Important Information for SSI/Medicaid Applicants & Recipients

Important Information for SSI/Medicaid Applicants & Recipients

New York State Law mandates that prearrangements with New York funeral firms MUST be REVOCABLE, except for SSI/Medicaid recipients. This means that all prearrangements (except when prepared for Medicaid spend down) may be canceled at any time prior to death and the entire balance, including all accrued interest, must be refunded within ten days of the request.

New York State Law also mandates that preneed burial trusts for applicants or recipients of SSI/Medicaid MUST be IRREVOCABLE. This means that the prearrangement MAY NOT be canceled prior to death. It may, however, be transferred to a different funeral home at any time.

Taxation of Preneed Funeral Trusts

The Internal Revenue Service has determined that Purchasers of preneed funeral trusts are responsible for any income tax (if the Purchaser is required to file) resulting from interest earned on the trust account. The funds, although set aside as payment for funeral expenses, always remain the property of the Purchaser. With the exception of irrevocable trusts, a Purchaser always maintains the right to withdraw the funds at any time prior to the performance of the funeral. Although withdrawals are not permitted from irrevocable trusts, the funds may be transferred to a different funeral firm at any time.

A Purchaser should receive a tax information statement each year by January 31st, (i.e., 1099 or K-1Grantor Trust Statement) indicating the amount of interest earned on the account for the previous year. In addition, at any time upon written request, a funeral firm must provide a Purchaser with an accurate balance including principal and accrued interest.

Most funeral firms are extremely knowledgeable concerning all aspects of prepaid funerals in general, specifics on SSI/Medicaid, and often have the added benefit of local Social Services Department relationships which may make this part of the “spend down” process go more smoothly.

Important Information for Applicants of Public Benefit Programs

“It was the judgment of Congress that persons should not have to choose between lifesaving welfare assistance and giving up their plan for the disposition of their bodily remains.” A 1982 amendment to the Social Security Act implemented a program whereby SSI/Medicaid eligible persons can set aside funds for their funeral and burial expenses before their resources are exhausted by medical bills or their income declines to such a level that they need the cash assistance provided by the Supplemental Security Income (SSI) program. This program was implemented through specific resource exclusions for prepaid funeral contracts.


There is often confusion about what each of these programs provide, specifically Medicaid and Medicare. Below are brief descriptions of each:


Medicare is authorized under the Social Security Act and is part of a national health insurance program for the aged and certain disabled persons. Medicare is administered by the Health Care Financing Administration under the US Department of Health and Human Services.


Medicaid is a joint state-federal health insurance program for low-income individuals. It is administered by individual states with federal oversight and regulation by the Health Care Financing Administration. Currently, all resources placed in an irrevocable funeral fund are excluded when an individual applies for Medicaid. Revocable contracts as an excludable resource are limited to $1,500. Please note that the revocable $1,500 limit is reduced proportionally by any irrevocable funeral funds or insurance policies. State Medicaid plans are currently linked to federal SSI eligibility criteria, however, individual states make their own Medicaid determinations using the federal SSI criteria.

Supplemental Security Income (SSI):

SSI is a means-tested, federally administered income assistance program that provides monthly cash payments to the needy, aged, blind and disabled in accordance with uniform nationwide eligibility requirements. SSI is administered by the Health Care Financing Administration under the US Department of Health and Human Services. The limit on countable resources for SSI is $2000 per individual and $3000 per couple. All irrevocable preneed funds are excluded and any revocable preneed funds of up to $1,500* for funeral expenses and unlimited burial space expenses (funeral merchandise) per individual are excluded, with limited exceptions, for SSI eligibility purposes.