*** The Health Care Programs Manual (HCPM) has been replaced by the Minnesota Health Care Programs Eligibility Policy Manual (EPM) as of June 1, 2016.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: June 1, 2011 |
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19.25.40.05 - Types of Burial Assets and Life Insurance |
Archived: June 1, 2016 (Previous Versions) |
There are many different types of burial assets. Definitions of the various types of burial assets and terms that relate to burial assets can be found in Burials and Life Insurance.
An evaluation must be completed for each type of burial asset before determining if that burial asset can be applied to the Burial Fund Exclusion (BFE). This section outlines each type of burial asset and what to look for when evaluating that asset.
After the evaluation of these burial assets is complete, Determining the Burial Fund Exclusion is the next step.
Life Insurance-Funded Burials.
Irrevocable Burial Agreements.
A burial space is a repository for the remains of the deceased. The following are examples of a burial space:
l Cemetery plot.
l Crypt.
l Mausoleum.
l Urns.
l Niches.
The value of a burial space is not limited to a specific dollar amount, but once purchased the value of the BS cannot be increased at a later date.
The space can be purchased separately or itemized on a statement of goods and services in a burial agreement.
Burial Space (BS) - Evaluation
Evaluate the burial space for the following:
l Exclude one burial space for the client and the following family members, even if they do not live in the same household:
n Spouse.
n Parents.
n Child (adult or minor).
n Step child (adult or minor).
n Sibling.
n Spouses of the above.
n People related by adoption.
l Burial spaces purchased by the client for a non-family member are considered a transfer of assets.
l The burial space cannot be excluded as a burial space if:
n The burial space costs are indistinguishable from burial services costs in a burial agreement.
n The burial space is not fully paid.
l Exclude interest accumulated on burial space contracts that stay in the burial fund.
l When burial spaces are duplicated on a burial agreement:
n If duplicated with an AFB or IFB determine an uncompensated transfer.
n If duplicated with an IBA consider the second burial space as an available asset.
Burial space items are things that are used at the burial space. The following are examples of burial space items:
l Markers/Headstones.
l Engraving.
l Opening/Closing of the burial space.
l Perpetual care.
l Casket.
l Vault.
Values are not limited to a specific dollar amount, but the value of a specific BSI cannot be increased at a later date.
BSI can be purchased separately or itemized on a statement of goods and services in a burial agreement.
Additional BSI may be purchased at a later date.
Burial Space Item (BSI) - Evaluation
Evaluate burial space items for the following:
l Exclude all burial space items for the client and the following family members even if they do not live in the same household:
n Spouse.
n Parents.
n Child (adult or minor).
n Step child (adult or minor).
n Sibling.
n Spouses of the above.
l Items purchased by the client for a non-family member are considered a transfer of assets.
l Items must be paid in full to be excluded, and the value cannot be increased at a later date.
Note: Burial space items that are purchased on installment plans remain burial funds until paid in full. Once paid in full they are then considered to be burial space items.
l Burial space items must be itemized in burial agreements including the individual dollar amounts.
l When burial space items are duplicated on a burial agreement:
n If duplicated with an AFB or IFB determine an uncompensated transfer. See Transfers.
n If duplicated with an IBA consider the second burial space item as an available asset.
Term life insurance policies have Face Value (FV) but do not have a Cash Surrender Value (CSV) or dividends. The insured can cancel the policy but there is no cash value to receive. The death benefit is only available upon the insured’s death.
Do not count term life insurance policies as an asset toward the asset total.
Example:
Malik works for the State of Minnesota. One of his benefits in working for the State is a term life insurance policy with a face value of $10,000. The only way to collect this benefit is if Malik dies. His wife, who he named the beneficiary, will receive the $10,000 upon his death.
Action:
The policy has no other value.
Non-term life insurance policies, often referred to as whole life policies, have both face value (FV) and cash surrender value (CSV). These types of policies also generate dividends.
l Count the following toward the client’s asset total:
n Cash surrender value of a non-term LI policy, unless it is being excluded as part of the burial fund exclusion (BFE).
n Dividend accumulations, unless they are being applied towards the BFE.
l Review who the life insurance covers:
n The client.
n The client’s spouse.
n The client’s health care-eligible dependent child.
Life Insurance-Funded Burials (IFB)
An insurance-funded burial is a type of burial agreement funded with a life insurance policy. The life insurance policy has an irrevocable designation of the cash surrender value (CSV) to the funeral provider as the primary beneficiary.
l The face value (FV), or death benefit, of the policy will be paid to the funeral provider in exchange for the provision of agreed-upon goods and services.
l The insurance-funded burial is not limited to a specific dollar amount.
l The CSV is no longer available to the policy owner because the policy’s benefits have been irrevocably assigned to a funeral provider.
l The estate of the person must be named as the contingent beneficiary for specific persons discussed in IFB - Evaluation.
l An itemized statement of goods and services must be provided.
n The goods and services may be revocable or irrevocable.
n May include items such as flowers, obituary notices, professional services and burial space items.
