Seems like a silly question, doesn’t it? You have money and other assets, as well as life insurance, so why worry about this.
Due to a recent personal experience I learned that there can be problems. After a relative’s death, the estate was locked immediately and no withdrawals could be made from any accounts. The power of attorney document is instantly null and void at death. While it might be possible to try and withdraw funds from the deceased’s bank account after death, the penalties for this are quite severe and the date of withdrawal after the date of death could later invoke these penalties.
Life insurance proceeds often take 3 to 5 weeks to arrive due to waiting for a death certificate, obtaining the proper forms, filling them out, submitting them, waiting for processing and eventually receiving a check.
Thus someone will pay for the funeral and probably will be reimbursed later from your assets or life insurance. Does this person, in your situation, have the money readily available in their checkbook? Or will this create a hardship and a delay on paying their own bills until reimbursed later?
Some of us will not have a dime to our name at the time of death. I am thinking of those of us who end up needing a nursing home or assisted living facility and must apply for Medicaid to pay for it. Medicaid requires one to spend-down to $2000 of savings to get Medicaid and that $2000 goes back to the state at death. You are also required to cash in any life insurance over $1500 before receiving Medicaid. For the family of such a deceased person there will be no reimbursement later.
There is a solution for both situations. Anyone can move some savings (up to a maximum of $15,000) into an irrevocable burial trust account that is immediately available at the time of death. Even Medicaid rules allow this before all of your savings are spent-down to that $2000 limit.
This interest bearing account can pay for the funeral in full before the body has even been picked up. Nobody has to come up with the cash for final expenses. Nobody puts off their own bills or visits the payday loan store. These are maintained by specialized trust companies who simply hold the finds, pay interest on them, and will wire transfer payment for funeral costs as soon as the funeral home faxes them the bill (which only happens once in your life).
The remainder is returned to the estate of the deceased, as the trust company does not sell caskets, vaults, flowers, headstones – your family chooses what to spend it on, how much or how little to spend, with the remainder going back to the deceased’s estate to be distributed through their will.
Since this is very often a long-term care issue with so many people who need LTC turning to Medicaid to pay the high costs of such care, we at TheLongTermCareGuy.com set up these trusts as a regular part of our business assisting folks needing LTC.
There is no cost to set up these trusts. Medicaid even allows you to set them up for your children and their spouses, which is NOT a gift or divestment and is detailed in Medicaid’s rules. There is no cost for meeting with us to see how we can help you with LTC planning.
So, to learn more about this or other strategies we have to help with LTC planning, including LTC insurance, call TheLongTermCareGuy.com at (920) 884-3030 and schedule a time to visit and learn what you can do to protect your family from this burden.