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16.5 Burial Assets

16.5.1 Burial Trusts

16.5.2 Burial Insurance

16.5.3 Life Insurance Funded Burial Contracts

16.5.3.1 Irrevocable Assignment of Life Insurance Funded Burial Contracts

16.5.3.2 Revocable Assignment of Life Insurance Funded Burial Contracts

16.5.4 Spaces

16.5.5 Burial Funds

16.5.6 Wisconsin Funeral Trust Program

16.5.6.1 Statement of Funeral Goods and 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 trusts, of which the total face value may not exceed $4,500. Any principal amount over $4,500 is a countable asset (see Section 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:

 

The ownership of the annuity or life insurance policy is irrevocably assigned by the policyholder to a funeral expense trust established by the insurance company. The trustee or trust administrator is required to pay all trust proceeds toward the policy holder's funeral expenses at the time of the policyholder's death. If a trust's proceeds exceed burial costs, the excess must revert back to the deceased person's estate.

 

A burial insurance policy is unavailable if both the following are true:

 

The purchase of a burial insurance policy that meets the above conditions is not a divestment because the purchaser is presumed to receive fair market value .

16.5.3 Life Insurance-Funded Burial Contracts

A life insurance-funded burial contract involves a person purchasing a life insurance policy on his or her own life and then assigning, revocably or irrevocably, either the proceeds or ownership of the policy to a third party, generally a funeral provider. The purpose of the assignment is to fund a burial contract.

 

Death benefits that exceed the actual costs of burial expenses must be paid to the insured’s estate or the insured’s beneficiary.

 

A burial contract that is funded with a life insurance policy must be in writing and must contain all of the following:

 

The assignment option (revocable or irrevocable) chosen by the customer impacts the determination of countable asset and/or divestment amount.

16.5.3.1 Irrevocable Assignment of Life Insurance-Funded Burial Contracts

An irrevocably assigned LIFBC is an unavailable asset because the member no longer owns it.

 

If a member has chosen irrevocable assignment of his or her LIFBC, the burial space exemption (see Section 16.5.4 Spaces) may apply, depending on the nature of the contract. Any portion of the contract that represents the purchase of a burial space is exempt and has no effect on the burial funds exclusion (see Section 16.5.5 Burial Funds).

 

If the face value of the burial funds portion of the contract exceeds $1,500, it offsets the burial fund exclusion described in Section 16.5.5 Burial Funds.

 

If the face value of the burial funds portion does not exceed $1,500, determine the CSV of the LIFBC at the time that it was assigned and proceed in the following order:

  1. Apply the CSV to burial spaces.
  2. Apply the burial fund logic described in Section 16.5.5 Burial Funds to any remaining CSV.
  3. Apply the CSV to any itemized goods or services, not accounted for by 1. and 2. above, purchased at fair market value .
  4. Apply divestment policy to any remaining CSV (see Section 17.13.2 Revocable Trusts).

 

Example 1: Mr Atkins has irrevocably assigned the ownership of his life insurance policy to a funeral home to fund a burial contract. The face value of the LIFBC is $3,000. The Statement of Funeral Goods and Services shows $3,000 for the pre-arrangement of the funeral, of which $1,300 is designated for a casket and $1,700 for funeral expenses (services and cash advances for such things as flowers and the obituary). The $1,700 funeral expense portion reduces the $1,500 burial fund exclusion (see Section 16.5.5 Burial Funds), and so $1,500 of this LIFBC will be considered his exempt burial fund. The $1,300 casket does not reduce the burial fund exclusion (see Section 16.5.5 Burial Funds) and is not a countable asset because it is a purchase of a burial space.

 

Because the LIFBC was assigned irrevocably, determine if Mr. Atkins is receiving other goods or services at fair market value for the remaining $200 designated for funeral expenses. If he is not receiving goods or services at fair market value, consider the remaining $200 divestment (see Section 17.13.2 Revocable Trusts).

 

If the face value of the LIFBC exceeds the total amount shown on the Statement of Funeral Goods and Services, determine the cash surrender value (of the LIFBC at the time that it was assigned) and apply the divestment policy (see Section 17.13.2 Revocable Trusts). Any portion of an irrevocably assigned LIFBC for which no goods and services are received at fair market value is the divested amount .

 

Example 2: Mr. Atkins has irrevocably assigned the ownership of his life insurance policy to a funeral home to fund a burial contract. The face value and the cash value of the LIFBC is $3,200. The Statement of Funeral Goods and Services shows $3,000 for the pre-arrangement of the funeral. A divestment in the amount of $200 occurred because the cash value of the LIFBC exceeds the expenses of the pre-arrangement of the funeral.

16.5.3.2 Revocable Assignment of Life Insurance-Funded Burial Contracts

When a member has chosen revocable assignment of his or her LIFBC, use the following procedures to determine the countable asset amount.

 

Identify all other burial assets and life insurance policies the member may have. Use burial fund logic (see Section 16.5.5 Burial Funds) to determine what portion of the LIFBC is a countable asset.

