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Need HELP...Who will be responsible for funeral costs with no life insurance?
06-04-2011, 10:09 AM
Post: #1
Rainbow Need HELP...Who will be responsible for funeral costs with no life insurance?
My dad has Parkinson's and is now in a NJ Nursing Home. He is still married to his 2nd wife who lives in another state but they have been separated for a long time (not legally). After she ran him dry financially, she left him. The only asset he has now is a whole life 50K policy with a cash value of ~5,000. We are being told by Medicaid that he must cash out the policy as it is an asset and can prepay his funeral. After the $2,000 penalty for cashing it out, his funeral will be no where near paid for and if it's cashed out then there is no policy.

Are those $10K Colonial Life policies on TV an option? Is his surviving spouse responsible for his funeral costs? Is he better to divorce her before he dies? He is 74 and not doing well.

Any help is greatly appreciated! God Bless!
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06-05-2011, 03:25 PM
Post: #2
RE: Need HELP...Who will be responsible for funeral costs with no life insurance?
Divorce won't solve anything in your case unless they are counting his 2d wife's assets (divorce will separate their assets and possibly get some of her assets over into his name).

See if you can have the insurance company change the policy to a pre-paid funeral policy.

Another alternative is for you to purchase the policy from your father for it's cash value; that way it will remain in force and your father will get the full value of the policy.

Under the "doctrine of necessaries" a spouse can be held liable for certain "necessary" expenses (support, medical) of the other spouse, during the marriage. This is based on old English law going back 300 years. Many states have abolished this rule, so you need to check whether it exists in your state. I don't believe it applies once a spouse dies, since the marriage obviously is terminated by the death. And there is generally no liability of a surviving spouse for the separate debts of the deceased spouse.

If a person dies without sufficient money for a burial, there are a few options: (i) donate the body to science for research and/or training of future physicians; (ii) opt for a simple cremation, which can cost as little as $700 in some communities; (iii) simple low-cost funeral and burial can be as low as $2,000; or (iv) a burial in a "potter's field," which is a section that some communities have set aside for burial of the desitute.

K. Gabriel Heiser
Phylius Press
Author,
"How to Protect Your Family's Assets
from Devastating Nursing Home Costs: Medicaid Secrets" (
http://www.MedicaidSecrets.com)
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06-06-2011, 12:20 AM
Post: #3
RE: Need HELP...Who will be responsible for funeral costs with no life insurance?
VERY helpful..thank you! She has no assets that I'm aware of, but jointly they owe Uncle Sam for a tax bill that sounds like she will have to assume.

Regarding the insurance. I'm assuming that if we are able to keep the whole life policy thru' one of the options you mentioned that we are still responsible to pay the premiums, correct? If so, does his premiums seem rather high for a 50K policy? $200 per month, especially if we are lucky enough to keep him around several years. He took this one out in 2006 and has since paid ~$9k into it. My brother and I are not looking for a financial gain when he passes other than paying for his funeral. We don't want to pay additional taxes on any proceeds (assuming they are taxed). Is it possible or even better to find him another whole life policy at this point?


(06-04-2011 10:09 AM)bojo4044 Wrote:  My dad has Parkinson's and is now in a NJ Nursing Home. He is still married to his 2nd wife who lives in another state but they have been separated for a long time (not legally). After she ran him dry financially, she left him. The only asset he has now is a whole life 50K policy with a cash value of ~5,000. We are being told by Medicaid that he must cash out the policy as it is an asset and can prepay his funeral. After the $2,000 penalty for cashing it out, his funeral will be no where near paid for and if it's cashed out then there is no policy.

Are those $10K Colonial Life policies on TV an option? Is his surviving spouse responsible for his funeral costs? Is he better to divorce her before he dies? He is 74 and not doing well.

Any help is greatly appreciated! God Bless!

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06-06-2011, 01:26 AM
Post: #4
RE: Need HELP...Who will be responsible for funeral costs with no life insurance?
Yes, unless the policy is "paid up," and it sounds like this one is not, you will need to continue to pay the premiums to keep it in force. As for whether you can do better with another policy, that's a question to pose to an insurance agent who can look at your father's health and life expectancy and compare the policy to others.

If you pay the full value of the life insurance policy to buy it from your father, then the proceeds that you receive upon his death will be taxable income. To avoid this, be sure to pay him somewhat less than the full value, so that a portion of the transfer of the policy from him to you is a gift. Under the IRS rules, that will permit the proceeds NOT to be deemed taxable income.

K. Gabriel Heiser
Phylius Press
Author,
"How to Protect Your Family's Assets
from Devastating Nursing Home Costs: Medicaid Secrets" (
http://www.MedicaidSecrets.com)
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06-06-2011, 02:25 AM
Post: #5
RE: Need HELP...Who will be responsible for funeral costs with no life insurance?
Does the statement below apply if we are able to convert the policy into a funeral pre-paid policy?
"If you pay the full value of the life insurance policy to buy it from your father, then the proceeds that you receive upon his death will be taxable income. To avoid this, be sure to pay him somewhat less than the full value, so that a portion of the transfer of the policy from him to you is a gift. Under the IRS rules, that will permit the proceeds NOT to be deemed taxable income."

I also read something about an irrevocable trust where we can sign the policy over to someone (not sure to whom: Medicaid? funeral home?) to pay the funeral expenses and then any remaining proceeds are split btw. the beneficiaries, as long as we continue to pay the premium. Thoughts?


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06-12-2011, 01:25 PM
Post: #6
RE: Need HELP...Who will be responsible for funeral costs with no life insurance?
If the proceeds pay the funeral bill of the deceased there is no taxable income to anyone, because it is deemed to be used by the decedent. It is only when the proceeds are paid to someone who bought the policy from the insured that the proceeds might be taxable, in some cases.

I'm not familiar with your last option.

K. Gabriel Heiser
Phylius Press
Author,
"How to Protect Your Family's Assets
from Devastating Nursing Home Costs: Medicaid Secrets" (
http://www.MedicaidSecrets.com)
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08-30-2012, 11:46 AM
Post: #7
RE: Need HELP...Who will be responsible for funeral costs with no life insurance?
Not sure this is a fact, but I heard somewhere that social security pays a little or small amount towards your final cost. This applies to those who receive it, I think.
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08-30-2012, 12:49 PM
Post: #8
RE: Need HELP...Who will be responsible for funeral costs with no life insurance?
Yes, according to Social Security, "A one-time payment of $255 can be paid to the surviving spouse if he or she was living with the deceased; or, if living apart, was receiving certain Social Security benefits on the deceased’s record. If there is no surviving spouse, the payment is made to a child who is eligible for benefits on the deceased’s record in the month of death."

K. Gabriel Heiser
Phylius Press
Author,
"How to Protect Your Family's Assets
from Devastating Nursing Home Costs: Medicaid Secrets" (
http://www.MedicaidSecrets.com)
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