Irrevocable Funeral Trust and Medicaid: How It Protects Your Savings
An irrevocable funeral trust is one of the few places Medicaid lets you put money it will not count. You prepay your funeral, keep that money safe from a nursing home spend down, and qualify for Medicaid sooner. This page explains how Medicaid treats a funeral trust, the limits in your state, and the mistakes that cost families money.
Why Medicaid Does Not Count an Irrevocable Funeral Trust
Medicaid counts assets you can access. Checking accounts, savings, CDs, and stocks all count toward the asset limit. In Iowa, a single applicant can keep $2,000. In Nebraska, the limit is $4,000.
An irrevocable funeral trust is different. Once you fund it, you cannot cancel it or take the money back. The money can only pay for your funeral. Because you cannot reach it, Medicaid does not count it as an asset, up to your state's limit.
That is the trade. You give up access to the money, and in return Medicaid leaves it alone.
Revocable vs. Irrevocable: What Medicaid Counts
The word irrevocable matters. Here is how Iowa Medicaid treats common funeral plans:
Irrevocable funeral trust or burial contract
Not counted.
Revocable funeral contract
Counted as an asset.
Savings account set aside for burial
Only $1,500 is excluded. The rest counts.
Life insurance assigned to a funeral home in an irrevocable contract
Not counted.
If you already have a revocable prepaid plan, ask about converting it. In Iowa, changing a revocable contract to irrevocable can clear a transfer penalty as of the first of the next month.
Medicaid Funeral Trust Limits by State
Each state sets its own limit on how much a funeral trust can hold. Some examples:
$6,696
Nebraska funeral trust limit.
$13,125
Iowa average funeral cost. Amounts above it need an itemized list of funeral costs. Money above the itemized total counts as a transfer and can trigger a penalty.
$15,000
Limit in most states, or less.
I offer funeral trusts in 48 states. They are not available in Michigan or New York. On our call, I check your state's limit before you fund anything.
Can You Buy a Funeral Trust During a Medicaid Spend Down?
Yes. This is one of the most common times families set one up. Paying for your own funeral is a fair trade, so Medicaid does not treat it as giving money away, as long as the trust stays within your state's limit.
The risk is overfunding. If the trust holds more than your funeral will cost, the extra can be treated as a gift. Gifts during the five-year look-back period can delay Medicaid coverage.
What a Funeral Trust Can Pay For
A funeral trust pays for the goods and services your funeral home lists. That often includes the service, casket or urn, vault, opening and closing of the grave, and the headstone.
A burial plot is often excluded from Medicaid on its own. In Iowa, one burial space per person is not counted, separate from the funeral trust.
Example: Protecting a Mother's Savings
Here is an example. Ruth is 84, lives in Iowa, and is moving into a nursing home. She has $40,000 in savings. Iowa lets her keep $2,000, so she must spend down $38,000 before Medicaid pays.
Ruth's daughter books a call. Together they set up a $12,000 irrevocable funeral trust, which is under the $13,125 Iowa average. That $12,000 now pays for Ruth's funeral and no longer counts. Ruth has $26,000 left to spend down, not $38,000. Her family will not pay for the funeral out of pocket later.
$38,000
Spend down before the trust
$12,000
Moved into the funeral trust
$26,000
Left to spend down
Mistakes That Cost Families Money
Buying a revocable plan
It still counts as an asset.
Labeling a savings account for burial
Only $1,500 is protected in Iowa.
Funding more than the funeral will cost
The extra can trigger a penalty.
Waiting until the application is filed
Set up the trust before you apply so your assets are already under the limit.
How to Set Up a Medicaid Funeral Trust
Funeral trusts are not sold online. Every plan starts with a call. We review your state's limit, your funeral costs, and your Medicaid timeline. Then we complete the paperwork together by phone or in person. See the full process on how to buy a funeral trust.
Funeral Trust and Medicaid FAQs
Does Medicaid count a funeral trust as an asset?
Not if it is irrevocable and within your state's limit. A revocable plan does count.
How much can I put in a funeral trust for Medicaid?
It depends on your state. Nebraska allows up to $6,696. Most states allow $15,000 or less. Iowa requires an itemized list for amounts over $13,125.
Can I buy a funeral trust after my parent enters a nursing home?
Yes. There are no health questions. Set it up before the Medicaid application is filed.
Is buying a funeral trust a gift under the look-back rule?
No, as long as the amount matches the cost of the funeral. Money above that can be treated as a gift.
Can a married couple each have a funeral trust?
Yes. Each spouse can have a separate trust, and each one is subject to the state limit.
Protect Your Savings Before You Apply
One call shows you your state's limit, what a funeral costs where you live, and how much a trust can protect. There is no cost and no obligation.
Funeral Trust Gal is part of the Aging Parent Resource Center.
Sara Guida is a licensed insurance agent, not an attorney, and does not represent any state Medicaid agency. Content on this site is general education, not legal or financial advice. Medicaid rules and funeral trust limits vary by state.