Classifying Assets Placed into an Irrevocable Burial Trust

Q If an applicant puts monies into an irrevocable burial trust, would that be considered an asset disposed of for less than fair market value? I have an applicant who put monies into an irrevocable burial trust a few months before the anticipated move-in date.

A Generally, a funeral trust, if created for the household member or applicant, will not be treated as a disposed-of asset because the household did not give anything away, says assisted housing consultant A. J. Johnson. The household member essentially set aside money to pay for his own funeral. In other words, he paid for his funeral ahead of time.

However, if the household member set the trust up for someone outside the household, it would be a disposed-of asset, says Johnson. Nonrevocable trusts established for the benefit of another person while residing in assisted housing is considered an asset disposed of for less than fair market value [HUD Handbook 4350.3, par. 5-7(G)(1)(b)(4)].

In this situation, if the resident used assets to purchase a “funeral trust,” the portion of the asset used to purchase the trust would be counted as an asset disposed of for less than fair market value if disposed of in the last two years, says Mark Chrzanowski, a compliance specialist at the Gene B. Glick Company. The disposed-of amount would be added to the Form 50059 as an imputed asset and would be counted for two years from the date of disposition.

Insider Sources

Mark Chrzanowski, COSM, RAM: Compliance Specialist, Gene B. Glick Management Co.; www.glickco.com.

A.J. Johnson, HCCP: A.J. Johnson Consulting Services, Inc.; www.ajjcs.net.