*** The Health Care Programs Manual (HCPM) has been replaced by the Minnesota Health Care Programs Eligibility Policy Manual (EPM) as of June 1, 2016. Please refer to the EPM for current health care program policy information. ***
Effective: December 1, 2006 |
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19.25.40 - Burials and Life Insurance |
Archived: June 1, 2016 (Previous Versions) |
Burial assets and life insurance are closely linked when evaluating how these assets are applied to the asset total.
What type of burial/life insurance assets the client owns, when they were purchased, and what they include will determine whether the assets are available, counted, excluded or designated for use in the Burial Fund Exclusion (BFE).
Burial assets include:
l Burial Agreements, also known as burial contracts or burial funds.
l Cremation Society Agreements.
l Annuity-Funded Burial Agreements.
l Insurance-Funded Burial Agreements.
l Burial Spaces.
l Burial Space Items.
There are two types of life insurance: non-term or term. How the policy is evaluated depends on the type of life insurance the client has.
For more detailed information on the burial assets and how they are evaluated, see Types of Burial Assets and Life Insurance.
For more information regarding the Burial Fund Exclusion and how to designate assets toward it, see Determining the Burial Fund Exclusion.
Definitions
The following terms and acronyms are used frequently throughout this section. The definitions can also be found in the manual glossary.
An annuity funded burial is an annuity contract with an irrevocable designation of the cash surrender value (CSV) to a funeral provider as the primary beneficiary. The value of the contract is to be paid to a funeral provider in exchange for agreed-upon goods and services.
The beneficiary is the person or entity who receives the death benefit of a life insurance policy or annuity contract.
A burial agreement is an agreement in which funds deposited with a funeral director are for funeral expenses. A burial agreement is also known as a burial contract, or a pre-need burial trust. Burial agreements may cover funeral and professional services, a burial space and burial space items or all three. They may be irrevocable or revocable.
l Irrevocable Burial Agreement (IBA) - To be an irrevocable burial agreement there must be an irrevocable assignment to any funeral home. The irrevocable portion of this type of agreement cannot be withdrawn before the depositor’s death.
l Revocable Burial Agreement (RBA) - A revocable burial agreement allows the value of the agreement to be cashed in by the purchaser at any time. They are usually older agreements.
Funds, contracts or accounts paid or designated in advance for services provided by funeral directors. Burial funds provide for the preparation of the body, cremation or burial services provided by the funeral provider.
Burial funds may be paid for in advance by purchasing a burial arrangement or by designating specific assets such as a bank account, certificate of deposit, or other liquid asset as the burial fund.
These are services which are pre-paid in a burial agreement. They include but are not limited to:
l Basic services of funeral director/staff.
l Embalming.
l Other preparations of the body.
l Visitation at the funeral chapel.
l Visitation at other facility.
l Funeral service at the funeral chapel.
l Funeral service at the other facility.
l Memorial service at the funeral chapel.
l Memorial service at other facility.
l Graveside service.
l Transfer of remains to funeral home.
l Funeral coach.
l Funeral sedans/limousine.
l Service vehicle.
l Forwarding of remains.
l Receiving of remains.
l Direct cremation.
A burial space is a repository for the remains of the deceased (e.g., cemetery plot, urn, niche, crypt, or mausoleum).
Burial space items are things that are used at the burial space which includes casket, vault, marker/gravestone, engraving, opening/closing of the grave and a one-time payment of preservation or perpetual care.
These are items that are pre-paid in a burial agreement. They include but are not limited to:
l Certified copies of death certificates.
l Motor escort.
l Clergy.
l Music.
l Flowers.
l Obituary notices.
l Crematory charges.
l Acknowledgement cards.
l Register book.
l Services folders/Prayer cards.
The cash surrender value is the amount the policy owner would receive if the policy were cashed in.
l This is only available in non-term life insurance policies.
l The CSV increases with time.
l The CSV of a life insurance policy includes any dividends and interest earned on premiums minus any loan and/or early withdrawal charges.
Example:
Julian purchased a $10,000 non-term life insurance policy 10 years ago. If he cashed in the policy today, he would receive the cash surrender value of $500.
Cremation Society Agreement (CSA).
This type of burial agreement is an agreement in which funds are pre-paid for burial through a cremation society.
Dividends that the policy holder has left in the custody of the insurer to accumulate interest. These do not increase the FV or CSV, and may be withdrawn by the insured without cashing in or borrowing against the policy itself.
Amounts of additional life insurance purchased with dividends. These increase the CSV and the death value of the policy, but do not increase the policy’s FV.
The face value of a life insurance policy is the policy’s death benefit (the amount paid out at the death of the insured) at the time a life insurance policy is purchased.
l Additional insurance purchased through dividend additions is not included in the FV.
l The amount payable at the time of death may exceed the face value because of dividends and increased cash surrender value.
Example:
Opal purchased a $1,000 non-term life insurance policy in 1974. If Opal died this year, her beneficiary would receive the $1,000 plus an additional $400 of dividends and other additions.
Action:
The face value of the policy is $1,000.
A goods and services statement lists the merchandise and services the owner of a burial agreement has agreed to purchase from a funeral provider.
Insurance-Funded Burial (IFB).
An insurance-funded burial is a life insurance policy with an irrevocable designation of the CSV to a funeral provider as the primary beneficiary. The value of the policy is to be paid to a funeral provider in exchange for agreed-upon goods and services.
Life Insurance is a type of policy which pays a beneficiary a designated sum upon the death of the insured person. There are two basic forms of life insurance policies: term and non-term.
l Term - The life insurance policy is for a specific number of years. It does not provide any cash surrender value or dividends and the death benefit is only available upon the insured’s death.
l Non-Term - Often referred to as a whole life policy. The life insurance policy does provide a cash surrender value and dividends. The person can borrow against the cash surrender value or the policy can be cashed in for the cash surrender value.