Insurance-Funded Burial (IFB) - Evaluation
Evaluate an IFB for the following:
l Review who the IFB covers:
n The client.
n The client’s spouse.
n The client’s health care-eligible dependent child.
Note: Burial spaces or burial space items included in an IFB for immediate family members are excluded if purchased in full.
l The irrevocable designation of the CSV must be attached to the life insurance policy.
n The designation must state, ”Any funeral provider whose interest may appear irrevocably.” This is because Minnesota law allows people to change funeral providers.
n If the designation is not attached this burial is not an IFB and should be considered simply as a life insurance policy.
n If the irrevocable designation of the CSV is to anyone other than the funeral provider it is considered an uncompensated transfer.
l Review goods and services.
n An itemized statement of goods and services must be provided, and it must be signed and dated by the funeral provider and the purchaser.
Note: If it isn't signed and dated by the funeral provider, it is not a valid contract and we would not recognize it.
n The amount paid for each good or service must be within the normal and customary charges for that trade area for that particular good or service.
m If the amount paid is greater than what is normal and customary, the difference between what was paid and what is customary is an uncompensated transfer.
m Often funeral providers in the local area have a price list listing the normal cost of their services and workers can use that for a comparison to see if the charges have been inflated.
Example:
Memorial services provided by the funeral provider are normally $2,500 in the Brainerd area. The client paid $4,000 for memorial services.
Action:
The difference between the amount paid and the normal charge ($1,500) is an uncompensated transfer.
n Compare the goods and services of all IFB, AFB and IBA burial agreements to determine if there has been a duplication of any burial service, cash advance item, burial space or burial space item.
m When comparing burial assets, be sure to compare assets purchased for the same person, not with the same owner.
Note: If the purchased for person has duplicate items but the burial assets are owned by different people, begin with the asset that the person has purchased for themselves first. The duplicate will be the asset purchased by the other person.
m Use the date of purchase (or the date an asset was purchased in full) to determine the order of review.
m The item/service purchased later is the duplicate item.
n Cash advance items (CAI) are considered unavailable.
l Determine if the IFB has been adequately compensated. If it has not been adequately compensated consider it a transfer of assets. See Transfers.
Adequate compensation was received if:
n The statement of goods and services is for an amount equal to or greater than the face value.
Note: When existing life insurance policies are converted to an IFB, use the current face value at the time of the conversion.
m The purchase price of the life insurance, if it was purchased and immediately used to fund an irrevocable burial fund.
m The face value, if a previously owned life insurance policy was used as a funding source and converted to an irrevocable burial fund.
l For MA Method B only:
The IFB must irrevocably designate the owner’s estate as the contingent beneficiary to the extent the proceeds are not used for payment of selected burial expenses.
n If this criterion is not met, the agreement does not qualify as an IFB. Consider the policy to be a standard life insurance policy for MA Method B clients.
l Exclude the portion of an IFB that is:
n Used to meet the burial fund exclusion (BFE).
n Excluded as a burial space or burial space item.
l Any amount in excess of the excluded amount is considered unavailable. See Determining the Burial Fund Exclusion.
Example:
Jane purchases a $5,000 life insurance policy which is irrevocably assigned to a funeral provider in June. She has a statement of goods and services with a funeral home which includes $2,000 for professional services, $2,000 for a casket, and $1,000 for a burial plot and marker. The month before this purchase Jane purchased a different burial plot and marker in a local cemetery.
Action:
The face value of this insurance funded burial is $5,000. Jane has received adequate compensation for a portion of the policy: $2,000 services + $2,000 casket = $4,000. However, because Jane has duplicated the burial plot/marker that had been purchased previously, the $1,000 value of the plot/marker in the insurance funded burial is considered an uncompensated transfer.
Annuity-funded burials are similar to an insurance-funded burial and follow many of the same policies.
An annuity-funded burial, which is a type of burial agreement, is funded with an annuity contract. The annuity contract has an irrevocable designation of the CSV to a funeral provider as the primary beneficiary.
l The value of the contract is to be paid to a funeral provider in exchange for agreed-upon goods and services.
l By irrevocably designating a funeral provider as the beneficiary, the annuity owner gives up all rights to receive income from the annuity.
l The annuity funded burial is not limited to a specific dollar amount.
l The statement of goods and services may include items such as flowers, obituary notices, professional services and burial space items.
