This article focuses on burial spaces, burial space items, and irrevocable insurance-funded burial agreements. There are various types of burial agreements, but only one type of burial agreement is discussed below because of the potential to exclude the entire amount for MA purposes if it is properly written.
Medical Assistance (MA) is a means-tested program with income and asset limits. As part of the planning process for MA benefits, an applicant may be required to reduce assets to qualify financially. Some assets are considered “excluded” assets for MA eligibility purposes. These assets can be retained by the applicant or purchased prior to eligibility and the applicant will still qualify for MA without the assets counted as “available.” Generally, excluded assets for MA eligibility purposes include:
- One vehicle of any value,
- Tangible personal property (if it is not kept for investment purposes),
- Capital and operating assets of a trade or business that the County determines are necessary to the applicant’s ability to earn an income are not considered,
- Some trusts including Supplemental/Special Needs Trusts and Pooled Trusts,
- Liquid assets (bank account) worth $3,000 or less, and
- Pre-funded funeral and burials.
Pre-funded funerals, burials, and burial items are categorized as “burial assets” for MA eligibility purposes. Burial assets include:
- Burial Agreements, also known as burial contracts or burial funds,
- Cremation Society Agreements,
- Annuity-Funded Burial Agreements,
- Insurance-Funded Burial Agreements,
- Burial Spaces, and
- Burial Space Items.
Insurance-Funded Burial Agreement
An insurance-funded burial agreement (IFB) is a type of burial agreement funded with a life insurance policy. The life insurance policy has an irrevocable designation of the cash surrender value (CSV) to the funeral provider as the primary beneficiary. An IFB should irrevocably designate “any funeral provider whose interest may appear irrevocably” as the primary beneficiary, and the owner’s estate as contingent beneficiary of the policy. An itemized statement of goods and services must be provided to the County when submitting financial proof as part of the MA application process. Depending on the amount of the policy, it should be excluded as an asset pursuant to Minn. Stat. § 256B.056, subd. 3(a)(4), or considered unavailable for MA purposes because it is irrevocably assigned and unavailable to the MA applicant.
Helpful note: The cash surrender value is no longer available to the policy owner because the policy’s benefits have been irrevocably assigned to the funeral provider. An IFB may include items such as flowers, sundries, obituary notices, professional services, and burial space items. In order to distinguish between burial services and burial space or burial space items, it is helpful to draw up two separate agreements.
Burial Services include, but are not limited to:
- Basic services of funeral director/staff,
- Other preparations of the body,
- Visitation at the funeral chapel,
- Visitation at other facility,
- Funeral service at the funeral chapel,
- Funeral service at the other facility,
- Memorial service at the funeral chapel,
- Memorial service at other facility,
- Graveside service,
- Transfer of remains to funeral home,
- Funeral coach,
- Funeral sedans/limousine,
- Service vehicle,
- Forwarding of remains,
- Receiving of remains, and
- Direct cremation.
Burial space and burial space items
Burial space includes cemetery plots, urns, niches, crypts, or mausoleums.
Burial space items include caskets, vaults, markers/gravestones, engraving, opening/closing of the grave, and a one-time payment of preservation or perpetual care.
An applicant may purchase burial space and burial space items for the following persons, if even if they do not live in the same household:
- Child (adult or minor),
- Step-child (adult or minor),
- Sibling, and
- Spouses of persons listed.
Purchase of burial space and burial items
An applicant can also purchase a burial space for people related by adoption. One burial space may be purchased for each person, and burial space items may be purchased for each person. The purchases will not be considered a gift or transfer if purchased pursuant to a properly written IFB agreement. Instead, the purchases will be excluded for MA eligibility purposes if the agreement clearly distinguishes burial space and burial space items from burial services. The burial space and burial space items must be paid in full and no space or items can be duplicated. Any duplicated items could result in an uncompensated transfer/gift or considered an available asset for MA eligibility purposes.
There is no dollar limit on the amount that is excluded for MA purposes on burial space or burial space items. However, the agreement must include itemized, individual dollar amounts. Values cannot be increased at a later date, but an applicant may purchase additional burial space items later.
As part of the asset reduction phase of MA eligibility, it is often recommended that an applicant purchase excluded assets or spend down on improvements of excluded assets (home improvements, car repairs, pay debts, etc.) Purchasing burial services, burial space, and burial space items are part of the asset reduction process. With the option of purchasing burial space and burial space items for family members, asset reduction can be done quickly. Additionally, transfer penalties for gifting can be avoided if burial agreements are properly written. Reduction of assets, including purchases of excluded assets, must take place before the month of application. Otherwise, the ability to purchase items is limited.
The laws pertaining to Medical Assistance eligibility are extensive and ever changing. If you are planning for long-term care and possible MA benefits, or you are helping someone else plan, please seek advice from an elder law attorney. Recommendations for asset reduction may differ on a case-by-case basis depending on an individual’s health care need or goals, and based on their financial circumstances. An elder law attorney can assist you in planning for long-term care, MA benefits, and proper asset reduction.