MR# 23.29 Irrevocable Assignment of an Existing Life Insurance Policy to a Funeral Home or Funeral Director to Fund a Prepaid Burial on Contract

10/18/2023

Summary

• This manual release includes policy changes concerning exempt life insurance policies.
• These changes are due to Public Aid Code 225 ILCS 45/2b.
• These changes allow the irrevocable assignment of a life insurance policy to a funeral home/funeral director to fund an irrevocable prepaid burial contract to be exempt.
• New HFS 3195 Irrevocable Assignment of Benefits of Life Insurance Policy form has been created for the life insurance policy assignment.

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1. The changes include the following:
   1. Prepaid Burial Contract
   2. Record the Details in IES
      1. Record all Life Insurance Policies in IES
      2. Record the Prepaid Burial in IES
   3. Documentation
   4. Manual Revisions
   5. Forms referenced

The law change allows customers to irrevocably assign an existing life insurance policy to a funeral home or funeral director to fund an irrevocable prepaid burial contract. This irrevocable assignment of a life insurance policy is exempt and considered an allowable transfer.

The changes include the following:

• • Irrevocably assigns and transfers all the benefits and proceeds of the life insurance policy to the funeral home/funeral director.
  • The cash value is not counted as an available asset.
  • The life insurance cannot be canceled.
  • The owner of the policy irrevocably waives their rights below:
    •  The right to collect proceeds of the policy.
    •  The right to surrender the policy and receive the cash value of the surrendered policy.
    •  The right to obtain a policy loan.
    •  The right to designate a primary beneficiary other than the funeral home.
    •  The right to collect or receive income, distributions or share of the surplus, dividend deposits, refunds of premium, or addition to the policy.
• The owner of the policy can ONLY change the assignee to another funeral home.
• Any policy proceeds remaining after payment to the funeral home for funeral goods and services is paid to the Technical Recovery Department of the Illinois Department of Healthcare & Family Services to the extent of medical services expended on the deceased customer.

To allow an irrevocable assignment of a life insurance policy to a funeral home/funeral director to fund a pre-paid burial contract, the completed HFS 3195 form is required. The HFS 3195 form can be found on the HFS website.

More than one policy can be used if the total face value of the policies are necessary to pay the amount described in the contract with the funeral home. A HFS 3195 form must be completed and received for each life insurance assignment.

• Life insurance policies that are NOT necessary to pay the amount described in the contract are NOT exempt.

NOTE: There is no monetary limit to the life insurance policy that can be assigned to a funeral home.

Prepaid Burial Contract

Caseworkers should continue to review the prepaid burial contract to determine if it is revocable or irrevocable. Refer to PM 07-02-08-b and PM 07-02-08-c: Irrevocable Prepaid Burial Contract for additional details on reviewing prepaid burial contracts.

Record the Details in IES

Both the life insurance policy and prepaid burial contract must be recorded in IES. The worker must follow the below steps until IES is updated to reflect the changes. Additional details are in the WAG 07-02-07-a.

Record all Life Insurance Policies in IES

Add a life insurance resource record. Refer to the Life Insurance Policy Resource Wizard for additional instructions.

• Add all known details of the life insurance on the life insurance details page.
• Select "Yes" to "has the life insurance been transferred?".
• Select "No" to "is the resource assessable?".
• Complete the life insurance transfer page.
  • The transfer date is the date the HFS form 3195 is signed.
  • The verification is "Transfer documents".
    • It was transferred to the funeral home. The funeral home/funeral director should be entered in the "Transferred to" section.
  • Enter the face value in the "Fair Market Value" field.
  • Enter the same value in "Amount received" that was entered in the "Fair Market Value" field.

Record the Prepaid Burial in IES

Refer to the Burial Resource Wizard and Record Burial resource Space Items for additional details.

• Add a prepaid burial resource record per the Wizards listed above.
  • "Other" should be selected in the funding dropdown.
  • This is only until the updates are made in IES.
• "Contract with funeral home" should be entered as the verification source.

Documentation

Add case comments including the following:

Manual Revisions

[signed copy on file]

Dulce M. Quintero

Secretary, Illinois Department of Human Services

Theresa Eagleson

Director, Illinois Department of Healthcare and Family Services

Forms referenced

• Form HFS 3195 form