What is an Irrevocable Funeral Trust?
An Irrevocable Funeral Trust is a planning tool used by many seniors today. They are set up through an insurance company as a way to pay for the high costs of funerals and are protected from Medicaid laws and other creditors.
An Irrevocable Funeral Trust Offers:
- Peace of Mind
- Issue Ages from 0 to 99
- Guaranteed Issue or Standard Issue
- Single Premium or Payments
- Funeral Trust Included
- No Underwriting
- Exempt From Nursing Home
- Medicaid Exempt
Agent Frequently Asked Questions:
Funeral Trust Program
Can everyone be covered?
Anyone up to age 99 can be covered with the plan regardless of health.
Is there any underwriting?
The plan is field underwritten, which means that agents ask the health questions.
How long does it take to get a policy issued?
Once the application and other documentation are received at the home office of FDLIC, a policy is generally issued in 5 to 7 days.
What is the maximum amount a policy can be written for?
The maximum policy amount is $30,000, but varies by state law.
What is the minimum amount a policy can be written for?
The minimum policy amount accepted is $500.
Do I have to deliver a policy?
No, FDLIC sends a Certificate of Coverage to the clients.
Can a client get a copy of the policy if they so chose?
Yes, clients can request a copy of their policy at anytime. There are instructions on how to request a copy of the policy on the Certificate of Coverage that is sent to the clients.
Questions on the Trust Document
What is the Decisions Made Early* Irrevocable Final Expense Trust?
The Decisions Made Early Trust is a trust agreement between the Settlor and the Trustee of the Decisions Made Early Trust which is established to make funds available at Settlor's death for the purpose of paying part or all of the Final Expenses as defined in the Irrevocable Final Expense Trust Agreement.
What does Irrevocable mean?
Irrevocable means it is impossible to change. Thus, terms of the agreement may not be changed, amended or canceled. The trust may not be terminated except through distributions permitted by the trust agreement.
Who is Pat Baxter?
Pat Baxter is the trustee of the Decisions Made Early Irrevocable Final Expense Trust Agreement. She is also Executive Vice President and Chief Operations Officer of Funeral Directors Life Insurance Company.
What can Pat Baxter do with the property my client transfers to her as trustee?
xUnder the terms of the Decisions Made Early Irrevocable Final Expense Trust, the trustee shall have no duty to and is expressly prohibited from changing, liquidating, or diversifying any trust asset contributed by Settlor. Thus, she cannot surrender a policy for its cash value. She can only make distributions according to the trust indenture which says that distributions shall be made to a service/product provider(s) in payment of Settlor's Final Expenses, and provided any funds remain, distribute to any Residual Beneficiary named.
Can the trustee change the beneficiary of the trust? Can she change the owner or beneficiary of the annuity or life insurance policy?
No.
What happens if something happens to Pat Baxter?
The Decisions Made Early Master Trust Agreement has an Advisory Committee comprised of three members. This Advisory Committee has the right to remove any Trustee by a written instrument delivered to the Trustee and upon a Trustee's death, disability, resignation or removal, the Advisory Committee shall have the power to appoint a successor Trustee.
It is my understanding that Medicaid allows for a burial fund (of $11500) or a prepaid funeral or funeral trust. Does a life insurance policy purchased in a lump sum payment and transferred to the Decisions Made Early Irrevocable Final Expense Trust, qualify for exclusion for Medicaid eligibility? If so, is there any limit on the amount that may be transferred and still excluded?
While Congress and the federal Health Care Financing Administration set out the main rules under which Medicaid operates, each state runs its own program and has its own Medicaid laws. As a result, the rules are somewhat different in every state, although the framework is the same throughout the countrv. Medicaid laws and court cases interpreting those laws are constantly evolving. The following describes those basic rules, but check your state for the specific application where you live. Almost all states allow for the irrevocable set-aside of funeral and burial funds in trust or pre-need insurance. In most states the limits as to the amounts that qualify for exclusion for Medicaid eligibility are "unspecified". In Indiana a court ruled that a "valid irrevocable Indiana funeral trust" is exempt regardless of its value (Id S 2615.20.15).
Do these transfers qualify for exclusion, without penalty, regardless of any lookback period or spend down provisions of Medicaid?
