3. I see one very good advantage to an Irrevocable Funeral Trust – everything is paid in advance. But I see more disadvantages. Though my mother has chronic pain, she’s in excellent health. If we prepay her expenses now and she lives another 10 years, what happens if the funeral home goes out of business?
A: This sort of trust is a waste of resources. You are tying up the money unnecessarily, in my view.
If we prepay too much, I understand the excess goes to the county?
A: Once again, I see no value in tying up money in a funeral trust. You can by an insurance policy to cover final expenses, and then use the money however you wish. Or you can just set some money aside in a separate account.
My parents have an Irrevocable Trust on the house which indicates that their funeral expenses are to be paid from the estate. Does this disallow us from entering into an Irrevocable Funeral Trust?
A: A trust instrument cannot force outcomes external to the trust holdings. The statement concerning final expenses is unenforceable, except to the extent that it prohibits use of the irrevocable trust assets from being used to pay final expenses.
Note: I get the feeling that this "geriatric manager" is not an attorney, and may sell insurance. If so, then that is a conflict of interest, because the goal may be to sell insurance, rather than to assist your mother. Moreover, a person who advises about about estate planning is practicing law. So, if the geriatric manager is not
an attorney, then making suggestions about how to structure your parent's estate is unlawful.
Not that I have anything personally against this person -- but my antenna is up, so I feel disposed to go a little beyond your question.
One more thing. Once upon a time, estate planning was a very viable means of avoiding taxes and putting more money into the hands of family beneficiaries. Modernly, however, federal law has managed to evicerate almost all of the estate planning mechanisms, except for those provisions which double the Uniform Estate Tax Exemption and avoid the cost of an expensive probate
Other creative estate plans can generally be shown to fail, unless their purpose is to donate money to a charity. If your parents are not planning to donate their assets to charity, then in my view, the sort of asset protection that you are attempting to effect is largely a waste of time and money. And, if you parents are seeking to donate assets, then they need to sit down with an estate planning attorney and work out a comprehensive plan to effect that outcome.
Regardless, there is no absolute escape from paying back Medicaid, unless assets are deposited into an irrevocable trust at least 60 months prior to the receipt of Medicaid benefits. Since it appears that your mother needs help now, the proposed trusts will not produce the expected outcome.
P.S. A little bird told me that you might be willing to pay for each answer separately. If you choose to do this, you can accomplish the same result
Hope this helps.