Michigan Medicaid Burial Rules: Burial Funds, Life Insurance and Funeral Contracts

If you or a parent may need Michigan Medicaid for nursing home care or a home and community-based waiver, funeral planning and Medicaid planning overlap. Michigan Medicaid burial rules decide how burial funds, prepaid funeral contracts, burial spaces and life insurance are treated when the state counts your assets. This guide explains those rules in plain English, using the sections of the MDHHS Bridges Eligibility Manual (BEM) that caseworkers apply.

This is general information, not legal advice. Long-term care Medicaid also involves spousal protections, a divestment look-back and income rules. Michigan Medicaid burial rules are one piece of that picture. Before you buy, cancel or transfer anything, talk with a Michigan elder law attorney. For general Michigan coverage background, see our Michigan life insurance guide.

The Michigan Medicaid asset limit: two different numbers

Michigan raised the asset limit for many SSI-related Medicaid (MA) categories in 2025. BEM 400 lists the categories that use the higher limit. They include Extended-Care (BEM 164), the category for nursing home and waiver clients who are aged, blind or disabled. Other SSI-related categories keep the old limit.

Figures are from MDHHS BEM 400 (April 1, 2026 edition) and are shown for illustration only. They are not quotes or offers, and they can change each January. Confirm current numbers with MDHHS, your local office or a licensed agent.

For the listed categories, the higher Michigan Medicaid asset limit took effect February 1, 2025. Months before that use the $2,000 and $3,000 limits.

The Michigan burial fund exclusion and what reduces it

The core of Michigan Medicaid burial rules is the BEM 400 “Funeral Plans” section. It excludes up to $1,500 for each qualified group member and spouse in assets clearly designated for burial expenses. Accumulated interest and dividends are excluded too. The fund can be cash, investments, life insurance or a prepaid funeral contract. Other property, such as a car or land, cannot be a burial fund.

The designation can be on the asset itself, such as an account title, or in a signed statement. It must show the value and owner, whose burial it is for, the date it was set aside and the form it is held in. The money cannot be mixed with other assets, except excluded burial space items.

The $1,500 maximum is reduced, dollar for dollar, by:

• the face value of excluded life insurance on the person, including term insurance, owned by the person or spouse;
• the principal held in an irrevocable prepaid funeral contract for the person (not the burial space items in it);
• funeral costs in a life insurance funded plan that was irrevocably transferred; and
• the face value of burial insurance on the person.

The term insurance point is a Michigan detail worth noticing. Under BEM 400, a small group term policy can shrink the Michigan burial fund exclusion even though it has no cash value.

Federal context. The federal SSI rule at 20 CFR 416.1231 also sets a $1,500 burial fund exclusion with similar reductions. For a Michigan Medicaid case, BEM 400 is what the caseworker applies.

Burial spaces under Michigan Medicaid burial rules

BEM 400 defines a burial space broadly: a plot or gravesite, crypt, mausoleum, casket, urn or niche, plus vaults, headstones, markers, burial containers, opening and closing of the grave, and perpetual care contracts. Flowers displayed at the gravesite and a cleric’s fee for a gravesite service also count as burial space items.

• Who it covers. Your own space, plus spaces for your spouse, parents, children, siblings and their spouses, by blood, adoption or marriage.
• Held for you. You must own the item or have a contract for specified items. Installment purchases are not “held” until paid off; payments made so far may be burial funds.
• One per purpose. A lot and a casket can both be excluded, but not a casket and an urn.
• Transfers. Giving a burial space to another person is reviewed as a possible divestment, except a transfer to a spouse or a disabled child.

How Michigan Medicaid burial rules treat life insurance

A policy that can build cash surrender value is an asset of its owner, and its value is that cash value. BEM 400 looks at each owner separately. If the total face value of all policies one owner has on the same insured person is $1,500 or less, the entire cash value is excluded. If it is more, the cash value counts.

• Not added to the face-value total: term insurance with no cash value, true burial insurance and endowment policies.
• Burial insurance in Michigan. BEM 400 notes that Michigan does not have burial insurance, though someone from another state might. A final expense policy that pays a named beneficiary is ordinary life insurance here.
• Proof. Caseworkers want a current insurer notice, dated within the year. Tables printed in the policy are not accepted as accurate.

Because the face-value test in Michigan Medicaid burial rules runs per owner and per insured, two small policies on the same person can add up to more than $1,500 and make both cash values countable.

A Michigan irrevocable funeral contract and life insurance funded plans

Funds in an irrevocable prepaid funeral contract are not counted. For a Michigan irrevocable funeral contract, the state uses form DHS-8A, Irrevocable Funeral Contract Certification, and contracts certified irrevocable on that form are excluded. BEM 400 sets no dollar cap. It does say a luncheon is not a burial expense, and a DHS-8A should not be certified with one.

A revocable prepaid contract is different. Its countable amount is what remains on deposit after the burial fund and burial space exclusions and any withdrawal fees.

Life insurance is another common way to fund a funeral. BEM 400 treats it in three ways:

If burial funds are used for something else while the person is on Medicaid, BEM 400 counts that amount as unearned income for one month.

