What is a burial reserve and how does it relate to guardianship and Medicaid?

Funeral planning is important regardless of age. It’s an especially important consideration for a guardian who is responsible for making decisions regarding another person’s wellbeing and finances.

Key takeaways:

1. Establishing a burial reserve fund is an important long-term planning tool for a dependent and their guardian. It helps a person applying for Medicaid lower their countable assets and meet Medicaid’s asset limit for qualification purposes.

2. A burial reserve fund saves on costs: one major benefit of prepaying funeral and burial expenses is spending less money down the road.

3. Funeral planning is important regardless of age.

A burial reserve, or irrevocable funeral trust, is a fund established under contract with a financial institution or a funeral director. It’s money set aside for a person’s burial and/or funeral arrangements. A burial reserve fund is designed to help pay for the final expenses in an individual's life. For both the individual and their guardian, a burial reserve fund provides peace of mind and assurance that funeral and burial expenses will be taken care of.

A burial reserve fund can also be an invaluable tool to help qualify for Medicaid. A person wishing to qualify for medical assistance long-term care benefits must reduce what’s referred to as “countable resources”—such as bank accounts and retirement funds—to below the limits of the program. One common way to do this and meet Medicaid’s asset limit is by establishing a burial reserve fund. The funds that go into a burial reserve don’t count as assets for Medicaid’s eligibility criteria.

A few specifics to keep in mind:

1. A burial reserve fund must be used for funeral and burial expenses.

2. The guardian needs to make sure the amount in the fund is reasonable. Also, there are limits on the amount of money that can be transferred to a burial reserve fund.

3. No part of the fund may be withdrawn before the person’s death.

4. The funds are irrevocable, meaning they can’t be changed, reversed, or dissolved for any reason.

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