Alert Indiana Medicaid Rule Changes
June, 2017

Medicaid planning with the use of funeral arrangements just became much more difficult in Indiana.  These changes are twofold.

The first change has to do with the making of funeral arrangements for family members.  The old law allowed a Medicaid applicant to purchase irrevocable funeral trusts for a spouse, children, stepchildren and spouse of children or stepchildren.

The new law only allows the applicant to purchase irrevocable funeral trusts for the applicant and spouse.  The applicant may still buy gravesites and markers for family members.  This change is being challenged because it may violate federal law.  We are advising our clients not to purchase funeral arrangements for family members.

The second change requires the State of Indiana or the estate of the applicant to be the beneficiary for any excess funds for a life insurance policy irrevocably assigned to a funeral home.  If the life insurance policy has been transferred to an irrevocable funeral trust or an irrevocable prepaid funeral agreement, and has one or more policies with the face value that exceeds $10,000 (excepting term policies), then it can be exempted if it designates the State of Indiana or the applicant’s estate to receive any remaining amounts after services are paid for

Examples of the second change!

  • Example 1:
    Mr. and Mrs. Smith apply for Medicaid.  He has a life insurance policy with a face value of $8,000, and she has one with a face value of $4,000.  The beneficiary of both policies is Miller’s Funeral Home.  The cash surrender value of both policies is exempt because each policy has a face value of $10,000 or less.
  • Example 2:
    The applicant has a $1,000 irrevocable burial trust.  Therefore, he is allowed a life insurance face value exemption of $9,000 ($10,000 – $1,000 = $9,000).  He has a life insurance policy with a face value of $8,000, and the beneficiary is his estate.  The cash surrender value is exempt.
  • Example 3:
    Sam has a life insurance policy with a face value of $30,000 and death benefit of $20,000.  The policy was transferred over to the funeral home and created an irrevocable funeral agreement, which designates the State of Indiana or Sam’s estate to receive any remaining funds after all services have been paid.  The life insurance cash surrender is exempt on the date it is irrevocable.

Please contact us with any questions.

Very truly yours,
Keith P. Huffman
June 2017

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