Annuity-Funded Burial (AFB) Evaluation
Evaluate an AFB for the following:
l Review for whom the AFB is purchased:
n The client.
n The client’s spouse.
n The client’s health care-eligible dependent child.
Note: Burial spaces or burial space items included in an AFB for immediate family members are excluded if purchased in full.
l The irrevocable designation must be attached to the annuity.
n The designation must state, ”Any funeral provider whose interest may appear irrevocably.” This is because Minnesota law allows people to change funeral providers.
n If the designation is not attached this burial is not an AFB and should be considered simply as a standard annuity.
n If the irrevocable designation is to anyone other than the funeral provider it is considered an uncompensated transfer.
l Review goods and services.
n An itemized statement of goods and services must be provided, and it must be signed and dated by the funeral provider and the purchaser.
Note: If it isn't signed and dated by the funeral provider, it is not a valid contract and we would not recognize it.
n The amount paid for each good or service must be within the normal and customary charges for that trade area for that particular good or service.
m If the amount paid is greater than what is normal and customary, the difference between what was paid and what is customary is an uncompensated transfer.
m Often funeral providers in the local area have a price list listing the normal cost of their services and workers can use that for a comparison to see if the charges have been inflated.
n Compare the goods and services of all IFB, AFB and IBA burial agreements to determine if there has been a duplication of any burial service, cash advance item, burial space or burial space item.
m When comparing burial assets, be sure to compare assets purchased for the same person, not with the same owner.
Note: If the person for whom the burial assets were purchased has duplicate items but the burial assets are owned by different people, begin with the asset that the person has purchased for themselves first. The duplicate will be the asset purchased by the other person.
m Use the date of purchase (or the date an asset was purchased in full) to determine the order of review.
m The item/service purchased later is the duplicate item.
n Cash advance items (CAI) are considered unavailable.
l Determine if the AFB has been adequately compensated. If it has not been adequately compensated consider it a transfer of assets. See Transfers.
Adequate compensation was received if the statement of goods and services is for an amount equal to or greater than:
Note: When existing annuities are converted to an AFB, use the current value at the time of the conversion.
n The purchase price of the annuity, if it was purchased and immediately used to fund an irrevocable burial fund.
n The current value, if a previously owned annuity was used as a funding source and converted to an irrevocable burial fund.
l For MA Method B only:
The AFB must irrevocably designate the owner’s estate as the contingent beneficiary to the extent the proceeds are not used for payment of selected burial expenses.
If this criterion is not met, the agreement does not qualify as an AFB. Consider the policy to be a standard annuity for MA Method B clients.
l Exclude the portion of an AFB that is:
n Used to meet the burial fund exclusion (BFE).
n Excluded as a burial space or burial space item.
l Any amount in excess of the excluded amount is considered unavailable. See Determining the Burial Fund Exclusion.
Burial agreements require that a specified amount be deposited with a funeral director to be used for funeral expenses.
l The money is payable on death to the funeral director.
l The agreement may cover funeral and professional services, a burial space or burial space items.
l A bank or other financial institution usually holds the money in trust.
l They may be revocable or irrevocable.
Irrevocable Burial Agreements (IBA)
If the agreement is irrevocable, the funds deposited into the agreement cannot be withdrawn before the depositor's death.
l Irrevocable burial agreements can be written in any amount.
l Irrevocable burial agreements purchased from a Minnesota funeral director are only irrevocable up to $2,000.
Note: Depositors may legally withdraw amounts over $2,000 regardless of the terms of the agreement.
l Irrevocable burial agreements set up in another state are considered irrevocable up to the full amount allowed under that state's laws.
Irrevocable Burial Agreement (IBA) Evaluation
Evaluate for the following:
l Count any Cash Advance Items (CAI) or amounts not designated as specific burial service, burial space or burial space items toward the client’s asset total.
l Review for whom the IBA is purchased:
n The client.
n The client’s spouse.
n The client’s health care-eligible dependent child.
Note: Burial spaces or burial space items included in an IFB for immediate family members are excluded if purchased in full.
l Review goods and services.
n An itemized statement of goods and services must be provided, and it must be signed and dated by the funeral provider and the purchaser.
m The itemized goods and services may be on a separate statement of goods and services attached to the burial agreement or the burial expenses may be itemized on the actual burial agreement. Either method is acceptable.
m If it isn't signed and dated by the funeral provider and the purchaser, it is not a valid contract and we would not recognize it.
n The amount paid for each good or service must be within the normal and customary charges for that trade area for that particular good or service.
m If the amount paid is greater than what is normal and customary, the difference between what was paid and what is customary is a counted asset.
m Often funeral providers in the local area have a price list listing the normal cost of their services.
n Compare the goods and services of all IFB, AFB and IBA burial agreements to determine if there has been a duplication of any burial service, cash advance item, burial space or burial space item.
m When comparing burial assets, be sure to compare assets with the same purchased for person, not with the same owner.
