are doing. Plus you have MORE companies to choose from including Homesteaders, ForeThought, Monumental, Cincinnati Equitable, Atlantic Coast, American Memorial, Assurant and MANY others. More choices are always better than three.

7. DO NOT OVERFUND a FUNERAL TRUST. Slick Marketers LOVE to tell people to pay $15,000 into their funeral trust. How many people really plan to spend $15,000 on the funeral?
What the marketers are NOT explaining is that your beneficiary will NEVER get that excess money back if the person is on Medicaid. The beneficiary HAS to be "the estate" and Medicaid is the first creditor in line to collect anything that runs through the estate.
If the funeral you would choose is $7,677 (or whatever amount it happens to be) just pay $7,677 into the funeral trust and DEMAND a 100% price guarantee. By overpaying you are just padding the commission of your agent and getting NOTHING in return for it.

8. And for agents, my earlier 2008 recommendation of the "funeraltrustdotcom" guys is definitely withdrawn. They come across like hucksters and I do NOT believe they are acting in the best interest of consumers. Of course that is just MY opinion.

All of this information is simply from an experienced funeral trust agent. I am NOT an attorney. Do not take ANY of my opinions as legal advice.

 

[Hopwood04]

Check out Settlers Life. They are part of the NGL family. The reason I mention this is because Settlers has a funeral trust that an individual can pay a monthly premium for the policy / trust unlike NGL or any of the others. This is a great way to sell final expense because if you run across an individual and they say that they already have a policy, an agent can reply "that's great but what happens if you have a medicaid approved stay in the nursing home and Medicaid cash surrenders your policy for it's cash value? If the policy was owned by a funeral trust, the prospect wouldn't have to worry about medicaid confiscating the cash values.

 

[Newby]

Check out Settlers Life. They are part of the NGL family. The reason I mention this is because Settlers has a funeral trust that an individual can pay a monthly premium for the policy / trust unlike NGL or any of the others.

It's true Settlers offers the single pay and multiple pay funeral trust. NGL also offers the single pay and multiple pay funeral trusts.

NGL owns Settlers and they use the same trust but the insurance products are different with each.

 

[RonRoberts]

Newby, I am confused. First, why sell a funeral trust in which you have to be aligned with a funeral home? Why would a $10,000 or $15, 000 final expense policy not be better? Secondly, since the policy has a beneficiary such as a child or sibling, then would the entire benefit not go to the beneficiary to pay the funeral costs? So is there truly a reason to worry about medicaid or a nursing home getting their hands on this benefit? Thanks for any information.

Ron

 

[Newby]

Newby, I am confused. First, why sell a funeral trust in which you have to be aligned with a funeral home? Why would a $10,000 or $15, 000 final expense policy not be better? Secondly, since the policy has a beneficiary such as a child or sibling, then would the entire benefit not go to the beneficiary to pay the funeral costs? So is there truly a reason to worry about medicaid or a nursing home getting their hands on this benefit? Thanks for any information.

Ron

Most people who but funeral trusts are doing it to make decisions about funeral services, casket, cemetery, music, and other funeral decisions when they are younger and healthy rather than the spouse or kids being forced to do it when they are emotional. They prepay because they can negotiate prices, get discounts, get better financial terms (from 24 months to up to 60 months same as cash) and price guarantee the funeral. A secondary benefit is that they can sign an irrevocable form when they need to if they need to exempt the funeral trust from Medicaid.

It's something people have been doing for generations. If your parents did it for you then you will usually do it for your kids. It gets a liitle more popular each decade.
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Newby, I am confused. First, why sell a funeral trust in which you have to be aligned with a funeral home? Why would a $10,000 or $15, 000 final expense policy not be better? Secondly, since the policy has a beneficiary such as a child or sibling, then would the entire benefit not go to the beneficiary to pay the funeral costs? So is there truly a reason to worry about medicaid or a nursing home getting their hands on this benefit? Thanks for any information.

Ron

Once people go on Medicaid, they usually need to assign their whole-life policies to a funeral trust or cash surrender them. You can't have more than $2,000 in assets for an individual to qualify for Medicaid in most states. The cash value of your life insurance is counted as an asset.

 

[arnguy]

As usual, good information from you, Scott (Newby)!

 

[RonRoberts]

Thank you Newby, I fully understand now. My mom and my grandmother has done this but for me my mother I believe purchased a $5000 burial policy for me and my brother and sister back when I was a small child (I am 45 now).
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They can purchase the single-pay, increasing benefit life insurance policy without the irrevocable trust and have more options and control.


So that they would not have a problem with the medicaid minimum would they need to have on record a relative as the owner of this policy?