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Estate Planning, Pre Paid Funeral

Clients or prospective clients commonly ask whether they need a will. Often these same individuals will explain to me that their assets are in trusts, or are jointly owned, or have beneficiary designations. They are correct in that these assets would pass to others without the need to use a will or go through the probate process.

However this is misguided.

Two questions for them:

  • what if you acquire an asset and pass away without retitling with a joint owner? or name a beneficiary?
  • What happens if a named beneficiary passes before you?

The responses usually are something to the effect of: “it won’t happen to me” or “I’ll name alternate beneficiaries,” etc. My response is why not be absolutely certain that the individuals or institutions you desire become your beneficiaries.

Hopefully, with the client’s advance planning, the will will never need to be used, but it should.

A common reason that an applicant for Medicaid will be denied Medicaid benefits is that he or she has assets or resources greater than the amounts permitted. Essentially, the applicant is not “poor.” A nice way to plan for Medicaid eligibility and to make sure that final wishes are carried out is for the applicant to pre pay for his or her funeral. Aside from accomplishing Medicaid planning, it is usually good for peace of mind and helps to avoid sometime ugly and highly emotional controversies with children and family after the Medicaid applicant has passed. I cannot begin to describe some of the terrible fighting that occurs when there is no direction for funeral or burial arrangements.

In order to be eligible for Medicaid an applicant is not permitted to have assets or resources greater than $14,850.00 in 2015 (the resources limit usually changes each calendar year). Additionally, if the applicant were to give away resources, in an effort to look or seem “poor” or financially eligible (assets below $14,850.00 in 2015), he or she may be penalized for a period of time for having gifted away resources.

By purchasing a pre-paid funeral the applicant can accomplish two goals at once – pay for something that will be needed in the future and convert an available resource (or asset) into an asset that will not count towards Medicaid eligibility.

To be continued ….

Aaron E. Futterman, CPA, Esq. is a partner in the law firm of Futterman & Lanza, LLP with offices in Smithtown, NY and clients throughout Suffolk, Nassau, Queens, Brooklyn, Bronx, Richmond, New York, Westchester and Rockland Counties. He concentrates his practice to Elder Law, Medicaid Planning, Medicaid Applications, Estate Planning, Probate, Estate Taxes, and Estate Administration. 

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