Irrevocable Funeral Trust and Medicaid: How It Works

An irrevocable funeral trust is one of the few places Medicaid lets your family set money aside. Here is how Medicaid treats a funeral trust, how it fits with the look-back period, and what to ask before you set one up. LifeCare Senior Advocates helps families use it as one part of a larger plan.

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Does Medicaid Count an Irrevocable Funeral Trust?

In general, no. Money in an irrevocable funeral trust is set aside for funeral and burial costs, and it cannot be cashed out or used for anything else. Because your parent can no longer get the money back, Medicaid generally does not count it toward the asset limit.

A revocable funeral account works differently. If your parent can cancel it and take the money back, Medicaid usually counts it as an asset. That is why the word irrevocable matters so much in Medicaid planning.

Each state sets its own rules for funeral trusts, including how much can go into one. Dave checks the rules where your parent lives before anything is set up. For the basics of how a trust is set up, see our irrevocable funeral trust planning page.

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What Medicaid Counts for Funeral Costs

Medicaid looks at how money for a funeral is held, not just what it is for.

Irrevocable funeral trust

Generally not counted. The money is locked in for funeral costs and cannot be taken back.

Revocable funeral account

Usually counted, because it can be canceled and cashed out. Some states allow a small burial fund that is not counted.

Burial space items

A cemetery plot, casket, vault, or headstone is generally not counted.

Life insurance

A policy's cash value may count, depending on the size of the policy and your state's rules.

Funeral Trusts and the Look-Back Period

Medicaid reviews money moved out of your parent's name in the five years before applying. A funeral trust is usually treated differently from a gift.

Funding a funeral trust is generally not treated as a gift, because the money pays for funeral goods and services
The amount should match the expected funeral cost, since an amount well above it can raise questions
A funeral trust can often be set up shortly before applying, even after a move to a nursing home
A spouse can usually have a funeral trust of their own
Once the trust is funded, the money cannot be taken back

Questions to Ask Before You Set One Up

A funeral trust is meant to last for years. These answers matter before the money goes in.

Which funeral goods and services does the trust cover?
Is the price locked in, or can the funeral home charge more later?
What happens if your parent moves or the funeral home closes?
Who receives any money left over after the funeral? In some states it goes to the state Medicaid program.
How much does your state allow in a funeral trust for Medicaid?

Where funeral trusts are not available

Dave does not offer funeral trusts in Michigan or New York. In every other state, the rules differ, so Dave checks them for your family's situation.

How Dave Fits a Funeral Trust Into Your Plan

A funeral trust is one step in a larger Medicaid plan, not a product on its own.

Look at the whole plan. Dave starts with your parent's care needs, assets, and Medicaid timing. The first conversation is at no charge.
Check the state rules. He confirms what your parent's state allows before anything is set up.
Set it up at the right time. Dave helps time the trust so it works with the rest of the Medicaid application.

How Dave is paid

Dave Brandt is a licensed insurance agent. When a funeral trust fits your plan, the insurance company pays him a commission, and you will always know when a recommendation involves a product. Learn how we work and how we are paid.

Funeral Trust and Medicaid Questions

Does an irrevocable funeral trust count toward the Medicaid asset limit?

In general, no. Because the money cannot be taken back, Medicaid does not count it as an asset. Each state sets its own limits on how much can go into one.

Is a funeral trust a gift under the Medicaid look-back?

Usually not. The money buys funeral goods and services, so it is generally not treated as a gift. The amount should match the expected cost of the funeral.

Can you set up a funeral trust after entering a nursing home?

Often, yes. Many families set one up shortly before applying for Medicaid as part of spending down. Check your state's rules first.

What happens to money left in a funeral trust?

It depends on the trust and the state. In some states, money left over after the funeral goes to the state Medicaid program. Ask before you sign.

Why Trust LifeCare Senior Advocates

Dave Brandt
Senior advocate and founder, LifeCare Senior Advocates

Dave Brandt brings more than 25 years in long-term care and works for families, not facilities. He uses funeral trusts as one part of a family's Medicaid plan, and he tells you when a recommendation involves a product.

This page is general information, not legal advice. Medicaid and funeral trust rules differ by state. Dave Brandt is a licensed insurance agent. Dave does not offer funeral trusts in Michigan or New York. LifeCare Senior Advocates is not a law firm and does not provide legal or investment advice.