Protect Mom’s Money

Here is a not untypical situation where Mom needs care and even though Medicaid will soon be needed, some funds can  be moved to family.

In our example, Mom is 83 years old and suffering from dementia.  She has 2 daughters, one of which is married, the other divorced.  The daughters have finally convinced Mom that she will be happier, safer, and better cared for in an assisted living facility.  Mom agrees to move in.

The daughters now need to liquidate Mom’s modest house and her car.  An estate sale ensues to dispose of the unneeded contents of the house.  When all is liquidated, and Mom’s first month is paid for, she retains about $110,000 in her bank account.

If Mom spends down to Medicaid impoverishment, and is left with just $2000 of assets, the daughters will end up paying for Mom’s funeral at death.  This is due to the requirement that any life insurance paying more than $1500 at death be “cashed in” and spent to qualify for Medicaid.

However, Mom can put up to $15,000 (varies by state) into an irrevocable burial trust (IBT).  These accounts are allowed by Medicaid, there is no 5 year look-back on transfers to an IBT, and the money earns interest until the date of Mom’s death.  At that time, the funds are available, by wire transfer, to pay for funeral costs immediately, even before the death certificate has been printed.  By comparison, life insurance proceeds are usually not received until 5 weeks or more after death, commonly causing someone to put up a credit card at the funeral home for at least partial payment.

In addition, in many states, Mom can also fund irrevocable funeral spaces trusts for up to $15,000 for each of her children and spouses thereof.  The funds will be immediately available for their funeral costs at death, and in the meantime are protected from any creditors, nursing facilities, lawsuits, etc., as they are outside the estate of the beneficiary of such trust.  The money is truly protected.

For those of you who thought that all Mom’s money would be spent on her Long Term Care costs, now you know that some funds can be left to family.  Of course, preparing for LTC while healthy with a LTC insurance policy is the least expensive way to deal with the care that the Health and Human Services government agency says will be needed by 70% of us.  But for those who did not prepare, options exist.  For more information visit

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