Hypothetical example: Michigan Medicaid burial rules at work

Hypothetical example. Walter is 79, single and applying for Michigan Medicaid nursing home coverage under the Extended-Care category. He owns:

• A savings account with $8,200.
• A small whole life policy on his own life: $1,000 face value, $650 cash value.
• A $3,000 certificate of deposit he has designated in writing for his funeral.

Step 1, life insurance. Total face value is $1,000, which is $1,500 or less, so the $650 cash value is excluded.

Step 2, burial fund room. That excluded policy reduces his maximum: $1,500 − $1,000 = $500.

Step 3, the CD. $500 is excluded. $3,000 − $500 = $2,500 counts.

Step 4, total. $8,200 + $2,500 = $10,700. The 2026 limit for one person is $9,950, so he is $10,700 − $9,950 = $750 over.

One possible path. With an attorney’s help, Walter uses the CD to buy a Michigan prepaid funeral contract certified irrevocable on form DHS-8A. Those funds are no longer counted. His countable assets become $8,200, which is $1,750 under the limit. Real cases depend on the contract and its paperwork, so treat this as an illustration only.

Michigan estate recovery basics

According to the MDHHS Estate Recovery page, recovery applies only to Medicaid beneficiaries who were 55 or older and received long-term care services on or after September 30, 2007. Key points:

• Estate means probate. Michigan defines the estate as property that passes to heirs through a probate proceeding. If a long-term care partnership policy was used to protect assets, recovery can reach all assets.
• Deferrals. Recovery is deferred while a spouse, a child under 21, or a blind or permanently disabled child is living.
• Hardship. A “home of modest value,” worth less than 50% of the county’s average home price at death, can support a hardship claim. Applicants must have household income under 200% of the poverty level and resources under $10,000.
• Deadline. The questionnaire sent with the notice must be returned within 2 weeks.

Estate recovery does not change Michigan Medicaid burial rules for eligibility, but because recovery reaches the probate estate, the beneficiary named on each policy matters. Ask your attorney before naming your estate.

Checklist: Michigan Medicaid burial rules before you apply

1. Confirm which Medicaid category applies, because it decides whether your Michigan Medicaid asset limit is $9,950 or $2,000.
2. List every policy by owner and insured person, with face value and cash value. Include group term coverage.
3. Get current cash values from each insurer in writing.
4. Subtract excluded policy face values and any irrevocable contract principal from $1,500 to see how much burial fund room is left.
5. Keep burial money in its own titled account or sign a designation statement.
6. Ask the funeral home whether the contract will be certified irrevocable on DHS-8A, and get an itemized list.
7. Estimate the funeral first with our funeral cost calculator.
8. Do not move a policy into a funeral trust or give away a plot before your attorney reviews divestment rules.

Michigan Medicaid burial rules: frequently asked questions

What is the Michigan Medicaid asset limit for nursing home care?

For the Extended-Care category and other categories listed in BEM 400, the limit is $9,950 for one person and $14,910 for two, effective January 1, 2026. Other SSI-related categories use $2,000 and $3,000.

How big is the Michigan burial fund exclusion?

Up to $1,500 per person, plus interest. Under Michigan Medicaid burial rules, it is reduced by the face value of excluded life insurance (including term), irrevocable funeral contract principal, irrevocably transferred insurance-funded plans and burial insurance.

Is there a dollar cap on a Michigan irrevocable funeral contract?

BEM 400 does not state one. Funds in an irrevocable contract are not counted, and Michigan contracts are certified on form DHS-8A. Expect the caseworker to check that each item is a real burial expense.

Does a small life policy count?

If one owner’s policies on the same person total $1,500 or less in face value, the cash value is excluded. The face value then reduces the burial fund exclusion.

Can I put my life insurance in a funeral trust?

BEM 400 treats life insurance funded funeral trusts as countable if revocable and as a divestment if irrevocable. An irrevocable transfer of the policy to fund a funeral is treated differently. Have an attorney review the documents.

Does Michigan recover from life insurance after death?

Michigan’s recovery reaches the probate estate. A policy paid to a named, living beneficiary generally does not pass through probate. A policy paid to the estate can.

How Octans can help

Octans Insurance is an independent agency based in Massachusetts. Our licensed agents compare burial insurance and final expense options from more than 120 carriers, and our guide to life insurance for seniors explains the basics. We are not attorneys and do not decide Medicaid eligibility. After your elder law attorney confirms how a policy will be counted, we can help you compare options. Call (617) 935-9220.

Keep Reading: Related Guides

• Life insurance in Michigan
• Final expense insurance
• Burial insurance
• Funeral cost calculator
• Medicare Advantage plans in Michigan (2027)
• Free Medicare help in Michigan
• Unclaimed life insurance in Michigan

Important: Octans Insurance agents are licensed in the states in which they operate. Coverage availability and rates may vary by state. Premium examples, when provided, are illustrative samples from published sources, not quotes. Final rates are determined by the insurance carrier based on underwriting and applicable policy criteria. Policy terms, exclusions, limitations, riders, and availability vary by carrier and state.

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