 

The value of the burial contract is equal to the CSV of the life insurance policy. If the face value of all life insurance policies is $1,500 or less, exempt the CSV under the life insurance exclusion.

 

If the face value of all policies exceeds $1,500, treat the CSV of the policy according to the burial funds exclusion (see Section 16.5.5 Burial Funds), if applicable.

 

If one or more burial spaces are included in the statement of funeral goods and services, the burial space exclusion (see Section 16.5.4 Spaces) does not apply because the provider has not received payment and therefore no purchase of burial space(s) has been made.

 

Example 3: Mrs. White has a revocably assigned LIFBC and no other burial assets or life insurance policies. The face value of the LIFBC is $3,000 and the CSV is $1,700. The total value of the LIFBC is equal to the CSV of $1,700.

 

The burial contract designates $1,300 for a casket and $1,700 for funeral expenses. The burial space exclusion (see Section 16.5.4 Spaces) does not apply to Mrs. White’s contract, but $1,500 of the CSV is exempt under the burial funds exclusion (see Section 16.5.5 Burial Funds). The remaining $200 of the CSV is a countable asset.

 

Example 4: Mrs. White has a revocably assigned LIFBC. She additionally has a burial plot already paid for and a whole life insurance policy with a face value of $1,500 and CSV of $1,000. The face value of the LIFBC is $3,000, and the CSV is $1,700. The total value of the LIFBC is equal to the CSV of $1,700.

 

The burial contract designates $1,300 for a casket and $1,700 for funeral expenses. The burial space exclusion (see Section 16.5.4 Spaces) does not apply to Mrs. White’s contract. No portion of the CSV is exempt under the burial funds exclusion (see Section 16.5.5 Burial Funds) because the face value of her whole life insurance policy is $1,500. The burial plot is exempt, because it is paid for. The entire value of the LIFBC ($1,700) is a countable asset.

16.5.4 Spaces

Burial space exemptions apply only to EBD fiscal group members. Burial space exemptions include all the following, if they have been paid for:

 

Exempt multiple spaces of any value under the following conditions:

 

Example 5: Bob, who is 12 years old, lives with his parents and is tested for EBD Medicaid. His father owns five burial plots and spaces: the first is for Bob, the second and third are for his parents, the fourth is for his older brother, who does not live at home, and the fifth is for Bob's uncle. All the plots and spaces are exempt except for the fifth.

16.5.5 Burial Funds

Burial fund exemptions apply only to EBD Medicaid fiscal group members. Burial funds are funds that are set aside for burial expenses. EBD Medicaid members and their spouses may each have one burial fund.

 

To find the amount of a burial fund that can be exempted, add:

  1. The face value of the person's irrevocable burial trusts.
  2. The face value of all of his or her life insurance policies whose cash value is exempt.
  3. The face value of his or her exempt burial insurance (see Section 16.5.2 Burial Insurance).
  4. The CSV of revocably assigned LIFBC (see Section 16.5.3.2 Revocable Assignment of Life Insurance-Funded Burial Contracts).
  5. The burial funds portion of irrevocably assigned LIFBC (see Section 16.5.3.1 Irrevocable Assignment of Life Insurance-Funded Burial Contracts).

 

If the total value of the above items is $1,500 or more, do not exempt any more burial funds. If the total is less than $1,500, subtract the total from $1,500. The result is the amount of his or her burial fund total that is exempt.

 

Example 6: Mrs. Smith, who is 74 years old, applies for EBD Medicaid. She has a $1,600 savings account designated as a burial fund, a $1,300 irrevocable burial trust, and two life insurance policies. The combined face values of the life insurance policies total $900. Add the values of exempted assets. The irrevocable burial trust is exempt. The life insurance cash values are exempt when the total of their face values does not exceed $1,500.

 

$1,300   Irrevocable burial trust

   +900   Face value life insurance

$2,200

 

The total is more than $1,500, so no portion of the burial fund (savings account) is exempt.

 

Example 7: This time, Mrs. Smith, in addition to her $1,600 savings account designated as a burial fund, has a $300 irrevocable burial trust and two life insurance policies with a combined face value of $900.

 

 $  300  Irrevocable trust

  + 900  Face value life insurance

$1,200

 

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.

 

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 he or she 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 Funeral Trust Program

The Wisconsin Funeral Trust is a single trust owned and operated by the 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 two preneed funeral contracts: one is for a guaranteed price and the other is for a non-guaranteed price. These contracts are available to all individuals, not just those who are or may be EBD Medicaid applicants or members.

 

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:

 

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 or member'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 or 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."

 

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 or her "burial fund." The $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 and Services

The U.S. 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 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 or family to reimburse it dollar-for-dollar equal to what was advanced. A funeral home can, however, charge additional sums for its 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 or 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.

 

 

 

This page last updated in Release Number: 15-03

Release Date: 11/24/2015

Effective Date: 11/24/2015