Note: If the person for whom the burial assets were purchased has duplicate items but the burial assets are owned by different people, begin with the asset that the person has purchased for themselves first. The duplicate will be the asset purchased by the other person.
m Use the date of purchase (or the date an asset was purchased in full) to determine the order of review.
m The item/service purchased later is the duplicate item.
l Exclude the portion of an IBA that is:
n Used to meet the burial fund exclusion.
n Excluded as a burial space or burial space item.
l Interest earned on these agreements may be separately designated as revocable or irrevocable. If the interest is designated as:
n Irrevocable - considerate it unavailable.
n Revocable - consider it a counted asset.
Revocable Burial Agreement (RBA)
If an agreement is revocable, the funds deposited into the agreement can be withdrawn at any time.
l Interest earned on an RBA is excluded if it remains with the agreement.
l Transfer provisions do not apply for RBAs unless the client transfers the ownership of the entire burial agreement.
Evaluate for the following:
l If a burial asset is duplicated, always count the RBA item as the duplicate and count it as an available, counted asset, regardless of the date of purchase.
Exception: If the duplicated asset is in a CSA, then use the asset with the later date of purchase as the duplicated item.
l Review goods and services.
n An itemized statement of goods and services must be provided, and it must be signed and dated by the funeral provider and the purchaser.
m The itemized goods and services may be on a separate statement of goods and services attached to the burial agreement or the burial expenses may be itemized on the actual burial agreement. Either method is acceptable.
m If it isn't signed and dated by the funeral provider, it is not a valid contract and we would not recognize it.
n Cash advance items are counted toward the owner’s asset total.
n Exclude a burial space or burial space items only if they were not previously excluded in an IFB, AFB or IBA, regardless if the date of purchase in the RBA was prior to that in the other burial agreement. If a BS or BSI was previously excluded count the value of the BS or BSI in the RBA toward the client’s asset limit.
l Exclude the portion of an RBA that is used to meet the burial fund exclusion (BFE).
l Count any amount that is not excluded or unavailable.
Cremation Society Agreements (CSA)
This type of burial agreement is an agreement in which funds are pre-paid for burial through a cremation society. They are evaluated the same way, whether they are irrevocable or revocable.
Evaluate for the following:
l If a burial asset is duplicated, always consider the CSA item as the duplicate and count it as an available, counted asset, regardless of the date of purchase.
Exception: If the duplicated asset is in a RBA, then use the asset with the later date of purchase as the duplicated item.
l Review goods and services.
n An itemized statement of goods and services must be provided, and it must be signed and dated by the funeral provider and the purchaser.
m The itemized goods and services may be on a separate statement of goods and services attached to the burial agreement or the burial expenses may be itemized on the actual burial agreement. Either method is acceptable.
m If it isn't signed and dated by the funeral provider, it is not a valid contract and we would not recognize it.
n Cash advance items (CAI) are counted toward the owner’s asset total.
Exception: If the duplicated asset is in an RBA, then use the asset with the later date of purchase as the duplicated item.
n Exclude a burial space or burial space items only if they were not previously excluded in an IFB, AFB or IBA, regardless if the date of purchase in the RBA was prior to that in the other burial agreement. If a BS or BSI was previously excluded count the value of the BS or BSI in the RBA toward the client’s asset limit.
l Exclude the portion of a CSA that is used to meet the burial fund exclusion (BFE).
l Count any amount that is not excluded or unavailable.
The client can designate other non-burial assets toward the burial fund exclusion in certain circumstances. For more information on when these can be applied see Determining the Burial Fund Exclusion.
The non-burial assets that can be designated toward the burial fund exclusion are:
l CSV of life insurance policies.
l Dividends from life insurance policies.
l Financial accounts such as savings or checking accounts.
l Other financial assets with definite cash value such as stocks, bonds, certificates of deposit (CD), money markets, individual retirement plans and trusts.
l Other liquid assets.
Do not apply the value of any other property toward the exclusion.
If these assets are applied to the BFE, they must be kept in a separate account if it is possible. A written statement from the client designating the asset to the BFE must be received.
Note: If the designated amount is in a timed deposit with an early withdrawal penalty, such as a certificate of deposit, the designated amount must be separated when the timed deposit matures.
Accounts designated for the BFE, including the interest earned, remain excluded and do not have to be reduced as long as they remain in the account.
l These accounts must be verified at each renewal. This is done to check to be sure the enrollee did not use any of the asset for a non-burial expense.
l If it was used for a non-burial expense the account will no longer be excluded as a burial account.