|
|
Wisconsin Department of Health and Family Services |
|
|
Wisconsin Department of Health and Family Services |
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, count them.
In non-spousal Impoverishment EBD Medicaid cases, each fiscal group member may have one or more irrevocable burial trusts, the total value of which may not exceed $3,000. (See 5.10.4 for information about burial assets for persons with a community spouse.)
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 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 policy holder'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:
It includes language that says it is irrevocable, and
It states that all of the proceeds must
be used for burial expenses.
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 following are not burial insurance policies:
If a policy has cash surrender value to which the client has access, the policy is not burial insurance it is life insurance.
If a burial policy calls for any excess proceeds to be paid to secondary beneficiary (other than the deceased person's estate), it is life insurance, not burial insurance.
Similarly, if a policy calls for the proceeds to be paid to a private party who is expected but not legally required to use the funds for the burial costs of the insured, the policy is life insurance.
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 which 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:
Name of funeral home and the insurer.
Statement of funeral goods and services.
Effect of canceling or surrendering the insurance policy.
Effect of changing the assignment of the policy proceeds.
Nature and extent of any price guarantees for goods and services.
The assignment option (revocable or irrevocable) chosen by the customer impacts the determination of countable asset and/or divestment amount.
An irrevocably assigned LIFBC is an unavailable asset because the client no longer owns it.
If a client has chosen irrevocable assignment of his/her LIFBC the burial space exemption (4.5.5.4) 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 (4.5.5.5).
If the face value of the burial funds portion of the contract exceeds $1,500, it offsets the burial fund exclusion described in 4.5.5.5.
If the face value of the burial funds portion does not exceed $1,500, determine the cash surrender value ( CSV ) and proceed in the following order:
Apply the CSV to burial spaces.
Apply the burial fund logic described in 4.5.5.5 to any remaining CSV.
Apply the CSV to any itemized goods or services, not accounted for by items #1 and #2 above, purchased at fair market value.
Apply divestment policy to any remaining CSV (4.7.13.2).
|
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 (4.5.5.5), 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 (4.5.5.5) 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 (4.7.13.2). |
If the face value of the LIFBC exceeds the total amount shown on the Statement of Funeral Goods and Services, determine the cash value and apply the divestment policy (4.7.13.2). 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. |
When a client has chosen revocable assignment of their LIFBC, use the following procedures to determine the countable asset amount.
Identify all other burial assets and life insurance policies the customer may have. Use burial fund logic (4.5.5.5) to determine what portion of the LIFBC is a countable asset.
The value of the burial contract is equal to the cash surrender value ( 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, if applicable.
If one or more burial spaces are included in the statement of funeral goods and services, the burial space exclusion (4.5.5.4) does not apply. This is because the provider has not received payment and therefore no purchase of burial space(s) has been made.
|
Example 1: 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 (4.5.5.4) does not apply to Mrs. White’s contract, but $1,500 of the CSV is exempt under the burial funds exclusion (4.5.5.5). The remaining $200 of the CSV is a countable asset. |
|
Example 2: 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 cash surrender value ( 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 (4.5.5.4) does not apply to Mrs. White’s contract. No portion of the CSV is exempt under the burial funds exclusion (4.5.5.5), 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 the following, if they have been paid for:
Plots, vaults, caskets,
crypts, mausoleums, urns, or other repositories customarily used for the
remains of deceased persons, and
Necessary and reasonable
improvements upon the burial space with items such as headstones, markers,
plaques, and
Arrangements for opening and closing the gravesite.
Exempt multiple spaces of any value under
the following conditions:
The space(s) must
be owned by the EBD person, that person’s spouse, or, when the EBD person
is a minor, 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 client or one of the following:
Spouse.
Minor
or adult natural, adoptive, or stepchild.
Brother or sister.
Natural or adoptive
parent.
Spouse of any of the above.
|
Example : Bob, age 12, lives with his parents and is tested for EBD MA. His father owns five burial plots and spaces: #1 is for Bob, #2 and #3 are for his parents, #4 is for his older brother, who does not live at home, and #5 is for Bob's uncle. All the plots and spaces are exempt except #5. |
Burial fund exemptions apply only to EBD fiscal group members. Burial funds are funds that are set aside for burial expenses. EBD clients and their spouses may each have one burial fund.
To find the amount of a burial fund that can be exempted, add:
The face value of
the person's irrevocable burial trusts.
The face value of
all of his/her life insurance policies whose cash value is exempt.
The face value of his/her exempt burial insurance
(4.5.5.2).
The cash surrender
value of revocably assigned life insurance funded burial contracts ( LIFBC
) (4.5.5.3.2).
The burial funds portion of irrevocably assigned LIFBC (4.5.5.3.1).
If the total value of 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 of this subtraction is the amount of his/her burial fund total that is exempt.
|
Example 1: Mrs. Smith, age 74, applies for MA. 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 up 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 2: 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 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.
This page last updated in Release Number : 05-01
Release Date : 01-11-05
Effective Date : 01-11-05
|
|
