Funeral Trusts
What Is an Irrevocable Funeral Trust and Why Might You Need One?
An Irrevocable Funeral Trust (IFT) allows you to prepay funeral and burial expenses in a way that can also help you qualify for long-term care Medicaid. Once money is placed in the trust, it is no longer considered your asset for Medicaid eligibility purposes—helping you meet strict asset limits while ensuring funds are set aside for final expenses. Unlike revocable arrangements, an IFT cannot be altered, refunded, or canceled, offering peace of mind and Medicaid compliance in one step.
In 2025, the average U.S. funeral cost is between $7,500 and $10,000, but prices vary widely depending on location and services chosen.
How Can an IFT Help You Qualify for Medicaid?
Medicaid requires applicants to meet an asset limit—usually around $2,000 for a single person in 2025 (state rules vary). By placing funds in an IFT, you can reduce countable assets without violating Medicaid’s rules. For example, someone with $15,000 in assets could prepay $13,000 into an IFT, leaving only $2,000 in countable assets—making them eligible for Medicaid benefits.
For married couples, Medicaid applies spousal impoverishment rules, allowing the non-applicant spouse to retain a higher portion of assets, often up to $157,920 in 2025. IFTs can be purchased for either spouse to further reduce countable assets.
Why Is the Look-Back Period Important?
Medicaid imposes a look-back period—typically five years—during which certain asset transfers can trigger a penalty. However, IFTs do not count as gifts under Medicaid rules, so they are exempt from penalties if properly structured. California and New York currently have more lenient look-back rules for certain Medicaid services, but state-specific laws change often, making it critical to verify local requirements.
What Makes an IFT Medicaid-Compliant?
- It must be irrevocable—funds cannot be refunded or withdrawn.
- Funds must only be used for funeral, burial, and related final expenses.
- In many states, a Goods & Services Statement is required, itemizing planned expenses to match the trust’s value.
- Most states require the state to be named as a residual beneficiary for any unused funds, as part of Medicaid’s Estate Recovery Program.
What Can an IFT Pay For?
IFT funds can cover a wide range of final expenses, including:
- Funeral home services and staff
- Clergy and musician fees
- Death certificates and printed notices
- Embalming, dressing, and casketing
- Caskets, vaults, burial plots, and headstones
- Cremation services and urns
- Cemetery fees and transportation (hearse, limousines)
- Clothing, makeup, and hairstyling
Note: Flowers and travel expenses for relatives are not allowable in every state—check your state’s rules before including them.
Do All States Allow IFTs for Medicaid Planning?
All states except Michigan and New York allow IFTs to reduce countable assets for Medicaid. These states instead permit irrevocable pre-need funeral contracts purchased through funeral homes. Rules and maximum amounts vary, so reviewing your state’s limits is essential.
Maximum IFT Amounts by State (2025)
| State | Maximum Amount / Rules |
|---|---|
| Alabama | $15,000 – Requires Goods & Services Statement |
| Alaska | $1,500 |
| Arizona | $9,000 – Requires Goods & Services Statement |
| Arkansas | No limit – Requires Goods & Services Statement |
| California | No limit |
| Connecticut | $10,000 |
| Delaware | $15,000 – Requires Goods & Services Statement |
| Florida | No limit |
| Georgia | $10,000 |
| Hawaii | No limit |
| Idaho | No limit |
| Illinois | $8,212 – Requires Goods & Services Statement |
| Iowa | $13,125 without G&S; No limit with G&S |
| Kansas | $11,960 – Requires Goods & Services Statement |
| Kentucky | No limit – Requires Goods & Services Statement |
| Louisiana | $10,000 – Requires Goods & Services Statement |
| Maine | $18,432 |
| Maryland | No limit |
| Massachusetts | No limit – Requires Goods & Services Statement |
| Michigan | N/A – Must be purchased through funeral home, up to $15,870 |
| Minnesota | No limit |
| Mississippi | No limit – Requires Goods & Services Statement |
| Missouri | No limit – Requires Goods & Services Statement; Up to $9,999.99 exempt |
| Nebraska | $6,507 |
| Nevada | $15,000 – Requires Goods & Services Statement |
| New Hampshire | No limit – Requires Goods & Services Statement |
| New Jersey | No limit – Requires Goods & Services Statement |
| New Mexico | No limit |
| New York | N/A – Only pre-need funeral agreements allowed |
| North Carolina | No limit |
| North Dakota | No limit – Requires Goods & Services Statement |
| Ohio | No limit |
| Oklahoma | $10,000 |
| Oregon | No limit |
| Pennsylvania | Average cost + 25% extra (approx. $13,267–$28,045) |
| Rhode Island | $15,000 |
| South Carolina | No limit |
| South Dakota | $15,000 |
| Tennessee | No limit – Requires Goods & Services Statement; $6,000 exempt |
| Texas | $15,000 |
| Utah | $7,000 |
| Vermont | $10,000 |
| Virginia | No limit |
| Washington | No limit – Must be reasonable for anticipated costs |
| Washington DC | No limit |
| West Virginia | No limit – Requires Goods & Services Statement |
| Wisconsin | $4,500 unless funded by life insurance; Requires G&S Statement |
| Wyoming | $15,000 – Requires Goods & Services Statement |
Do You Need Professional Help?
Because state rules vary and can change frequently, professional Medicaid planning assistance is strongly recommended. Setting up an IFT incorrectly—such as overfunding it or failing to provide required documentation—can result in Medicaid ineligibility instead of approval.
Are There Any Costs to Set One Up?
Most IFTs are free to establish. If you work with a Medicaid planner, setup may be included in the planning package. Some states require a small administrative fee if a Goods & Services Statement is needed.
