Can my mom refinance her home and cash out money to prepaid her funeral bill and not be penalized

Q) My mom may be force to refinance her home due to the fax the lady that refinance her house has passed away and they need to settle her estate. We know she can refinance her home and would not effect her Medicaid that she is receiving now for. But can she refinance her home and cash out money to prepaid her funeral bill and not be penalized if in the future she would have to be placed in for long term care using Medicaid?

A) The answer to your question may depend on your mom’s specific circumstances and the state in which she lives, as Medicaid rules and regulations can vary by state. In general, Medicaid has rules regarding the transfer of assets and income that may affect eligibility for benefits.

If your mom is receiving Medicaid benefits or is planning to apply for Medicaid in the future, it’s important to carefully consider the impact that refinancing her home and cashing out money could have on her eligibility. Medicaid has a look-back period during which any transfers of assets or income may be subject to penalties or restrictions on eligibility for benefits.

One option your mom may want to consider is setting up a funeral trust, which is a type of account that can be used to prepay for funeral expenses. Depending on the state, funds in a funeral trust may be exempt from Medicaid asset limits and could be used to pay for funeral expenses without impacting Medicaid eligibility.

It’s important to consult with an attorney or financial advisor who is knowledgeable about Medicaid rules and regulations in your state to fully understand the potential impact of refinancing and cashing out on Medicaid eligibility.

According to Medicaid: When your mother receives her cash, you or whoever is representing her will have to inform the Medicaid agency for your state. Medicaid coverage will then end until she has again spent down her money to the countable asset limit, $2,000 in many states. The money can be spent for anything that will benefit your mother, including prepaying her funeral, travel, dining out, clothes, television, DVD player, and paying off any debts she may have. In most cases, your mother cannot make gifts with her money. However, there are some exceptions to this rule and in some states good planning techniques that may permit some gifting. To be sure, you will need to consult with a qualified elder law attorney in your state.