What is Asset Recovery?
When someone is trying to qualify for SSI/Medicaid in New Jersey, they must engage in what is called a “spend-down.”
Spend-down is the process in which a person’s assets are lowered until they reach the level where their net worth is less than the threshold for Medicaid eligibility. Establishing an irrevocable prepaid funeral trust account for funeral expenses can be part of that spend-down process.
Sometimes, however, because of either growth of the trust or because arrangements change when the intended funeral recipient dies, there is money left over following the funeral. That is where the state steps in, as any further assets that may belong to the SSI/Medicaid recipient are subject to asset recovery.
Asset recovery is the state’s method of recouping money it spent on an SSI/Medicaid recipient’s care. In all but rare occasions, the state will seek to claim any excess funds following a funeral. All irrevocable funeral arrangements, regardless of how they are funded, are subject to asset recovery.
In the case of a trust account established with the New Jersey Prepaid Funeral Trust Fund, leftover money is automatically forwarded to the State of New Jersey after the funeral expenses are paid. In the case of an existing insurance policy, the state, which has already been named the beneficiary of the policy, will retain funds over and above the final bill.
A funeral director is able to assist you in establishing your irrevocable trust account. In all cases, a funeral director must deposit any money paid in advance for a funeral or burial into an interest-bearing trust account within 30 days of receipt.
In certain unique cases, it may be advisable to contact a lawyer who specializes in elder care and SSI/Medicaid in order to facilitate the spend-down and assess what assets the recipient may have that could cause a delay in or denial of eligibility.