Disregard a prepaid burial contract funded by a life insurance policy when ownership of the insurance policy has been irrevocably assigned. With the irrevocable assignment of ownership of the insurance policy, the resource no longer belongs to the person.
When a life insurance policy funds a prepaid burial contract, the life insurance policy is purchased at the time the prepaid burial arrangement is made. The funeral home, acting as an agent of the insurance company, sells the person the life insurance policy. The person assigns ownership of the life insurance policy to a third party. The third party may be a trust within the insurance company. The party accepting the assignment of the life insurance policy is responsible for ensuring that the funeral home receives the proceeds of the insurance policy when they provide the funeral goods and services selected by the person.
The assignment represents the transfer of resources. If the person resides in an NH or SLF facility, or has applied for or is receiving DoA HCBS waiver services, determine if fair market value was received. The amount exempted is limited to the insurance benefit designated for the cost of funeral goods and services to be provided upon the person's death. The contract must include a complete description of funeral goods and services to be provided and the cost of those goods and services. Treat any amount not specified in the contract as a transfer for less than fair market value.
To be considered exempt, a burial plan established on or after 07/01/12, the trust that funds the burial must also state that, upon the death of the person, the State will receive all amounts remaining in the trust up to an amount equal to the total medical assistance paid on the person's behalf.
To be valid, the irrevocable assignment of ownership of the insurance policy must be acknowledged by the insurance company. If the irrevocable assignment is not acknowledged by the life insurance company, treat the policy as the customer's policy. If the face value is greater than $1,500, apply the cash value of the policy to the customer's resource limit (see PM 07-02-07).