One tool for those looking to spend down their assets in order to apply for Medicaid benefits is the Irrevocable Funeral Trust (“IFT”). Through an IFT, a person can set aside funds to pay for his or her funeral and burial expenses. Importantly, funds in an IFT are not considered to be part of a person’s estate for purposes of Medicaid qualification. A recent article discusses the basics of the IFT.
Importantly, an IFT should not be used by just anyone. High net-worth individuals who will not require Medicaid assistance, for example, would not use an IFT because they likely have sufficient funds or insurance policies that will cover medical expenses.
However, those who are worried about how to pay for their long-term care costs and do not have money earmarked for their funeral should consider an IFT. A person taking out an IFT will be required to pay completely in advance, and will not be permitted to take out an IFT for an amount that exceeds 125 percent of the average funeral cost.
Importantly, no medical underwriting is necessary for an IFT. Beyond the one-time payment to the insurance company, the insured party faces no expense from the trust.