Do funeral expenses take priority over Medical Assistance claims?

Authored By

Senior Legal Line - Legal Aid Service of Northeastern Minnesota

Dear Senior Legal Line,

My mother just died after years of living at the nursing home on Medical Assistance. She had an insurance policy designated to cover her funeral expenses, but there was not enough in the policy to cover all of her funeral expenses. The unpaid funeral expenses are the flowers, food, and the music (she had a string quartet). Mom had a little bit of savings that we children want to use to pay for these unpaid expenses, but the county social services department says that mom’s money has to be paid to them instead. I thought that funeral expenses take priority over Medical Assistance claims. Is the county correct?

Signed, William

Answer

Dear William,

You just waded into a bit of legal controversy. When a person dies, they leave an estate. Minnesota law sets forth a priority of debts (called claims) that are paid out of the estate, so that a claim in the first level position is paid first, then the second, third, fourth, and so on. See Minnesota Statutes Section 524.3-805. If the money runs out by paying second level position claims, for example, the claims in the lower positions don’t get paid. So the question is, what positions are funeral and Medical Assistance claims?

Reasonable funeral expenses are second level claims and Medical Assistance claims are fourth level claims. According to Minnesota Statute Section 524.3-805, your mom’s savings should be used to pay the unpaid reasonable funeral costs. This seems like the answer to your question. But, the statute doesn’t define what “reasonable” means. The Minnesota Department of Human Services has put out policy with their definition of what reasonable funeral expenses mean in their estate recovery policy.

The Minnesota Department of Human Services’ estate claim policy is in the Medical Assistance Estate Recovery Manual, which can be found at https://bit.ly/2JSmC1r. I shortened the URL so it would be easier to find. (The main DHS webpage is www.mn.gov/dhs but it takes some digging to get to the manuals). Minnesota Department of Human Service created this statewide policy with their January 2017 Bulletin #17-32-02.

The policy says that if a decedent’s funeral costs exceed the dollar amount of insurance funds (or burial trust, whichever the decedent had arranged to pay the funeral), then you must analyze the funeral costs that exceed that amount using this funeral expenses policy. The county’s policy is that only “reasonable” funeral expenses take priority over MA claims. The policy’s definition of reasonable does not include flowers, food, or more than one musician and one vocalist, so that is why the county is challenging you on this.

The controversy is that the Bulletin hadn’t gone through the normal rulemaking process and has not been adopted as rules. Because of this, some of the policy may likely fail if challenged, according to elder law experts, but the cost to challenge it is often too much, especially for estates that don’t have money to pay all the claims in the first place. In the meantime, the policy exists and the counties are following it.

Please note: Another problem with the policy is that it throws into question whether prepaid funeral plans made prior to the Bulletin are affected by the policy. The policy defines reasonable funeral costs in a way to limit what the county will allow towards the cost of a casket, cemetery plot, and grave marker. The policy says that you have to get 2 quotes for the least expensive and take the less expensive casket, to determine the reasonable cost of a plot, and the lowest cost stone marker, respectively. It’s not clear if this just affects the use of the estate money in estate recovery (like your mom’s situation, William) or also affects prepaid plans.

In the face of this uncertainly, the best way to avoid problems is to do more careful funeral planning, so that the prepaid trust or insurance policy has enough funds to pay for your funeral, including the flowers, food, and string quartet – and other expenses that are “unreasonable” under the policy. If possible, run your plan by your local county social services department and get written approval. Private elder law attorneys can help you achieve your goals if you need help, as well as funeral directors. William, your options are few unless the estate wishes to challenge the policy in court. I suppose you and your siblings could chip in to pay the funeral home for the “unreasonable” expenses, but only if you can afford it and wish to do it – children are not personally liable for their parents’ debts unless the children signed onto the debt. Also, paying for someone else’s debts can be viewed as a gift to that person/estate, and gifts can cause problems in certain circumstances, a topic too complicated to go into here. Before you make a gift, seek legal advice.

About Senior Legal Line

Senior Legal Line is a legal question and answer line for Seniors.

The column is written by the Senior Citizens’ Law Project. It is not meant to give complete answers to individual questions. If you are 60 years of age or older and live within the Minnesota Arrowhead Region, you may contact the Legal Aid Service of Northeastern Minnesota with questions for legal help by writing to: Senior Citizens’ Law Project, Legal Aid Service of Northeastern Minnesota, 302 Ordean Bldg., Duluth, MN 55802. Please include a phone number and return address. To view previous articles, go to: www.lasnem.org. Reprints by permission only.