SI NY01130.420 Pre-Paid Burial Contracts - (RTN 430 - 05/2011)
A. New Jersey
New Jersey has established three funeral prepayment options: irrevocable prepaid funeral trusts; irrevocable assignment of an existing policy; and purchase of a funeral insurance policy. There is no dollar limit on the amount of money used to fund these prepayment options. Examine and evaluate the contract provided. Use the following to determine whether the prepayment option is an excludable resource.
1. Irrevocable Prepaid Burial Contracts (Effective January 18,1992)
Here the individual irrevocably contracts with the funeral director or cemetery and prepays for the goods and services. In New Jersey, the funeral director or cemetery must hold any moneys paid for future funeral services as trust funds in a separate FDIC insured bank account. A prepaid funeral trust must contain, in a conspicuous manner, the following statement:
New Jersey law requires this agreement to be irrevocable for applicants or recipients of public assistance programs (such as the Medicaid, Supplemental Security Income (SSI), Work First New Jersey and Work First New Jersey General Public Assistance programs, or any successor program thereof) and for the State of New Jersey to be named as beneficiary of any irrevocable funeral trust or irrevocably assigned newly issued funeral insurance policy purchased or created for the provision and payment of funeral and burial goods and services. Any moneys remaining after the provision of funeral goods and services shall be paid over to the State as required by law.
If the intended funeral recipient is either in receipt of SSI or an applicant for SSI within six months of the date the agreement is signed and the agreement provides that the trust is irrevocable during the individual's lifetime, it is not a countable resource. If, however, the intended funeral recipient does not become an applicant for or a recipient of SSI within six months of signing the agreement it reverts to a revocable trust. In the latter situation, develop the value of the resource per SI 01130.420B.
NOTE: The face value of the burial funds portion of the contract, if any, offsets the $1,500 burial funds exclusion available to an individual. The face value of the burial space portion of the contract, if any, does not offset the $1,500 burial funds exclusion (SI 01130.420B.2).
2. Irrevocable Assignment of an Existing Insurance Policy (Effective February 27, 2000)
Here the owner of an existing insurance policy or policies irrevocably assigns the ownership and/or beneficial interest to another party for the intended purpose of funding funeral expenses. The cash value of the policy or policies cannot exceed (either alone or in conjunction with a trust fund) the current retail value of the proposed funeral. The New Jersey State Funeral Directors Association offers a program called Sure Trust, which allows the owner to irrevocably assign insurance policies for this purpose. However, individual insurance companies may make create similar policies.
When the ownership of an existing life insurance policy is irrevocably assigned to a funeral provider to fund a burial contract, it is not a resource (SI 01130.425C.2.).
NOTE: The face value of the burial funds portion of the contract, if any, offsets the $1,500 burial funds exclusion available to an individual. The face value of the burial space portion of the contract, if any, does not offset the $1,500 burial funds exclusion (POMS SI 01130.420B.2).
3. Newly Issued Funeral Insurance Policy (Effective February 27, 2000)
Here the individual purchases a funeral insurance policy intended specifically for the payment of funeral expenses. The purchaser must either irrevocably assign ownership and beneficial interest of the policy to meet the intended purpose, or, if the policy has one, use a "settlement of proceeds" provision allowing for the payment of the funeral bill prior to the settlement of any beneficiary interest.
A newly issued funeral insurance policy intended specifically for payment of funeral expenses where ownership and beneficiary interest can be irrevocably assigned, would be considered burial insurance by SSA (SI 01130.300A.4.). Thus, it would not be considered a resource.
NOTE: The face value of the burial insurance offsets the $1,500 burial funds exclusion available to an individual by the policy's face value. The face value of the burial space portion of the contract, if any, does not offset the $1,500 burial funds exclusion (