SI DEN01130.420 Prepaid Burial Agreements Denver Region

See SI 01130.420

A. General

"Prepaid burial agreement" is a generic term that includes contracts, trusts, escrow accounts and similar instruments that purport to prepay for burial services to dispose of the human body after death. The following instructions provide details regarding State law as it impacts on prepaid burial agreements in supplementation to POMS SI 01130.420.

Note: 

If the prepaid burial agreement is irrevocable, and thus not a resource, the original dollar value of the burial funds portion of the contract offsets the $1,500 limit of the burial funds exclusion. The portion of the contract for purchase of burial space items does not offset the $1,500.

B. Development

Development varies by State. Following are descriptions of the development that is necessary for each particular State in the Denver Region.

1. Colorado

Under Colorado law all prepaid burial agreements, in the form of a contract, are revocable with one exception. The exception applies only to SSI applicants/recipients and to applicants/recipients of medical assistance, social services, or public assistance from the State of Colorado.

  1. a. 

    The Exception

    SSI applicants/recipients (or medical, social services, or public assistance recipients) can own irrevocable prepaid burial agreements for any amount plus accrued interest. (Prior to April 21, 1986 only amounts up to $1,500 plus accrued interest were excluded and prior to July 1, 1983 the limit was $1,000 plus accrued interest.) The agreement does not have to be preexisting, i.e., the individual could choose to amend the agreement with the consent of the seller to convert the agreement from revocable to irrevocable. A prepaid burial agreement of any amount, plus accrued interest, may be made irrevocable under State law. For this exception to apply, the agreement need not have been purchased in Colorado.

  2. b. 

    Determining Irrevocability

    Determine whether the agreement is a contract or a trust/escrow agreement. If the agreement is a contract it must state that it is "irrevocable" or words to that effect.

    If the contract is revocable then the exception does not apply. The contract is a resource and its value is countable unless it can be excluded from resources as funds set aside for burial (SI 01130.411).

    If the agreement is in the form of a trust or escrow account it must be read in its entirety in order to determine its irrevocability. Colorado law requires the following conditions for the exception to apply to prepaid burial trusts/ escrows. The trust/escrow account must:

    • be made with a Federally insured bank or savings and loan association or a trust company under the supervision of the State Bank Commission;

    • be irrevocable during the lifetime and be paid only upon death for the burial;

    • provide for payment without limitations as to place of burial or provider of services. In any, case, however, the individual is not precluded from indicating a nonexclusive preference as to place of burial or provider of related services.

    In addition, the State of Colorado requires that the trust be valid. To be valid, the trust/escrow must contain the following:

    • an identifiable value, such as $1,000;

    • a capacity and intent on the part of the settlor to create the trust;

    • a trustee and;

    • an identifiable beneficiary.

    If the prepaid burial agreement is not a contract, not a trust/escrow and you have a question about applying the Colorado statute exception, submit the document to Assistance/Insurance Programs Branch for review.

  3. c. 

    SSI Couple Cases

    An SSI couple can own prepaid burial agreements separately or jointly. The exception in (a) applies to each member of the couple if each agreement is irrevocable. Non-excluded resources are still subject to the couple limit which is $3,000 beginning January 1, 1989.

  4. d. 

    Trusts

    If the settlor and the sole beneficiary are one and the same, then the trust/escrow is revocable and thus the current market value is countable as a resource for SSI purposes.

  5. e. 

    Life Insurance Policies

    State law allows that life insurance policies may be assigned to fund burial contracts, unless the terms of the policy prohibit assignment. An owner of a life insurance policy can legally designate a funeral home as the beneficiary.

  6. f. 

    Examples

    Question: John D. has a prepaid irrevocable burial contract with a face value of $2,800. The contract does not include burial spaces and/or plots. He pays by installments. He has paid $2,000 to date. What is the value of the prepaid burial contract?

    Answer: The burial contract value is $2,000. Beginning April 21, 1986, the entire contract is not a resource for SSI purposes. Prior to April 21, 1986, $1,500 ($1,000 prior to July 1, 1983) of the amount was not a resource; the rest was a resource for SSI purposes.

    Question: Maxine S. has a prepaid burial trust with the Denver City Bank in the amount of $1,950.

    Maxine S. is both the trustor and the beneficiary. Is the burial trust a resource?

    Answer: Yes. When the settlor (trustor) and beneficiary are one and the same, the trust is revocable. Treat the purchase price (or equity value, if less) as a resource for SSI purposes.

    Note: 

    This type of burial trust is a countable resource only to the extent that its value exceeds the $1,500 limit of the burial funds exclusion.

2. Montana

Prepaid burial agreements may be either revocable or irrevocable depending on the language used in the instrument.

  1. a. 

    Contracts:

    Prepaid burial contracts may be irrevocable. Obtain a copy of the contract. Determine that it is irrevocable if express language indicates the purchaser could not obtain a refund. If language in the contract indicates that special conditions exist, e.g., both parties must mutually agree or the purchaser may rescind the agreement if the purchaser moves permanently out of the State, the contract remains irrevocable until the condition is met.