The irrevocable assignment of assets to the Decisions Made Early Irrevocable Final Expense Trust is designed to qualify those assets for exclusion, without penalty, regardlesso f any look-back period or spend down provisions of Medicaid but because the rules are somewhat different in every state, check your state for the specific application where you live.
If the residual beneficiary is a family member, is the amount paid to the residual beneficiary subject to the look-back period or spend down provisions of Medicaid?
Because the rules are somewhat different in every state, check your state for the specific application where you live, but the irrevocable assignment of assets to the Decisions Made Early Irrevocable Final Expense Trust is designed to qualify those assets for exclusion, without penalty, regardless of any look-back period or spend down provisions of Medicaid, and regardless of whether the residual beneficiary is a family member.
Can the residual beneficiary be the funeral home?
The servicing funeral home will automatically be paid first according to the trust agreement. Therefore, FDLIC recommends that the residual beneficiary be a family member of the insured.
Are you allowed to have more than one policy in the trust?
As long as you complete a new Trust Agreement and Assignment form for each policy, you are allowed to have more than one FDLIC policy in the Decisions Made Earlyt' Trust.
Can the money be taken out once it is put in?
Yes, during the 30 day free-look period only, then no money can be taken out of the irrevocable trust.
Explain the Part A and Part B mentioned in Article 4 of the trust agreement. While Congress and the Federal Health Care Financing Administration set out the main rules under which Medicaid operates, each state runs its own program and has its own Medicaid laws. As a result, the rules are somewhat different in every state, although the framework is the same throughout the country. Medicaid laws, and court cases interpreting those laws, are constantly evolving.
Because it is impossible to know how Medicaid laws will be interpreted in the state of the Settlor's residence for purposes of Medicaid qualification, the Trustee shall divide the Trust Estate into two separate shares, trusts A and B. Trust A shall be composed of cash in an amount equal to the lesser of (1) the maximum amount that may be set aside in the state of the Settlor's residence for funeral expenses and qualify as Exempt Assets for purposes of Medicaid qualification, less the aggregate amount of assets designated for such purposes not owned by this Trust or (2) the Settlor's funeral expenses paid or payable by the Trustee in accordance with and as specifically authorized by Settlor's expense directive attached to the Trust as Exhibit "A".
Trust "B" shall be the balance of the Trust Estate after the assets have been allocated to Trust "A".
This provision in the trust allows the Settlor to take the maximum amount for funeral expenses and qualify as Exempt assets for purposes of Medicaid qualification as determined in the Settlor's state of residence.
Is a specific funeral home named anywhere in the application documents?
No specific funeral home is named in the application or the trust documents. The trust dictates the payout procedures at the time of death. The funeral home that provides the products and services at the time of death will receive proceeds from the trust as payment.
Can these funds be attached by Medicaid or nursing home?
The Decisions Made Early Trust is designed to qualify those assets for exclusion, without penalty, regardless of any look-back period or spend down provisions of Medicaid and as such, assets excluded by Medicaid would not be attachable by Medicaid or a nursing home.
Can the client cash in the policy at a later date?
The client can only cancel this policy during the 30 day free look period and receive their money back. Because the client has assigned all rights of the policy they can no longer cash it in, borrow against the cash value, or implement any other options. The assignment was completed specifically for this reason making it "un-attachable" by creditors or nursing homes.
How long does it take to get the benefits paid out at the time of death?
The funeral home providing the services will fax a copy of the itemized bill signed by the family along with a copy of a certified death certificate to FDLIC. The benefits of the Decisions Made Early Irrevocable Trust are then paid out to the funeral home that performs the services and to the residual beneficiaries the next business day.
Who actually are the primary beneficiary and owner of the policy?
The primary beneficiary and owner should be the Decisions Made Early lrrevocable Trustee in order to remove these assets from the estate.
Who can be named as a residual beneficiary?
The client can name anyone they choose as a residual beneficiary. However, FDLIC recommends that the client names someone other than their spouse in order to avoid the funds coming back to the estate and creating problems with creditors.
Can the residual beneficiary be changed at a later date?
No.
Why does the client assign their rights of the policy to the trust?
The client assigns their rights of the policy to the trust to get the money out of their estate so that it will be protected from attachment by creditors, such as: nursing homes, Medicaid, hospitals, lawyers, and estate tax.
Can a client get their money back?
The client does have a 30 day free look period and the time frame for this period begins when they receive the letter and Certificate of Coverage from FDLIC.