Irrevocable Funeral Trust in Delaware: Medicaid Asset Protection
Why Funeral Trusts Matter for Medicaid Planning
Delaware's Medicaid asset limit for long-term care is $2,000 in countable resources. That is not a typo — two thousand dollars. Families scrambling to get a parent below that threshold often overlook one of the simplest asset protection tools available: the irrevocable prepaid funeral trust.
Under Delaware Medicaid rules, a qualifying irrevocable funeral trust may be excluded from countable assets up to $15,000 per person. For a married couple, qualifying arrangements may cover up to $30,000 combined, subject to program requirements.
How It Works
An irrevocable funeral trust is a contract between the Medicaid applicant (or their authorized representative) and a funeral home or insurance-backed trust provider. The applicant funds the trust with a lump sum — up to $15,000 — and the funds are earmarked exclusively for funeral, burial, and related end-of-life expenses.
The key word is "irrevocable." Once the money goes in, neither the applicant nor anyone else can withdraw it or redirect it to non-funeral purposes. A qualifying irrevocable arrangement can be excluded from the applicant's countable assets, subject to the program's requirements and the $15,000 limit.
Covered expenses typically include:
- Casket or urn
- Funeral service and chapel fees
- Embalming and body preparation
- Cemetery plot and marker
- Burial vault or grave liner
- Transportation of remains
- Obituary costs
- Flowers and memorial items
Treatment of any balance above the actual funeral costs depends on the trust or contract terms; review those terms before signing.
Irrevocable Funeral Trust vs. Prepaid Burial Plan
These terms overlap but are not identical:
Prepaid burial plan: A direct contract with a specific funeral home that locks in today's prices for specific services. The funeral home holds the money (often in a state-regulated trust or insurance policy). If the funeral home closes, the state's prepaid funeral guarantee fund (where one exists) may or may not cover the full amount.
Irrevocable funeral trust: A trust instrument — often insurance-backed — that designates funds for funeral expenses but is not necessarily tied to one specific funeral home. The family retains the ability to choose a provider at the time of need, depending on the trust terms.
For Medicaid purposes, a qualifying irrevocable prepaid arrangement may be excluded up to $15,000 per person; confirm that the arrangement meets DMMA's requirements. The critical documentation requirement is that the trust or contract must explicitly state it is irrevocable and designated for funeral expenses.
Free Download
Get the Delaware — Medicaid Long-Term Care Eligibility Checklist
Everything in this article as a printable checklist — plus action plans and reference guides you can start using today.
Timing and the Lookback Period
Funding a funeral trust during the five-year Medicaid lookback period should be documented as a purchase of funeral goods and services at fair market value. Keep the agreement, invoice, and payment records, and confirm with DMMA or an elder-law attorney how the specific arrangement will be treated.
The $15,000 exclusion does not make amounts above the limit exempt, and the arrangement must be irrevocable. Confirm the treatment of any excess or revocable terms with DMMA before relying on the arrangement.
What to Watch For
Get the irrevocability in writing. Some funeral homes sell "prepaid" packages with cancellation terms. Before signing, confirm the contract explicitly states it is irrevocable and keep that language for the Medicaid file.
One trust per person. The $15,000 exemption is per individual. A married couple can each establish their own trust, protecting up to $30,000 combined. The trusts should be in separate names — one for each spouse.
Keep the contract accessible. When filing the Medicaid application through Delaware ASSIST, keep a copy of the irrevocable trust agreement and provide it if DMMA requests asset verification.
Do not confuse with life insurance. Term life insurance with no cash surrender value is already exempt from Medicaid's asset count. Whole life or universal life policies with cash value are countable. Do not assume that converting a cash-value life insurance policy into an irrevocable funeral trust is permitted; obtain a review before transferring funds.
How This Fits Into the Spend-Down Strategy
Most families use irrevocable funeral trusts as one piece of a broader asset spend-down to reach the $2,000 threshold. The full sequence typically includes paying off the parent's debts, completing home repairs and safety modifications, purchasing necessary personal items, and funding the funeral trust.
The Delaware Medicaid Long-Term Care & Asset Protection Guide details every compliant spend-down strategy, including the specific documentation DMMA requires for each transaction, so nothing gets flagged during the eligibility review.
Get Your Free Delaware — Medicaid Long-Term Care Eligibility Checklist
Download the Delaware — Medicaid Long-Term Care Eligibility Checklist — a printable guide with checklists, scripts, and action plans you can start using today.