Funeral Planning In North Dakota
Funeral planning in North Dakota requires careful consideration if there is ever a need for medical assistance. Current North Dakota Medicaid rules allow for an asset exemption of $9000 per person in which $6000 is considered funeral allowance and $3000 is considered for personal use. These categories may be adjusted to add more to the funeral exemption, example $8000 in the funeral allowance and $1000 in the personal funds. However, one can’t go the other way and increase personal funds over $3000.00. All assets are considered when applying for medical assistance including property (land and house), autos, annuities, life insurance policy cash values/premium paid and bank accounts. Upon death of the person receiving medical assistance, all unused personal funds in their checking account are claimed by the State of North Dakota for reimbursement of some of their costs for that person. Taking that into consideration it is wise to have more funds in the funeral account and less in the personal account.
When setting up a funeral account it should meet medical assistance guidelines. Usually a CD, life insurance or annuity is set up in the amount of $8000.00. There is growth to both methods. If the funeral costs exceed the funeral funds balance, the family usually makes up the difference. Current funerals average approximately $9500 for casket, services and burial vault. The cash advances for flowers, grave opening and closing, church honorariums etc. average approximately $1200.00. These figures are averages for merchandise selections and donations to the church etc. The Medicaid applicant can not give funds to anyone else to cover any shortfalls in funeral expenses than what was set aside in the funeral account. This would be considered an implied trust and would require a change somewhere to maintain the $9000 total funeral allowance and personal allowance. If funeral costs exceed funds in the funeral trust then family members make up the negligible difference.
Funeral accounts have been set up by individuals for many years using certificates of deposit, life insurance or annuities. Many have never entered a nursing home or needed medical assistance and the funds were there to pay for funeral expenses. However, many have and by setting up the account years in advance, growth occurred, and this growth was and still is not counted against the allowed funeral exemption. It is not considered part of the $9000 total asset allowance. In summary there is no penalty for the growth. Imagine the difference of setting up an account now, add the growth then compare this to not setting it up. When the medical assistance day of reckoning arrives one will be only allowed the $9000.00 total with no funeral account interest. One cannot stress the importance of setting up a funeral account well ahead of time.
The funeral funds are usually invested in a bank certificate of deposit or single premium life insurance policy or annuity. Each has its advantages and disadvantages. Either option provides an excellent paper trail for documentation and proof. Usually a lump sum is invested though payment schedules are possible. There is growth in these investments.
The certificate of deposit is usually set up with the person’s name and proceeds payable on death to the funeral home. Interest is paid on the account and allowed to accrue to take advantage of the increase in the CD value as discussed in the above. You are also the CD owner and have complete control over the CD. No one other than you or your power of attorney can make changes or have access to these funds. They are as safe as the bank where the money is at. They may be cashed in by the owner with usually a three month interest penalty.
Life Insurance or an Annuity can also be a method of setting aside funds for a funeral. They are single premium policies most of the time. The insured can make the funeral home the owner or a trusted loved one. Funeral homes usually use an insurance product specialized for the intended purpose. One of the most used plans in the country that has been around for many years is called Purple Cross and is underwritten by National Guardian Life Insurance Company. There is guaranteed growth in either the life insurance or annuity product. Premium paid is what is considered as the basis for either the life insurance or the annuity. Depending on age and ability to answer no to several health questions, life insurance can offer a significant increase in the insurance face amount of the policy and thus the funds available to pay funeral costs. Another advantage over CD’s is growth in the annuity or life insurance is not considered income as is the interest in a CD. There are no 1099’s issued to the owner/insured when one owns a life insurance or annuity policy and the proceeds are paid to the funeral home upon death. The insurance or annuity can be cashed in ahead of death. However, there are significant penalties in the first seven years of the insurance or the annuity. These penalties are stated in the policy.
Preplanning and paying for one’s final expenses are allowed transfers of assets recognized by the state of North Dakota and the federal government. On February 8, 2006, President Bush signed into Law the Deficit Reduction Act of 2005, which among other provisions places severe restrictions on the ability of the elderly to transfer assets before qualifying for Medicaid Coverage of nursing home care. This act was sent to the President after having passed in the House of Representatives by a vote of 216 for and 214 against.
Estate planning and transfers of assets not relating to funeral costs should be discussed with an attorney that feels confident in these matters. The scope of these transfers is much broader than what the funeral home can provide information on and very unique to each individual. A significant item in the new law is the five year look back period which examines all transfers of assets. Documentation is very important and action on your part well ahead of time is good advice for those willing to plan well ahead. Remember the burden of proving one’s eligibility for medical assistance falls on the person (or family member) applying for it. The county eligibility workers will review your paperwork and application and if not satisfactory, deny paying for the persons medical expenses/nursing home expenses. The old laws were pretty generous and allowed for significant transfers. Those days appear to be gone. The new rules require the individual to pay for their medical/nursing home expenses until their financial resources are reduced to the levels for the funeral and personal funds allowed amount of $9000.00.
Much of the above discussion has centered on one individual applying for medical assistance. Married couples are treated the same way if both require medical assistance at the same time. When one spouse requires nursing home care and the other does not, different asset levels apply. The spouse is allowed to keep the house, one vehicle, adjoining and contiguous acreage to the farmstead and cash up to but not exceeding $99,540.00 with a minimum of 19,908. Examples 1: $200,000 assets divided in two giving $99,540 to the spouse not in the nursing home and balance going to the one in the nursing home. Example 2: $ 27,908 of which $19,908 goes to the spouse not in the nursing home and $9000 goes to the spouse in the nursing home. This $9000 then becomes that spouses allowed personal and funeral exemption. (Examples are for amounts for 2006)
Preneed funeral accounts may affect other government assistance programs. Funeral accounts do not affect eligibility to receive food stamps. However there is discussion at the state level which may result in funeral accounts being considered when determining food stamp eligibility.
Fuel assistance is another government program which does consider funeral account deposits. The state only considers $3000 of the funeral account exempt when considering the applicants total assets. However higher asset limits are allowed in this program and usually the funeral account does not create a problem.
State and federal government programs are subject to change. Changes made do not need to be widely publicized. That is why consulting an attorney on changes will be to your benefit. The benefit is an orderly, easily documented and legal means of obtaining assistance for yourself or a loved one when the time arrives. Funeral directors are aware of these changes and may offer some guidance. However, the specifics should be left up to your attorney to provide.
Funeral pre planning is important in providing you with peace of mind. It allows you to plan and set aside funds for funeral services. It takes advantage of current laws. Your family will also appreciate your efforts in making a difficult time somewhat less stressful. (Nick Hertz –revised 08-09-2012)