If burial funds are used for another purpose, consider that they were used in the following order: non-excluded interest, non-excluded originally designated amounts, excluded interest, and then excluded originally designated amounts. The penalty only applies to the use of excluded funds (including excluded interest).
NOTE: This is important in determining if a redesignation is necessary. To determine if redesignation is necessary, see SI 01130.410D.6.a. in this section.
EXAMPLE - Ms. Marquez designated $2,000 as a burial fund. We excluded $1,500 and counted $500. The account grew to $2,200 as of April 2018 ($1,650 excluded and $550 non-excluded; for information on prorating interest on commingled burial funds, see SI 00830.501) because of accumulated interest. Ms. Marquez used $750 for a non-burial purpose in April 2018. The technician determined that the $750 used consisted of $550 in non-excluded funds, all $150 of excluded interest and $50 of originally designated excluded burial funds. A penalty of $200 applies ($150 of excluded interest and $50 of originally designated excluded funds). Redesignation of the amount of burial funds is also necessary, per SI 01130.410D.6. in this section.