SI CHI01130.424 (MI) -- Michigan Prepaid Burial Contracts (RTN 412 -- 06/2008)

A. General

The Michigan Department of Human Services (DHS) certifies prepaid funeral contracts as irrevocable for individuals receiving its services. DHS does not count these irrevocable burial contracts as resources in determining eligibility for its services. DHS completes the certification on Form DHS-8A, “Irrevocable Funeral Contract Certification” (Exhibit 1). A certified burial agreement remains irrevocable regardless of whether the individual continues to receive DHS services.

To exclude a Michigan prepaid funeral contract from resources for SSI eligibility, you must verify that DHS has certified the contract as irrevocable. If DHS has not certified the contract, it is revocable and counts as a resource for SSI.

B. Amount of Irrevocable Agreement(s)

Burial contracts in Michigan conversion cases prior to January 1, 1974, which were approved by DHS, are irrevocable. Prepaid burial agreements dated January 6, 1979 or later, which are approved by DHS are irrevocable.

The State irrevocable limit was $1,500 plus interest prior to March 6, 1984. On March 6, 1984, the State raised the irrevocable limit to $2,000 plus interest. Effective June 1, 2002, the State raised the limit to $10,050, plus interest. This amount is the sum of the original $2,000 limit and the amount allowed under section 2080 of the Michigan insurance code ($8,050 effective June 1, 2002). The amount allowed by the Michigan insurance code is adjusted annually in accordance with the consumer price index. (CPI). The total amount was increased to $10,257 effective June 1, 2003; to $10,423 effective June 1, 2004; to $10,560 effective June 1, 2005; to $10,808 effective June 1, 2006; to $11,072 effective June 1, 2007; and to $11,238 effective June 1, 2008. We expect this amount to change annually, consistent with any increases in the CPI. Interest and dividends may be added to the account in excess of the limit and are not available to the individual.

Effective June 1, 2002, the amount that DHS can certify as irrevocable is reduced by the amount of a death benefit from an insurance policy or annuity contract, the proceeds of which have been assigned as payment for funeral goods or funeral services for the contract beneficiary. The limit on such a policy or contract was $10,050 effective June 1, 2002; $10,257 ($8,257 plus $2,000); $10,423, effective June 1, 2004; $10,560 effective June 1, 2005; $10,808 effective June 1, 2006; $11,072 effective June 1, 2007; and $11,238 effective June 1, 2008, all exclusive of interest. This amount is also indexed to the CPI. See SI R01130.425 (MI) for additional information about life insurance funded burial contracts and trusts in Michigan.

C. Adding to an Existing Prepaid Burial Contract

The prepaid burial contract limit applies to both newly formed agreements and existing irrevocable agreements. The individual can add to an existing agreement, even if the limit was lower when the agreement was established, as long as the total does not exceed the new limit. An individual may also have more than one irrevocable agreement, provided the combined amounts of the original values of the agreements do not exceed limits set by State law. Each agreement or addition must be certified by DHS. Accrued interest is not included in determining the limit.

EXAMPLE: In 1984, an SSI recipient established a $2,000 irrevocable agreement. On November 1, 2004, the irrevocable agreement is worth $3,500 ($2,000 original value plus $1,500 accrued interest), all of which is irrevocable and not a resource. On that day, the individual uses $8,423 from a small inheritance to contract for additional goods and services from the funeral home. DHS certifies this as irrevocable. He now has an irrevocable agreement of $11,923 ($10,423 in irrevocable deposits and $1,500 in irrevocable accrued interest).

D. Establishing an Irrevocable Agreement

SSI applicants/recipients interested in establishing irrevocable agreements should be referred to the local DHS office with form DHS-8A.

  1. Insert in the remarks section of DHS-3473 the following: "Mr./Ms./Mrs. ________ is an SSI applicant/recipient who is interested in establishing an irrevocable burial agreement."

  2. If an agreement is established, the individual will be given a copy of form DHS-8A, Irrevocable Funeral Agreement (Exhibit I). The applicant should return this form to the FO.

  3. The earliest date an agreement can become irrevocable under this provision is the date it is approved by DHS, but never earlier than January 6, 1979.

E. Form DHS-8A, “Irrevocable Funeral Contract Certification” (Exhibit 1).