If burial funds are used for another purpose, you should assume that they were used
in the following order: nonexcluded interest, nonexcluded originally designated amounts,
excluded interest, 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. See SI 01130.410D.6.a. to determine if redesignation is necessary.
EXAMPLE - An individual designated $2,000 as a burial fund. We excluded $1,500 and counted $500.
The account grew to $2,200 as of April 1994 ($1,650 excluded, $550 nonexcluded, see
SI 00830.501 on prorating interest on commingled burial funds) because of accumulated interest.
The individual used $750 for a non-burial purpose in April 1994. The claims representative
determined that the $750 used consisted of $550 in nonexcluded funds, all $150 of
excluded interest and $50 of originally designated excluded burial funds. A penalty
of $200 applies ($150 excluded interest and $50 originally designated excluded funds).
Redesignation of the amount of burial funds is also necessary (see SI 01130.410D.6.).