    Note: 

    It is not necessary to verify that the funeral home has complied with State law that requires the burial contract purchase money be put in a mandatory trust. Make your determination as to the irrevocability of the contract by perusing the prepaid burial contract. Do not request to see the trust agreement.

  2. b. 

    Trusts:

    A trust must contain the following: an identifiable trust corpus, capacity and intent on the part of the settlor to create the trust, a trustee and an identifiable beneficiary.

    If the settlor and the sole beneficiary are one and the same, then the trust/escrow is revocable and thus the current market value is countable as a resource for SSI purposes.

  3. c. 

    SSI Couple Cases

    An SSI couple can own prepaid burial agreements separately or jointly. The exception in (a) applies to each member of the couple if each agreement is irrevocable. Non-excluded resources are still subject to the couple limit which is $3,000 beginning January 1, 1989.

  4. d. 

    Life Insurance Policies

    State law allows that life insurance policies may be assigned to fund burial contracts, unless the terms of the policy prohibit assignment. An owner of a life insurance policy can legally designate a funeral home as the beneficiary.

  5. e. 

    Examples:

    Question: John D. has a prepaid irrevocable burial contract with a face value of $2,800. The contract does not include burial spaces and/or plots. He pays by installments. He has paid $2,000 to date. What is the value of the prepaid burial contract?

    Answer: The burial contract value is $2,000. Beginning April 21, 1986, the entire contract is not a resource for SSI purposes. Prior to April 21, 1986, $1,500 ($1,000 prior to July 1, 1983) of the amount was not a resource; the rest was a resource for SSI purposes.

    Question: Maxine S. has a prepaid burial trust with the Denver City Bank in the amount trustor reserves the power of revocation, notwithstanding any express language to the contrary in the instruments. If either, the current market value of the burial agreement is a resource for SSI purposes.

  1. c. 

    Legal Guardian: A legal guardian of an infant or of an incompetent cannot contract or encumber the property or assets of the child or incompetent to purchase prepaid burial agreements unless the guardian first obtains permission from the court. Obtain a copy of the court order authorization for the file.

  2. d. 

    Representative Payee: A representative payee of the Social Security recipient has the authority to expend conserved Social Security benefits for a prepaid burial contract for the beneficiary.

    Obtain this information from the recipient and document the file whether SSA conserved funds were used to purchase the prepaid burial agreement and, if so, the amount. You must still determine if the burial agreement is irrevocable.

  3. e. 

    .

3. North Dakota

  1. a. 

    General: Effective March 1, 2021, all pre-need burial funds must be placed in an irrevocable itemized funeral contract to meet the North Dakota Pre-Need Burial Provision. Once the purchaser designates this contract as irrevocable, the purchaser has 45 days to cancel the irrevocable part of the contract. During this 45-day period, the entire value of the contract is revocable and therefore countable for SSI purposes. Once the contract becomes irrevocable (after the 45-day period), the contract is excluded from resources for SSI purposes if the contract meets the criteria for exclusion under the North Dakota Pre-Need Burial Provision (SI DEN01130.421). Obtain a copy of the itemized funeral contract and be sure to note the date that any portion was designated as irrevocable.

  2. b. 

    Life Insurance Policies: There is no provision in State law which would prohibit the insured's ability to transfer a life insurance policy to fund a burial contract. An owner of a life insurance policy can legally designate a funeral home as the beneficiary.

4. South Dakota

  1. a. 

    General: South Dakota permits pre-need burial agreements to be either revocable or irrevocable. Obtain a copy of the pre-need burial agreement. It should specify in writing whether it is revocable. If the agreement does not address revocability, resolve the question by obtaining the written intent from the parties to the contract.

  2. b. 

    Revocability: If prepaid burial agreement is revocable, then the current market value (or equity value if less) is a resource and subject to the $1,500 burial fund and the burial space exclusions.

  3. c. 

    Life Insurance Policies: State law provides that a life insurance policy may be assignable or not assignable to fund a burial contract, depending on its terms. An owner of a life insurance policy can legally designate a funeral home as the beneficiary.

5. Utah

  1. a. 

    General: Prepaid burial plans, contracts or agreements made in the State of Utah prior to May 10, 1983 are revocable. Agreements entered on or after that date may now be revocable or irrevocable at the option of the beneficiary/payor at the time the agreement or contract is made.

  2. b. 

    Life Insurance Policies: State law provides that the owner of any rights in a life insurance policy may assign any of those rights to fund a burial contact or to someone else. The only exception to this is when assignment of insurance rights is expressly prohibited by an annuity contract which provides annuities as retirement benefits related to employment contracts. An owner of a life insurance policy can legally designate a funeral home as the beneficiary.

6. Wyoming

  1. a. 

    General: Prepaid burial agreements are generally revocable. A person who is receiving old age pension benefits can make their contract irrevocable.

  2. b. 

    Life Insurance Policies: State law allows that life insurance policies may or may not be assignable to fund burial contracts, depending on the terms of the policy. An owner of a life insurance policy can legally designate a funeral home as the beneficiary.


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SI DEN01130.420 - Prepaid Burial Agreements Denver Region - 02/03/2023
Batch run: 02/03/2023
Rev:02/03/2023