Questions regarding final disposition of human remains and the legal right to control such disposition sometimes become litigated issues during estate planning, long-term care planning, or probate. Estate planning and elder law attorneys should be aware of how a person purchases burial space, prepays for funeral services, or transfers/sells rights to burial space. Whether you are assisting clients with pre-planning during life, or whether you are representing family members after the death of a loved one regarding their rights about disposition, it is important to know the basics regarding burial, cremation, insurance pre-planning, and control over disposition.
There are many terms related to burial spaces: cemetery lots, burial plot, tomb, mausoleum crypt, columbarium niche, etc. Depending on what type of service a person wants after they die, and whether they prefer cremation or burial, will dictate the type of cemetery lot, burial plot, or burial space required.
Pre-planning for Long-Term Care (Pre-Funding)
Pre-need arrangements refer to planning for the final disposition of a person prior to the death occurring, and generally implies “pre-funding” or paying for those services in advance.
The person meets with a funeral provider (i.e., mortician at a funeral home) who is also a licensed insurance agent, or with an independent insurance planner who is familiar with funeral pre-funding methods, and plans their funeral or final disposition by executing a pre-need contract. People have 72 hours to cancel a pre-need contract. Individuals applying for Medical Assistance (or Veterans Benefits) are recommended to pre-plan and pre-fund their funerals.
Under Minnesota law, funeral goods and services are usually pre-funded by two means:
- A savings account or certificate of deposit.
When this method is used, 100% of the funds must be deposited within 15 days. No administrative fees are allowed to be charged by the funeral provider. An annual 1099 statement showing accrued interest is issued to the beneficiary, and that interest is taxable income of the person for whom the pre-arrangement is made.
2. An insurance policy or insurance annuity.
Commission fees are allowed to be paid to the sales person or the insurance agency selling the policy. The entire amount is paid up front, at once. Some funeral providers will guarantee that the cost of their pre-funded funeral goods and services will remain the same (a price guarantee). It is important to get a price guarantee in writing if this is part of the agreement. An insurance policy is the preferred method for pre-funding if a person is looking at long-term care in the near future, in order to ensure the monies set aside in the policy are considered excluded assets for Medical Assistance or Veterans Benefits eligibility purposes. (See my prior article regarding MA excluded assets: burial items and spaces.)
In Minnesota, a pre-funded arrangement may be transferred to, or used at, any funeral provider. Administrative fees cannot be charged when a change in funeral providers is made.