Irrevocable Funeral Trust Limits Ohio

[jdeasy]

Life Insurance and the Medicaid Application

Life insurance can be problematic when attempting to qualify for Medicaid. To be eligible for Medicaid, an individual cannot have more than $2,000 in countable assets. A whole life policy with a face value of $1,500 or less is considered exempt and will not count against that person's $2,000 asset limit. Thus, besides this one small exception, all other life insurance policies owned by a Medicaid applicant that include cash value are available assets to that individual and will count toward that person's $2,000 asset limit.
Since whole life insurance policies accumulate cash value that is accessible to the policy owner, it is counted as an available asset to a Medicaid applicant. Thus, if a Medicaid applicant has a $10,000 whole life policy with an accumulated cash value amount in the policy of $3,000, that person would not qualify for Medicaid.

The cash value is the issue, not the face amount. The cash value is a countable asset. It doesn't matter if they have a $100,000 face policy if it's term with no cash value or even it's whole life with no cash value yet.

And it's countable for the owner of the policy. Not the insured unless the insured is the owner.

But this thread is about irrevocable trusts. The cash value doesn't matter at all in those as long as it's not over the state limit. Ky has a limit of $15,0000. Indiana has a $10,000 limit. The op is asking about Ohio's limit.

 

[Newby]

If the person already has a $15,000 policy in force and they do not have the excess money to single pay the size policy they need to fund their funeral, they can irrevocably assign the existing policy to any licensed funeral home and it is exempt from counting as an asset for Medicaid. They should NOT 1035 the policy into a new policy just to have a funeral trust.

That kind of gibberish is what the Funeral Trust marketers are slinging at seminars. You wouldn't turn your own grandmother's $15,000 policy into a $1,500 funeral trust policy. Why would you do that to other people's?

 

[jmarkk1]

So if client has whole life policy for $15000 that costs $100/month they can assign to funeral home? In the event medicaid comes in does medicaid allow them the funds necessary to keep paying policy?

 

[jdeasy]

So if client has whole life policy for $15000 that costs $100/month they can assign to funeral home? In the event medicaid comes in does medicaid allow them the funds necessary to keep paying policy?

What the policy is costing has nothing to do with it.

 

[jmarkk1]

Also, what happens if funeral costs less than face amount of policy? Does family get the extra or does state gobble it up?

 

[Newby]

So if client has whole life policy for $15000 that costs $100/month they can assign to funeral home? In the event medicaid comes in does medicaid allow them the funds necessary to keep paying policy?

No. Their kids usually have to pay the premiums. If they have no one to pay them they usually go reduced paid up.
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Also, what happens if funeral costs less than face amount of policy? Does family get the extra or does state gobble it up?

If someone is on Medicaid, all excess funds from a funeral trust or an assigned life insurance policy MUST go through their estate and Medicaid will be the 1st creditor in line to get the estate.

 

[ScottLFB]

Newbie is correct on both answers, but what is the OP trying to do here. Are you just questioning limits for your own research or are you working on someone that needs to do something immediately?

$15K is the limit for a Irrevocable Funeral Trust in most states, but you can also write the immediate family members to help make more of the asset disappear if needed.

I wouldn't suggest turning Grandma's $15K Face with $4K cash value into a $4K Funeral Trust either. Kids don't like that when Grandma passes away 6 months later..

Good Luck,
Scott

 

[Newby]

Newbie is correct on both answers, but what is the OP trying to do here. Are you just questioning limits for your own research or are you working on someone that needs to do something immediately?

$15K is the limit for a Irrevocable Funeral Trust in most states, but you can also write the immediate family members to help make more of the asset disappear if needed.

I wouldn't suggest turning Grandma's $15K Face with $4K cash value into a $4K Funeral Trust either. Kids don't like that when Grandma passes away 6 months later..

Good Luck,
Scott

Only certain states allow the Medicaid person to spend down money with funeral trusts on others. I don't have a list of which do and don't but it blows up about 6-months later when there is a problem.

I know of one man in that had to pull $60,000 out of his own retirement money to pay it back into his mother's Medicaid spend down money. His "financial advisor" and an attorney worked with him to buy funeral trusts on the mother and her kids.

About 6-months later they found out that his state don't play that game. The insurance company wouldn't give the money back because it was in an irrevocable funeral trust. But Kentucky doesn't recognize irrevocable funeral trusts UNLESS you are already on Medicaid. So the mother's was the only one they allowed.