Using a Prepaid Funeral Plan for Medicaid Spend Down

In many states, a prearranged funeral or cremation may help you qualify for Medicaid. To find out for sure, contact a Medicaid office in your state. You should also talk to your attorney about your state’s Medicaid requirements. You’ll want to be informed before you do, so here are a few things to consider about prepaid funerals and Medicaid before you make a call.

What is Medicaid spend down?

To qualify for Medicaid coverage of long-term care—in home, nursing home or assisted living—your income and assets need to be less than a certain amount. However, not all assets count toward your total resources.

If your income is too high or the amount of your assets is too great, you may be able to spend down those assets in order to qualify for assistance. There are rules around how you may spend down your income and assets.

One thing that may help spend down assets in some states is a prepaid funeral or cremation plan.

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Prepaid funerals and Medicaid spend down

Medicaid does not count funeral, cremation and cemetery arrangements as part of your net worth in most states. Therefore, if permissible in your state, when you purchase a prepaid plan, you are spending down your assets and could be increasing your likelihood for Medicaid eligibility.

Choosing a prepaid plan involves many decisions, such as whether you’d like to be buried or cremated, the type of service you prefer and other details. After deciding on the goods and services you want for your funeral or celebration, you can purchase either a pre-need trust-funded funeral contract or an insurance policy to fund your funeral.

Note: The following options are not offered in all states. Please see your local funeral provider to discuss how to best fund your plans.

  • Pre-need insurance is a policy for which you pay premiums. The benefit goes directly to the funeral home at the time of need to pay for the products and services you selected.
  • A revocable trust holds the money for your plans. You or your beneficiary can make changes, cancel or cash out the trust at any time in accordance with the contract terms and state law. Because you can cash out a revocable trust, it often does not qualify for Medicaid spend down. As with a pre-need insurance policy, the money in the trust is paid to the funeral home directly after your death.
  • Irrevocable trusts are also used for funeral, cremation and cemetery expenses. They may not be canceled or cashed out, and the benefit is paid directly to the funeral home at the time of need. Families usually designate an irrevocable trust only for Medicaid spend down.

Read Prepaid Funeral Plans vs. Funeral Insurance vs. Life Insurance to learn more about how insurance and trusts work.

Irrevocable trusts and the Medicaid spend down process

You can use irrevocable funeral trusts for yourself and, in some states, your spouse and your adult children. How much can be placed into an irrevocable trust for Medicaid spend down varies by state. Check with your attorney or Medicaid office for the rules in your state.

When planning a funeral or memorial service, there are hundreds of details to consider and decisions to be made. Like any funeral or cremation, a prepaid plan can be personalized just for you. Depending on your state, a funeral trust may be used to pay for items such as:

  • Cremation
  • Embalming, makeup and hair
  • Transportation
  • Venue, such as a funeral home
  • Catering and decor
  • Flowers
  • Funeral director or celebrant and support staff
  • Casket or urn
  • Cemetery property
  • Headstone or monument
  • Death certificates

Plan with us

When you're ready to plan, a Dignity Memorial® advisor can answer all your questions and walk you through everything you need to know about prepaid funeral and cremation plans. When you plan with us, you get a promise that your funeral plan will be honored by any one of more than 1,900 locations in North America. Our free Personal Planning Guide helps you get started.



This article is meant to be general in nature and should not be construed as legal advice. Please consult with your attorney for legal advice.