Medicaid Eligibility Handbook

Medicaid Eligibility Handbook

Release 11-02 July 27,2011

16.5 BURIAL ASSETS

16.5.1 Burial Trusts

16.5.2 Burial Insurance

16.5.3 Life Insurance Funded Burial Contracts ( LlFBC )

     16.5.3.1 Irrevocable Assignment of LlFBC

     16.5.3.2 Revocable Assignment of LlFBC

16.5.4 Spaces

16.5.5 Burial Funds

16.5.6 Wisconsin Funeral Trust Program

     16.5.6.1 Statement of Funeral Goods & Services

     16.5.6.2 Cash Advances

16.5.1 Burial Trusts

Exempt all burial trusts made in Wisconsin that are irrevocable by Wisconsin law, as noted in the trust agreement. If made in another state, exempt all that are irrevocable by the laws of that state. Refer any question about any state's law to your corporation counsel.

Interest and dividends are irrevocable if they accrue to irrevocable trusts and if the trust agreement specifies they are irrevocable. If the interest or dividends are irrevocable, exempt them. If interest or dividends are revocable, they are a countable asset.

In non-spousal Impoverishment EBD Medicaid cases, each fiscal group member may have one or more irrevocable burial trust, of which the total face value may not exceed $3,000. Any principal amount over $3,000 is a countable asset. (See 18.4 Spousal Impoverishment Assets for information about burial assets for persons with a community spouse .)

16.5.2 Burial Insurance

A burial insurance policy is a contract whose terms preclude the use of its proceeds for anything other than the payment of the insured's burial expense. It is an insurance product sold by a state licensed insurance company, and is typically funded with an annuity or life insurance policy.

The following are not burial insurance policies:

1. If a policy has cash surrender value to which the member has access, the       policy is not burial insurance it is life insurance.

The total is less than $1,500, so determine what portion of Mrs. Smith's savings account can be exempted as a burial fund.

$1,500 Maximum burial fund exclusion

- 1,200

  $ 300

Mrs. Smith can exempt $300 from her savings account as a burial fund. The remaining $1,300 is an available asset.

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Anyone claiming a burial fund must sign a statement identifying the fund's location, type, amount, and account number. The statement must specify the month and year in which s/he first intended to set the fund aside for burial.

The fund can be excluded retroactively back to the first day of the specified month, but no earlier than November 1, 1982. It loses its exemption if it is used for anything other than the person's burial.

The fund set aside for burial must be identifiable, but not necessarily segregated from other funds.

16.5.6 Wisconsin Pre-Need Funeral Trust Program

The Wisconsin Funeral Trust is a single trust owned and operated by the Wisconsin Funeral Directors Association (WFDA). It was established and maintained according to the rules of the Wisconsin Department of Financial Institutions. It is available for use by all WFDA members statewide. Funds placed in the Trust will be invested in accordance with applicable state law.

WFDA has created 2 preneed funeral contracts; one is for a guaranteed price and another is for a non-guaranteed price. These contracts are available to all individuals, not just those who are or may be EBD Medicaid applicants/recipients.

The agreement by the purchaser with the funeral home constitutes a purchase, even if revocable in whole or part. The contract nearly always includes burial spaces, which are excluded assets. The contract is not:

1. An installment burial contract.

2. An insurance funded burial contract.

3. Divestment as the funds transferred are in exchange for equal amounts          of goods and/or services.

In determining countable asset value:

1. Deduct first the amount identified as irrevocable under Wisconsin law.

2. Deduct next the amount equal to the value of all burial spaces purchased         by the contract. Remember that "burial spaces" includes caskets and outer       burial containers vaults, liners, etc.

3. Deduct any amount that can be included in the applicant's/recipient's                burial fund.

4. The remainder is the countable asset.

Example 8:

Total Contract Value =                          $5,200

Amount Designated as Irrevocable = - $3,000

                                                             $2,200

Value of Excluded Burial Spaces =    - $1,300

                                                               $ 900

Amount of Excluded Burial Funds*= - $ 0

Countable Asset = $ 900

* The amount of funds that may be excluded as the $1,500 "burial fund" is reduced by any amount of cash value in his/her life insurance and the amount of irrevocable burial trust. Whenever the burial contact specifies $1,500 or more as irrevocable, no funds can be excluded as "burial fund."

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Example 9:

Total Contract Value =                          $4,200

Amount Designated as Irrevocable = - $1,300

                                                              $2,900

Value of Excluded Burial Spaces =     - $1,300

                                                              $1,600

Amount of Excluded Burial Funds*       - $ 200**

Countable Asset                                    $1,400

**This example assumes that the person has not identified another insurance or irrevocable burial funds toward his/her "burial fund". $1,500 maximum burial fund allowance, less the $1,300 this contract makes irrevocable, leaves room for an additional $200 to be allocated to the "burial fund". Note that in example 1, the purchaser was able to achieve a higher exemption.

16.5.6.1 Statement of Funeral Goods & Services

The US Federal Trade Commission (FTC) requires funeral directors nationwide to use a "Statement of Funeral Goods and Services" as a way of indicating to their customers what is being purchased and their charges. This form looks a great deal like the first page of the WFDA preneed funeral contract. WFDA has advised their members to complete and provide to the family a copy of the Statement" of Funeral Goods and Service along with the' preneed funeral contact as a service to their customers and in compliance with FTC rules.

16.5.6.2 Cash Advances

On both the WFDA preneed funeral contract and the FTC's Statement of Funeral Goods and Services is an area called "Cash Advance Items". These are expenses for services and goods not provided by the funeral home but often related to the funeral.

Usually, the funeral home asks the purchaser/family to reimburse it dollar-for-dollar equal to what was advanced. A funeral home can, however, charge additional sums for their service in making cash advances on behalf of the deceased's family. For example, a funeral home may advance a $175.00 payment for an obituary charge to the local newspaper; when billing the family, the funeral home adds a $20.00 service fee for a total of $195.00. By FTC rule, whenever the funeral home bills for more than the actual amount of the cash advance, it must identify this to the purchaser/family with a standard phrase added to the Statement of Funeral Goods and Services; the phrase is "We charge you for our services in obtaining ... ". This phrase appears on the WFDA preneed agreement and comes into effect whenever the small box to the left of each line under "Cash Advance Item" is marked.

Amounts identified on a preneed agreement under "Cash Advances Items" are not disregarded and are part of the "Total Contract Value" in the asset calculations (see the formula above) for EBD Medicaid. This is true whether there is an additional charge on the cash advance item or not.