• Hilton Funeral Home

Setting Funds Aside

Updated: Oct 1, 2020

If you’re reading this guide, you may have started asking yourself some important questions about your funeral arrangements and end-of-life expenses.

We understand that this is not an easy topic to think about and discuss with your family. You may not even know where to start. But when we spend much of our time preparing for what

might happen in our lives, it makes perfect sense to plan for what will happen, even though it may be difficult.

Are there benefits to setting aside funds ahead of time?

Yes. As we mentioned in the previous post, it may spare your family the financial burden of paying for your funeral when you die. Decisions about who is responsible for paying and where the money will come from are not left to your children, friends or other family members.

What are my funding options?

Your funding options

When you pay for funeral goods and services in advance with a funeral home directly, the funeral home is responsible for placing your money into a trust or escrow account in accordance with applicable state law. You may also elect to purchase a whole life insurance policy to fund your preneed contract. On occasion, an annuity may be used. These annuity products are guaranteed issue, meaning everyone can qualify without the medical underwriting typical of traditional life insurance products.

Preneed Insurance Policy

A preneed insurance policy is a simple life insurance policy intended to cover the funeral or

cremation expenses listed in your preneed contract. This can include goods and services, and the benefit from the policy is payable directly to the funeral home upon your death. Since the funeral home is paid directly, you may prefer this type of policy in order to minimize the obligation for your family to pay for your funeral up front and make the process easier on them at the time of your death.

Funeral Trust

A funeral trust is established by a funeral home with a qualified financial institution and a portion or all of the money you pay to the funeral home under your preneed contract must be held in the trust account until the goods and services are delivered.

Life Insurance Policy

A traditional life insurance policy can be used to pay for funeral expenses. Upon your death, your beneficiary would be responsible for using the available funds from your life insurance to pay for your funeral. Keep in mind that a death certificate will be required before the insurance company will release death benefit proceeds. This can take weeks, while your family members may be required to pay for your funeral services at the time they are rendered.

Looking for more information on the differences:

How does my choice affect my Medicaid eligibility?

Paying for your funeral in advance can have a major effect on your Medicaid eligibility. In most states, an individual living in a nursing home can have only about $2,000 in “countable” assets in order to qualify for Medicaid benefits. For example, if you have $10,000 set aside to pay for your funeral but have not actually prepaid or set it aside in an

irrevocable trust you will not be eligible to receive Medicaid benefits. Prepaying for your funeral may be an effective way to reduce, or “spend down,” your assets to qualify for benefits. Just remember that Medicaid limits vary by state.

If you decide to prepay for your funeral, the funds you have set aside for your funeral must be

placed into an irrevocable contract with a funeral home. This is an acceptable way to keep your money from being counted as an asset by Medicaid.

Importantly, there is no “look back” period for this type of transfer. This means that it is not

subject to the five-year asset transfer rule imposed by the federal government for Medicaid

qualification. Normally, the government will include any asset you transfer at any time during the five years prior to filing your Medicaid application. This does not apply to irrevocable funeral contracts and trusts, because the law prohibits any withdrawals or changes to this type of contract. It can only be used to pay for funeral expenses.

If you choose to use a traditional life insurance policy with an initial face amount of more than $1,500 to pay for your funeral expenses, be aware that the policy cash value is considered an asset and will count against you when it comes to qualifying for Medicaid.

Are there special considerations if I am a U.S. veteran?

If you are a U.S. veteran, there are many burial benefits available to you at no cost. The government provides the following:

If you choose to be buried in a national cemetery:

• Gravesite in any of the 131 national

cemeteries (subject to available space)

• Grave liner/vault

• Opening and closing of grave

• Perpetual care as part of a national shrine

• Government headstone or marker

• Burial flag

• Presidential Memorial Certificate

• Military funeral honors

If you choose to be buried in a private cemetery:

• Government headstone or marker

• Burial flag

• Presidential Memorial Certificate

• Burial allowances for funeral expenses

and a plot or interment

Make sure your family can locate your discharge papers to prove your eligibility for government benefits.

Will Social Security provide any benefits to my family when I die?

Social Security benefits paid to your spouse or, if there is no surviving spouse, an eligible child, after you die can be used to cover some funeral expenses. But the one-time death benefit payment of $255 is generally only enough to pay a small percentage of overall costs.

In order for the death benefit to be paid, the Social Security Administration must be notified

as soon as possible when you die. The funeral director can report your death, but your family

must know and provide your Social Security number, which is another reason why it is vital to document of all of your personal information.

Here is a quick snapshot of survivor benefits for spouses:

• A one-time death benefit payment of $255 can be paid to you if you were living with

the deceased.

• You may be eligible to collect 100% of your spouse’s monthly benefit at your full retirement age, or a reduced benefit as early as age 60; or, you will continue to receive your benefit, if higher, provided you are of age to collect benefits.

• No survivor benefits are paid if you remarry before age 60 and are still married. If you remarried before age 60 but that marriage has now ended, you may collect survivor benefits from a deceased ex-spouse.

Looking for more information on Social Security:

If you have any questions or are looking to go ahead and pre-plan please give us a call. This is one of the best gifts you can give to your family.

(301)-349-2135- Hilton Funeral Home

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