A life insurance funded burial contract involves an individual assigning either the proceeds or ownership of an insurance policy to a third party, generally a funeral provider, as payment for a burial contract. As indicated in SI 01130.425B, in this type of burial arrangement, the focus is on the assignment of the insurance policy rather than the contract. This is because the contract itself--apart from the insurance policy assigned to fund it--has no resource value. Therefore, as discussed more fully in the subsections below, it must be determined whether such an assignment is revocable under state law, thus providing the individual with access to the cash value, if any, of the insurance policy.

However, prior to reaching the issue of revocability, it should be noted that Michigan law gives the purchaser of a life insurance policy at least 10 days to cancel the policy and recover the full premium paid. During this period, the policy is a resource, and its value is the amount of premium paid. After the initial cancellation period, follow the instructions below.

In the case of a revocable assignment of the proceeds of a life insurance policy, the policy is not considered a resource for SSI purposes if it meets two additional requirements, as discussed in SI 01130.425E.1:

1. 1. 

   The individual irrevocably transfers ownership of a life insurance policy to a trust and neither owns nor has the legal right to direct the use of trust assets to meet their support and maintenance needs; and

2. 2. 

   State law allows a life insurance policy, in which the proceeds have been revocably assigned to fund a funeral contract, to be placed irrevocably in trust.
   
   Here, Michigan law does not specifically prohibit an insurance policy, in which the proceeds have been revocably assigned to fund a funeral contract, from being placed irrevocably in trust. However, to create a valid assignment of the proceeds of an insurance policy, the following requirements must be satisfied by the trust documents and/or documents signed by the individual:

   1. a. 

      the assignment must be associated with a contract for funeral services for which the assigned proceeds serve as payment;

   2. b. 

      the assignment must be revocable by the assignor (“assignor” refers to the individual or entity who makes the revocable assignment of the insurance proceeds);

   3. c. 

      if the assignment is revoked, funeral services may be obtained from any other funeral establishment;

   4. d. 

      the assignment must contain the following disclosure in boldfaced type: “This assignment may be revoked by the assignor or assignor’s successor or, if the assignor is also the insured and deceased, by the representative of the insured’s estate before the rendering of the cemetery services or goods or funeral services or goods. If the assignment is revoked, the death benefit under the life insurance policy or annuity contract shall be paid in accordance with the beneficiary designation under the insurance policy or annuity contract.”;

   5. e. 

      the assignment must provide that the actual price of the funeral services delivered at the time of death may be more or less than the price set forth in the assignment;

   6. f. 

      the assignment must provide that any increase in the price of the funeral services shall not exceed the ultimate death benefit under the insurance policy;

   7. g. 

      the assignment must provide that if the ultimate death benefit under the insurance policy exceeds the price of the funeral services at the time of performance, the excess amount shall be distributed to the beneficiary designated under the policy;

   8. h. 

      the assignment must provide that any addition to or modification of the burial contract does not revoke the assignment or the contract for funeral services which are not affected by the addition or modification unless the assignment is revoked;

   9. i. 

      the assignment must be limited to that portion of the proceeds of the insurance policy which is needed to pay for the funeral services for which the assignor has contracted;

   10. j. 

       the death benefit of the insurance policy which is subject to the assignment must not exceed a given amount when the first premium payment is made on the policy. Prior to June 1, 1996, this amount was $5,000. The amount is now adjusted annually in accordance with the consumer price index as shown below:

       Dates	Amount
       6/1/96-5/31/97	$6,859
       6/1/97-5/31/98	$7,039
       6/1/98-5/31/99	$7,214
       6/1/99-5/31/00	$7,376
       6/1/00-5/31/01	$7,565
       6/1/01-5/31/02	$7,837
       6/1/02-5/31/03	$8,050
       6/1/03-5/31/04	$8,257
       6/1/04-5/31/05	$8,423
       6/1/05-5/31/06	$8,560
       6/1/06-5/31/07	$8,808
       6/1/07-5/31/08	$9,072
       6/1/08-5/31/09	$9,238

   11. k. 

       the assignment must contain a dispute resolution rights section which states that after the funeral services are provided, in the case of a payment dispute, the representative of the insured’s estate may seek arbitration to resolve the dispute;

   12. l. 

       the assignor must be responsible for making the premium payments due on the insurance policy;

   13. m. 

       at the time the assignment is made, the assignor must certify that the insured does not have in effect other life insurance policies that have been assigned as payment for funeral services which together with the additional assignment would have an aggregate face value in excess of the limitation provided in j. above.

If the documents satisfy all of the above requirements, the insurance policy is not a resource. This is true even though the individual retains the right to revoke the assignment of proceeds and change the funeral provider.