Important Details About Preplanning You Should Know!
"Necessity never made a good bargain." Benjamin Franklin
Many New York residents prearrange and prefund their funerals as part of their regular estate planning.
Preplanning protects and safeguards individuals and families from difficult decisions and unplanned financial burden on one of life’s certain saddest days. There are clear advantages to planning ahead.
Can you imagine planning a wedding in just a few days?
Or any significant celebration for that matter?
Why leave the most important celebration of your life to the last minute? The peace of mind you gain from easing the burden on your surviving loved ones and ensuring your wishes are known make this task the intelligent choice!
Consumers in New York State benefit from the strictest, most comprehensive funeral preneed laws in the country. In New York State, 100% of the principal and interest must accrue to the benefit of the Trust (less a third party Trustee administrative fee), which must be deposited in FDIC insured certificates of deposit backed by the government of the United States. A Board of Trustees, who are members of the New York State Funeral Directors Association and are carefully appointed by the NYSFDA Board of Directors, oversee the operations of the trust.
All documentation generated by this process must meet stringent federal and state requirements for resource qualification and funeral service disclosures.
Different Types of Preneed Agreements
New York State law mandates that prearrangements with New York funeral firms MUST be REVOCABLE, except for SSI/Medicaid recipients. This means that all prearrangements (except when prepared for Medicaid spend down) may be canceled at any time prior to death and the entire balance, including all accrued interest, must be refunded within ten days of the request. They are also transferable.
New York State law also mandates that preneed burial trusts for applicants or recipients of SSI/Medicaid MUST be IRREVOCABLE. This means that the prearrangement MAY NOT be canceled prior to death. It may, however, be transferred to a different funeral home at any time. This is considered a protected asset and not part of the Medicaid look back. SSI/Medicaid recipients are allowed to set aside money to fully fund the service of their choice before their funds are exhausted down to necessary eligibility levels.
We are extremely knowledgeable concerning all aspects of prepaid funerals including the specifics on SSI/Medicaid spend downs and what other family members may be eligible to create a protected preneed trust for themselves utilizing assets of applicants for Medicaid.
Aside from being revocable or irrevocable, there are essentially two types of preneed agreements. Following is a description of each:
1. GUARANTEED ARRANGEMENTS
The funeral home may offer a guaranteed preneed agreement whereby the price of the funeral services and merchandise portion is guaranteed not to exceed the balance in your trust account at the time that the funeral is provided. The Guarantee will be null and void if withdrawals are made from the trust account or not fully funded and will not apply to certain third party items.
2. NON-GUARANTEED ARRANGEMENTS
A non-guaranteed agreement means that the funeral home will provide the funeral services and merchandise selected at the cost of those items at the time of your funeral. If the total cost of the funeral exceeds the amount in the trust account, the additional expense will be due. If the total cost is less than the balance in the account, the excess funds will be refunded (except irrevocable trusts). The cost of the items at the time of your funeral must correspond with the funeral homes printed General Price List at that time.
Taxation of Preneed Funeral Trusts
Purchasers of preneed funeral trusts are responsible for any income tax (if the Purchaser is required to file) resulting from interest earned on the trust account. The funds, although set aside as payment for funeral expenses, always remain the property of the Purchaser. With the exception of irrevocable trusts, a Purchaser always maintains the right to withdraw the funds at any time prior to the performance of the funeral. Although withdrawals are not permitted from irrevocable trusts, the funds may be transferred to a different funeral firm at any time.
Supplemental Security Income & Medicaid Limits
2017 Medicaid Resource Limits (Excludes irrevocable burial account, house, car and life insurance with a face value of $1,500.00 or less.)
1 Person Household -- $14,850
2 Person Household -- $21,750
The Federal maximum community spousal resource allowance is $120,900
2017 SSI Resource Limits: (Excludes irrevocable burial account, life insurance with face value of $1,500 or less.)
1 Person Household - $2,000
2 Person Household - $3,000