State of Wisconsin
Release 19-02 September 10, 2019
16.5.1 Burial Trusts
16.5.2 Burial Insurance
16.5.3 Life Insurance-Funded Burial Contracts
22.214.171.124 Irrevocable Assignment of Life Insurance-Funded Burial Contracts
126.96.36.199 Revocable Assignment of Life Insurance-Funded Burial Contracts
16.5.5 Burial Funds
16.5.6 Wisconsin Funeral Trust Program
188.8.131.52 Statement of Funeral Goods and Services
184.108.40.206 Cash Advances
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 "Spousal Impoverishment Protection" refers to special financial provisions in Medicaid law regarding income and assets that affect certain married couples receiving or applying for nursing home or community waiver services. EBD Elderly, Blind, or Disabled Medicaid cases, each fiscal group member may have one or more irrevocable burial trusts, of which the total face value 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. may not exceed $4,500. Any principal amount over $4,500 is a countable asset. Although Wisconsin law allows $3,000 to be irrevocable, Wisconsin’s Medicaid state plan allows an additional $1,500 to be considered as though it were irrevocable by law for these burial trusts. This is why $4,500 is allowed. (See Section 18.4 Spousal Impoverishment Assets for information about burial assets for persons with a community spouse Someone who is 1) Married to an institutionalized person and 2) Not living in a nursing home or other medical institution for 30 or more consecutive days..)
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 The price an item would sell for on the open market in a local geographic area.
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.
An irrevocably assigned LIFBC Life Insurance-Funded Burial Contract 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:
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 The net market value minus the value received..
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.
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.
Burial space exemptions apply only to EBD fiscal group members. Burial space exemptions include all the following, if they have been paid for or are included in a contract to purchase with a LIFBC that meets the criteria in Section 16.5.3 Life Insurance-Funded Burial Contracts:
Exempt multiple spaces of any value under the following conditions:
The space(s) must be owned by the elderly, blind, or disabled person, that person’s spouse A spouse is that person recognized by Wisconsin law as another person's legal husband or wife. Wisconsin does not recognize common law marriage., or, when the EBD person is a minor A minor is a person less than age 18., by the minor’s parents.
Both a plot and a mausoleum space cannot be exempted for the same person.
Each person may have more than one type of space.
The space(s) must be for the use of the elderly, blind, or disabled member or one of the following:
Minor or adult An adult is anyone age 18 or older. natural, adoptive, or stepchild.
Brother or sister.
Natural or adoptive parent.
Spouse of any of the above.
If the burial space expenses are being paid for through an LIFBC for a relative with a qualifying relationship (other than the EBD person and that person’s spouse), allow only those expenses listed above in Section 16.5.3 as exemptions. Any other goods or services purchased through the LIFBC would be a divestment.
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.
Example 6: Harry is applying for HCBW. Last year he used his life insurance policy with a face value of $10,000 and a cash value of $8,000 to set up a LIFBC for his son. On the Statement of Goods and Services, $4,000 is designated for a casket, $1,000 for a vault, and $500 for the cemetery plot, for a total of $5,500 that is exempt burial space expenses. The remaining $2,500 that was put in to the LIFBC is considered divestment.
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:
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 7: 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
The total is more than $1,500, so no portion of the burial fund (savings account) is exempt.
Example 8: 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
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
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.
The Wisconsin Funeral Trust is a single trust owned and operated by the WFDA Wisconsin Funeral Directors Association. 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:
Total Contract Value = $6,700
Amount Designated as Irrevocable = - $4,500
Value of Excluded Burial Spaces = - $1,300
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."
Total Contract Value = $4,200
Amount Designated as Irrevocable = - $1,300
Value of Excluded Burial Spaces = - $1,300
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.
The U.S. FTC Federal Trade Commission 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.
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.
page last updated in Release Number: 19-02
Release Date: 9/10/2019
Effective Date: 9/10/2019