Written by Keith Bry, DelcoUSA

  There are many different financial vehicles available to pre-fund a funeral plan. One such vehicle is an insurance funded Funeral Trust. This month, I asked Keith Bry, head of National Marketing Support at DelcoUSA, to share some basic information about insurance funded Irrevocable Funeral Trusts. If you are not familiar with the concept of an insurance funded Irrevocable Funeral Trust, I encourage you to read what Keith has to say about it. Have questions for Keith? He can be reached at keith_bry@delcousa.com.

  Have you heard about The Irrevocable Funeral Trust? Almost everybody knows about traditional pre-need life insurance policies, and many people are aware of trust funding deposits at a bank for funeral funding, but many people, including many insurance agents and funeral directors, are not aware of insurance funded Irrevocable Funeral Trusts.

  The Irrevocable Funeral Trust is quickly growing into one of the most preferred vehicles for funding a pre-arranged funeral; in part because it combines many of the best features of the two traditional funding mechanisms. An Irrevocable Funeral Trust is generally established by a life insurance company, and customers irrevocably assign their paid-up policies to the trust. By making an irrevocable assignment, the policy is generally given “exempt asset” status by Medicaid, in the same way a policy assigned to a funeral home would be considered exempt.

  Medicaid will approve this structure in almost all states because the proceeds cannot be borrowed against, surrendered, free looked or in any other way re-captured by the owner. The assignment is irrevocable. Many insurance companies provide a list of qualifying expenses that lay out typical items that may be purchased with the proceeds after the insured person dies. The life insurance company will pay the claim directly to the funeral home if they file the claim paperwork. Excess proceeds, if any, are returned to the Estate of the Insured, where the Medicaid recovery unit can access the funds. The only time excess proceeds are paid to someone other than the Estate of the Insured is when Medicaid never provided any benefits.

  Funeral Home clients often like the Irrevocable Funeral Trust option because they can reserve the right to make their funeral choices at any time in the future, or can leave those choices to other family members if they don’t feel like visiting the funeral home. Many seniors want to set aside funds to pay for their funeral, but don’t want to make specific choices inside the funeral home. They just want their family to know the money is there when the time arises.

  The irrevocable funeral trust is a great option for Funeral Directors. They can use the Funeral Trust during Medicaid spend-down situations, they have the option of providing specific goods and services, and they have the option of saving those choices for a future date. Having different tools for your clients will help you serve your clients in different ways.

  Medicaid rules vary from state to state; please contact an Elder Law attorney for the rules in your state.