SI DEN01130.421 Pre-need Funeral Contracts Established in the State of North Dakota (TN 0401 - 12/2004)

See SI 01130.420

A. Policy - North Dakota State law requirements

State law requires the vendor of a pre-need burial agreement to deposit funds received from the sale of the agreement in a saving account or a certificate of deposit (CD) held by a trust company or a federally insured financial institution within the State. The vendor is required to maintain a record of each sale, and to file an annual report with the State securities commissioner showing the purchaser, beneficiary, the amount received, (including all installments), and the name and address of the institution where the funds are deposited.

State law also provides that the purchaser may request a return of their funds at any time. The financial institution is merely required to provide a five-day notice to the pre-need vendor by registered or certified mail.

These contracts are revocable. However, State law specifies that:

“Upon written request, a purchaser of a pre-need funeral service contract may make a certain amount of the pre-need funds irrevocable. The irrevocable amount may not exceed the amount of the allowable asset exclusion used for determining eligibility for (Medicaid) at the time the contract was entered. A purchaser of a pre-need funeral service contract has forty-five days from entering the contract to cancel the irrevocable part of the contract by giving notice to the cemetery association or licensed funeral establishment with whom the contract was entered.”

A resident of North Dakota wishing to have funds designated as irrevocable in a pre-need burial contract must do so at the signing of the contract. Because the purchaser has forty-five days in which to cancel, the entire value of the contract is revocable, and the entire value is a countable resource until the forty-sixth day. On the forth-sixth day the portion designated as irrevocable is no longer a resource for SSI purposes.

The First-of-the-Month rule is used to make SSI resource determinations. For example, if an individual purchases a pre-need burial contract on November 20^th and, at that time requests that a portion of the contract be made irrevocable, the entire value of the contract would be a resource for December and January. Beginning February 1^st the portion designated as irrevocable would no longer be a resource.

The amount identified as irrevocable can not exceed the allowable asset exclusion in the State's Medicaid program. That limit is currently $3,000.

B. Policy - North Dakota burial contracts funded by payable on death (POD) bank accounts

Some individuals may have funded their pre-need funeral arrangements by establishing a separate bank account or CD made POD to the funeral home or cemetery. Some of these bank accounts may have been incorrectly excluded from resources. Because the owner of the CD or bank account is alive, he or she is still the owner of the account. The “POD” designation does not transfer ownership from the individual to the funeral home until the owner is deceased.

In these situations, even though a pre-need contract exists, and even though the contract specifies that certain burial space items are intended to be purchased upon the individuals death, only the general $1,500 burial funds exclusion applies (to the extent it has not been used elsewhere). Amounts in excess of this limit are not excluded under the burial space exclusion because the funds are not paid to the funeral home for burial space items while the individual is living. Since the burial space is not paid for until the customer's death, the customer still retains possession and control of the funds.

C. Procedure - redeveloping cases with incorrect burial exclusion determinations

Recipients having a CD or bank account POD to a funeral establishment, either as their sole source of burial funds, or in addition to a pre-need contract, must be identified during the redetermination process. The interviewer should explain that only up to $1,500 of the POD instrument may be excluded as burial funds, even though the account is titled “POD” to the funeral home.

Individuals having in excess of $1,500 in burial funds, and having other countable resources, may exceed the resource limit. They may wish to revise their pre-need arrangements.

The interviewer should inform the individual of the burial space exclusion. Although we are unable to advise a recipient on how to dispose of funds, we can suggest they talk with the funeral provider to examine options. The recipient may wish to consider canceling the existing revocable contract, and create a new contract which is irrevocable in whole or in part. See A above.

Recipients with POD accounts (B above) that affect eligibility may wish to consider the following two options to retain eligibility.

1. They may create a pre-need burial contract and designate up to $3,000 as irrevocable. The irrevocability would not be effective until the first of the month following the 45 day cancellation period as described in section A.

2. They may purchase or contract for purchase of burial space items. The value of burial space items is totally excluded from resources.

D. Procedure - overpayments

The recovery of an overpayment is waived when the liable individual (see SI 02201.020) is without fault (see SI 02260.010) in causing the overpayment, and recovery or adjustment would:

• Defeat the purpose of title XVI of the Act (see SI 02260.020); or

• Be against equity and good conscience (see SI 02260.025); or

• Impede effective or efficient administration of title XVI of the Act (see SI 02260.030) because of the amount involved.

Individuals, who relied on SSA's prior determination, that individually held CDs or other financial instruments made POD to a funeral or cemetery provider were wholly excluded, are without fault in causing the overpayment. Adjudicators may waive any overpayments caused by these incorrect determinations, assuming all other waiver criteria are met.

E. Procedure - reinstatement vs. new claim

Under the rules of administrative finality, some individuals may be found retroactively ineligible in excess of 12 months. Generally a new application must be taken after 12 consecutive months of suspension. SI 02301.205B lists situations which permit reinstatement rather than a new claim after 12 consecutive months of suspension. SSI benefits can be reinstated without a new application if:

• an individual does not appeal a determination or decision and reestablishes eligibility during a 60 day appeal period or

• if an individual appeals a determination and reestablishes eligibility during the administrative appeals process or civil suit.