Supplemental Security Income assists those with limited means and resources. Its purpose is to provide for the recipient's basic needs, but it does not pay for funeral expenses. Social Security pays a small death benefit of $255 to a surviving spouse or child of those who receive Social Security payments, but that's not enough for a typical funeral. According to the National Funeral Home Directors Association, an average funeral costs more than $7,000. Even the simplest funerals cost significantly more than $255.
Fortunately, there are some actions you can take to prepare for your funeral expenses -- or the expenses of a loved one -- even within the SSI program's strict limitations on participants' income and assets. These include taking out a life insurance policy, making prepaid funeral arrangements, and starting a burial fund.
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One of the difficulties of saving money while on SSI is that you are limited to $2,000 of countable resources for an individual, or $3,000 for a couple. If your savings push you over the limit, you risk losing your eligibility. However, the Social Security Administration allows you to have up to $1,500 per person in a designated burial fund that does not count when calculating your resources. For an account to qualify, you can designate it specifically as a burial fund by titling it as a burial fund account. Your other alternative is to file a statement with the SSA stating how much money in your account is considered a burial fund, when you first considered it a burial fund, and whose burial the money is for.
You may have a life insurance policy with a face value or $1,500 or less without it counting against your allowable resources. Unfortunately, life insurance options can be limited for those who qualify for SSI, since your age, disabilities or other medical conditions that got you into this program are likely to shorten your lifespan and make you a risky customer for the insurance company. Some insurance companies offer guaranteed-issue life insurance, which you can purchase regardless of your medical conditions. However, this is more expensive than other policies, and generally does not pay the full face amount until the policy has been in effect for a specified amount of time -- often two years.
Prepaid Funeral Arrangements
Depending on the laws in your state, you may be able to work out a prepaid arrangement with a funeral director. The laws regarding prepaid funerals vary from state to state, and some states do not allow SSI recipients to enter into these arrangements. Check with your local SSA office to see whether you're eligible to enter into a prepaid funeral arrangement without risking your program eligibility.
If you withdraw money that has been set aside in a burial fund and use it for a different purpose, you could be subject to a penalty.