Unfortunately, funeral costs are not considered health care expenses, so Medicare coverage does not extend to costs associated with a beneficiary's passing.
This can create issues for surviving family members since funeral expenses can significantly drain finances after the fact. In fact, according to the National Funeral Directors Association, the median cost of a funeral with viewing and burial in 2019 was close to $8,000, not including cemetery and monument charges, and certain other related expenses.
If possible, it's wise to consider other possible courses of action before a loved one passes so that you can minimize financial impacts when the time comes.
Here are some other ways you may be able to defray or minimize funeral-related expense.
You might be able to use a Medicare Medical Savings Account (MSA) to help pay for funeral costs. An MSA is a private insurance company plan that sets up a bank account that you can use to cover your health expenses. It's only available in some states and has a high deductible.
Although funeral expenses aren't considered medical expenses and can't be paid using funds from a Medical Savings Account plan, anything left in the account when you die becomes part of your estate. When those funds become available, they can be used toward your final expenses.
Depending how quickly your family moves forward with a funeral, money from the MSA might not be available in time. But you can juggle funds around and replace funds used for funeral expenses when they become available.
Social Security may provide a death payment that can be used toward funeral expenses, but it's a small amount. Surviving spouses or a child will receive a lump-sum payment of $255 if they meet specific requirements.
In most cases, your spouse will receive the death payment if you're living together when you die. Otherwise, the money can go to your child or children if they are eligible for benefits on your record in the month of your death. If your spouse or child is eligible but not receiving benefits when you die, they must apply for the death payment within two years of the date of death.
This benefit is typically automatically paid out after reporting the death to the Social Security Administration.
This type of policy is life insurance policy that's purchased and explicitly used for a funeral, cremation, or burial costs, outstanding medical bills, credit card debt, or any other end-of-life expenses.
Final expense insurance is generally available to people aged 50 to 85, although some insurance companies may set the cutoff at age 80. You can choose between term and whole life coverage in death benefit amounts that usually range from $5,000 to $50,000.
Company rates and policies differ from state to state, so check with an insurance professional for advice in your state.
Life insurance policies do not specifically cover funeral goods or services and may not cover the entire cost of your funeral at the time of your death. The beneficiary of a life insurance policy may use the proceeds for any purpose, unless otherwise directed.
If you make funeral arrangements far in advance, this is a way to ensure dedicated funds pay for all those related expenses that reflect an accurate amount, so there are no surprises down the road.
Medicaid does not cover funeral costs, cremation, or burial expenses. However, Medicaid and Social Security do provide alternative forms of support.
Rules established under Medicaid regulations let recipients earmark funds for their funeral and burial. These funds are excluded from the accounting of assets recorded when determining eligibility for benefits.
For example, burial plot owners do not need to be concerned about the plot value jeopardizing their qualification for Medicaid. Be aware that the amount of money and how to keep the money separate from other funds varies from state to state.
A payable on death account (POD) is a bank account that will automatically transfer to the named beneficiary after your death. A POD account is sometimes called a Totten trust.
It supersedes any wishes in your will, so it's best to make sure your POD account and your will align with each other to avoid potential challenges and conflicts.
The named beneficiary simply presents a death certificate to the bank and gets funds on the spot. While you are alive, it is not a joint account. The person you name beneficiary cannot touch the money until you're dead, but you can withdraw or add to the account at any time.
The U.S. Department of Veterans Affairs could help pay for your burial if you are a veteran.
If the death is not service-related, your family could receive a $300 burial allowance as well as $807 for a plot. They could receive up to $807 as a burial allowance and $807 for a plot if the death was not service-related, but the veteran was hospitalized by the VA at the time of death.
Surviving loved ones can receive $2,000 for a service-related death.
Veterans can also receive a free gravesite and headstone in a national VA cemetery.
Check out the VA website for more information on eligibility and application procedures for veterans' burial benefits.
Every state has various rules and assistance for funeral expenses. Consider contacting your state health department or the county coroner for help.
The Department of Health and Human Services may provide burial support for poverty-stricken people. You'll apply for help at the health department in the county where the deceased resided.
If you're limited on funds, consider alternatives such as direct cremations, at-home funerals, or green burials.
You might also consider donating your body to a medical school to help train future doctors while saving your family a lot of money. If you want to go this route, make arrangements in advance since most institutions require pre-enrollment. Once the facility has used the cadaver, they'll cremate the body for free and return the ashes to your family.
Although Medicare does not cover funeral expenses, you'll still need to report your loved one's death to Medicare. You will need the deceased person's Social Security number, and you'll report the death by calling Social Security at 1-800-772-1213, Monday through Friday, from 7 AM to 7 PM. TTY users can call 1-800-325-0778.
If the deceased worked for a railroad, contact the Railroad Retirement Board to report the death at 1-877-772-5772, Monday through Friday, from 9 AM to 3:30 PM. TTY users can call 1-312-751-4701.
The funeral home you choose may help you contact Medicare and Social Security to report the death. Check with your funeral provider to see if they'll take care of this for you.
If your loved one was enrolled in a Part C Medicare Advantage Plan or Part D Medicare Prescription Drug Plan, the Centers for Medicare & Medicaid Services (CMS) will notify the plan after you report the death to Medicare. The beneficiary will be disenrolled from the plan on the first day of the month after the month of death.
DISCLAIMER: Medi-Solutions Insurance Agency, LLC is not affiliated or endorsed with the Social Security Administration or the Federal Medicare Program. Information is for educational purposes only and should not be construed as an offer of insurance, advice, or recommendation. The information provided is not intended as tax, financial, investment, or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.
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