Medical Assistance for People Who Are Age 65 or Older and People Who Are Blind or Have a Disability

2.3.3.2.7.11.3 Prepaid Burial Arrangements

A prepaid (or pre-need) burial contract is an agreement, whereby the buyer pays in advance for burial services and/or burial spaces that the seller agrees to furnish upon the death of the buyer or other designated individual.

Pre-need Burial Arrangements funded by a life insurance policy should be evaluated under the Life Insurance Funded Burial Contracts policy.

Contract is a Countable Asset

If a burial contract is revocable it is a countable asset. However:

any portion of the contract that clearly represents the purchase of burial spaces may be excluded, regardless of value; and
some or all of any remaining value of the contract may be excluded under the burial fund exclusion.

Contract is Not a Countable Asset

Up to $2,000 of a burial contract can be irrevocable for one person or $3,000 for a couple. This amount is not counted because it is unavailable to the person. The portion of a burial contract that cannot be revoked is not a countable asset. However:

any portion of the contract that clearly represents the purchase of burial spaces is excluded, regardless of value; and
any portion of the contract that represents burial funds reduces the $1,500 burial fund exclusion for an individual.

Contract Revocability

Irrevocable burial agreements set up in another state are considered irrevocable up to the full amount allowed under that state's laws. A state's laws determine whether a contract is revocable. Some burial contracts may be partly revocable. For example, if the total value of an otherwise irrevocable contract exceeds the limit set for irrevocability by State law, the excess is revocable.

EXAMPLE

A contract for $2,850 in unspecified burial goods or services:

$2,850	-	total value of contract
$2,000	-	maximum irrevocable under State law
$1,500		Applied to the burial fund exclusion
$500		not excluded, but unavailable due to irrevocability of contract
$850	-	available, counted asset

For people who are married, any division of burial contract funds is acceptable. For example, one spouse may have a $2,500 burial contract, the other spouse a $500 burial contract.

Interest earned on the irrevocable burial contract is neither income nor assets, as long as it is left to accumulate.

Evaluating Contracts

Conditions for Liquidation

A prepaid burial contract, even when not technically irrevocable, may have conditions attached to its liquidation or revocation. If either of the following conditions exists, the contract is not an asset.

Significant hardship may result from the conditions required for revoking a contract. Significant hardship means an unrealistic demand; for example, having to move out of state.
State law or contractual terms may require mutual consent of buyer and seller in order to sell or revoke a contract. If the seller will not consent, or will consent only under conditions that would pose a significant hardship to the buyer, this must be documented.

Value of Contract as an asset

If a burial contract is an asset, the value is the amount payable to the owner upon revocation, or cash surrender value.

Single-Purpose Burial Space Contracts

General

The burial space exclusion applies to any single-purpose burial space contract if:

the contract lists all of the burial spaces and either includes a value for each space or the total value of all the spaces combined; and
the seller's obligation to provide those items is not contingent on further payment (as in certain installment contracts); for example, the items are actually being held for the individual's future use.

Exception: The burial fund exclusion applies (subject to the $1,500 maximum or as reducing that maximum) to:

the unidentified portion of a single source burial space contract that does not identify some or all of the spaces, or does not include either a value for each burial space or the total value of all the spaces combined; and
the amount paid on an installment contract for burial spaces if the contract does not entitle the person to the spaces until the full purchase price has been paid.

Until the burial space contract has been paid in full, all payments are considered to be funds set aside for burial. Amounts paid in excess of the maximum available burial fund exclusion are countable assets. On the first of the month following the month in which full payment has been made, these items can become subject to the unlimited burial space exclusion because at the point of full payment the contract becomes an agreement representing the purchase of a burial space.

Single- Purpose Contracts for Burial Expenses

A single-purpose contract for burial expenses includes only services that are applicable to burial expenses and that are subject to, or reduce the amount of, the burial fund exclusion.

Contracts for Both Burial Spaces and Burial Expenses

Irrevocability Designation

If a combined contract designates which portion is irrevocable and which is not, that designation is controlling. That is, if the contract designates only the burial space purchase as irrevocable, the portion dealing with burial funds is revocable and is subject to the burial fund exclusion.

If it cannot be determined which amounts represent the purchase of burial spaces and which represent burial funds, and which parts of the contract, if any, are irrevocable, the person has not distinguished spaces versus services. In those cases, the entire contract is considered as an asset in the form of burial funds. The person may ask the funeral provider to amend the contract to distinguish burial services from burial space items.

Maximum on Irrevocable Amount

If the contract does not designate which part is irrevocable and the contract value exceeds $2,000 ($3,000 for a couple), we apply the maximum to burial spaces first.

If space purchases exceed the maximum excluded contract value of $2,000, the excess is revocable but subject to the burial space exclusion.
If space purchases are less than the maximum excluded contract value of $2,000, the balance is considered burial services.

Irrevocable burial funds reduce the amount available for excluding other burial funds.

Installment Contracts

The amount paid for any spaces and services in a combined contract being purchased in installments are considered burial funds if the contract:

does not entitle the individual to the spaces and services listed until the full purchase amount has been paid; or
relieves the seller of the obligation to provide the spaces and services listed at the price listed until the contract is paid in full.

Once the contract has been paid in full, the space and fund exclusions are applied as appropriate.

Value of a Revocable Contract

The amount refundable upon revocation of the contract should be stated in the contract. If it is not, additional documentation may be required.

Legal Citations

United States Code, title 42, section 1382b

Code of Federal Regulations, title 20, section 416.1231

Minnesota Statutes, section 256B.056, subdivision 1a

Minnesota Statutes, section 256B.056, subdivision 3d