SI CHI01130.426 (WI) Wisconsin Life Insurance Funded Burial Contracts (RTN 403 -- 03/2007)
In applying the life insurance funded burial fund/space exclusions (SI 01130.425C through SI 01130.425D.), it must first be determined that the life insurance funded burial contract (LIFBC) is valid under state law. If the LIFBC is not valid under Wisconsin law, consider the value of the life insurance policy as a countable resource per SI 01130.300B.
If the LIFBC is valid under Wisconsin law, follow the instructions in SI 01130.425F through SI 01130.425G.
If a trust is involved in the transaction, the trust rules may also be applicable (SI 01120.201H.1).
B. State law
Effective June 1, 1997, Wisconsin law expressly provides that:
A life insurance policy may provide for the assignment of the proceeds of the policy to a funeral director or operator of a funeral establishment if:
Wisconsin State law does not limit the ability to irrevocably assign the proceeds of a life insurance policy to fund a pre-need funeral agreement. However, the individual must be able to designate a different beneficiary to the policy (upon written notice to the insurer) and a different funeral director or operator of a funeral establishment to receive the assignment of the policy proceeds (after written notice to the current designated funeral director or operator of a funeral establishment). Furthermore, if an agent of a funeral provider was involved in the sale of the policy, the policyholder must have entered into a valid burial agreement. Where a multi-premium insurance policy is designated to fund a burial contract, special requirements may also apply (see SI CHI01130.426C., step 6).
Even if these factors are met, policies issued after July 1, 1997 are nevertheless a resource for the first 30 days after they are issued. Under Wisconsin law, a policy holder has the unrestricted right to return a life insurance policy used to fund a pre-arranged funeral agreement within 30 days after the policy holder receives the policy.
This provision should be conspicuously printed on the front of the policy or attached. However, even if the policy does not have this provision in writing and the policyholder tried to cancel it within the 30 day-period, Wisconsin courts would treat the policy as if it conformed to the law and allow the policyholder to cancel within the 30-day period. If the policyholder returns the policy, all premiums paid must be refunded directly to the policyholder.
In general, in Wisconsin, a life insurance policy issued after July 1, 1997 and used to fund a pre-need burial contract is a resource for the first 30 days after it is issued, since the policyholder has the right to cancel the policy during that time and recover the premiums paid. If the policy was issued prior to that date, check the policy to determine any cancellation period. After the cancellation period, the policy will not be a resource if the following conditions are met:
The individual has irrevocably assigned the policy or policy proceeds to a funeral firm, with the right to name a different funeral firm to receive the proceeds;
The individual had the right to change the beneficiary to the insurance policy;
The individual has either irrevocably assigned or waved the right to obtain the cash surrender value of the policy;
The individual has submitted to the insurance company the irrevocable assignment of proceeds and the assignment or waiver of the right to obtain the cash surrender value; and
The individual entered into a valid burial agreement.
If the life insurance policy is a multi-premium funeral policy (i.e., if the premiums to fund the policy are paid over time, rather than in a single premium) and the policy was issued or renewed on or after July 1, 2000, please contact MOS-CRSI/SSI for policy guidance.
The burial agreement should be considered substantially compliant and therefore, valid under Wisconsin law if it:
Identifies the agent selling the agreement and the funeral establishment with which he or she is affiliated;
Indicates that the agreement is being funded by a life insurance policy;
Identifies the funeral establishment that will provide the services;
Lists the funeral services and merchandise selected; and
Indicates whether prices for funeral merchandise and services are guaranteed.
If each of these conditions are met, the LIFBC is valid under state law and the instructions in SI 01130.425F through SI 01130.425G should be followed. If any of the conditions are not met, the LIFBC might not be valid under state law. However, you should submit questionable cases to the Regional Office, MOS-CRSI/SSI for analysis.
If a funeral home or insurance company wants approval of forms before it markets a package, obtain as much information as possible about the options for executing the forms (i.e., will the policy permit assignment to a funeral home, etc.). It is preferable to obtain packages that have already been marketed, rather than blank forms, because that reveals relevant information that may be critical to the evaluation, such as to whom the policy has been assigned (i.e., whether to a funeral provider or other person or entity), as well as the addresses of the parties, etc. The package can be submitted to the Regional Office for review at the address shown below.
If an individual submits a life insurance funded contract established prior to July 1, 1997 that does not meet these requirements, the case should be submitted to the Regional Office to obtain a legal opinion. Mail the LIFBC package to the following address:Social Security Administration
Chicago Regional Office
P.O. Box 8280
Chicago, IL 60680-8280
The resource determination must be held pending notification from MOS-CRSI/SSI of the determination of legality.