Adult Medicaid Manual MA-2230 FINANCIAL RESOURCES

XIII. BURIAL EXCLUSION

Burial exclusion is only used when the a/r has excess countable resources. It is a method to exclude up to $1500 value of otherwise countable liquid assets for burial expenses for each financially responsible person. This section contains rules and procedures for burial exclusion.

A. Burial Exclusion Rules

1. Always ask the a/r if he or a financially responsible person has resources which are intended to be used for burial purposes.

REISSUED 11/01/11 – CHANGE NO. 17-11

(XIII.A.)

2. Use the $1,500 burial exclusion to reduce countable resources when the a/r or financially responsible person has excess liquid assets in:

a. A revocable burial contract for his burial expenses,

b. Cash surrender value of life insurance on his own life,

c. Cash/bank accounts/certificates of deposit, or

d. Stocks and bonds.

e. Revocable burial annuities.

3. Do not use the burial exclusion if the a/r or financially responsible spouse/parent have irrevocable burial arrangements valued at $1,500 or more. Irrevocable contracts are not a countable resource but they “use up” the burial exclusion for an individual.

4. If excluding $1,500 (for each financially responsible person) of countable assets listed above is sufficient to reduce countable resources to the limit for the budget unit:

a. Inform the a/r that liquid assets (except life insurance) designated as a burial asset cannot be excluded if commingled (held in the same account) with non-burial assets. Request proof that the assets have been separated. See MA-2303, Verification Requirements for Applications, and MA-2304, Processing the Application, for time frames and requirements.

b. When burial assets are not commingled, exclude $1,500 of the value of liquid assets for the a/r and each financially responsible spouse/parent’s burial expenses.

c. Begin the burial exclusion with any month assistance is requested, including the retroactive period.

5. Burial exclusion applies to all financially responsible individuals, including:

a. An MAABD/MQB/MWD applicant/recipient of any age.

b. A legal spouse of the MAABD/MQB/MWD applicant/recipient, including the community spouse of the institutionalized a/r.

c. Parents of the MAABD applicant/recipient, if the a/r has never been married and is under age 18.

REISSUED 11/01/11 – CHANGE NO. 17-11

(XIII.A.)

6. If the burial exclusion ($1,500 of liquid assets per budget unit member) does not reduce resources below the allowable resource limit, resources must be reduced within the 45/90 day standard processing time for applications. The individual is not eligible until the date the resources are reduced below the allowable resource limit.

7. Follow the steps in B. - F. below to use the burial exclusion. Always deduct the value of burial assets until the burial exclusion is depleted (you reach zero dollars) or all assets have been deducted. Deduct assets in the following order:

a. Irrevocable Burial Arrangements

b. Face Value of Life Insurance if total face value is $10,000 or less.

c. Revocable Burial Arrangements

d. Cash Surrender Value of Life Insurance if total Face Value Exceeds $10,000

e. Dividend Accumulations or Cash/Funds in a Bank Account

Refer to G. below for instructions in applying the burial exclusion.

B. Irrevocable Burial Arrangements

Follow these steps for each individual to determine if there is an irrevocable arrangement as specified in 1, 2, or 3 below. Deduct any irrevocable burial arrangement from the person’s $1,500 burial exclusion.

1. Irrevocable trust/contract

A trust, contract, insurance policy or annuity with a funeral home, bank, insurance company, etc. that lists the a/r or financially responsible spouse/parent as the beneficiary.

a. Irrevocable means neither the depositor/purchaser nor the funeral home/bank can withdraw the funds or change the contract.

NOTE: Even though a court, including a magistrate, can revoke an irrevocable contract, the contract remains irrevocable and is excluded until it is revoked.

b. View a copy of the contract to verify that it is irrevocable, the name of the beneficiary and the face value received in exchange for funds.

REISSUED 11/01/11 – CHANGE NO. 17-11

(XIII.B.1)

c. Do not require that the contract include a listing of goods and services to be provided unless the information is needed for evaluation for transfer of assets (MA-2240, Transfers of Assets) if it appears assets may have been transferred without equal compensation.

2. Irrevocable designation of beneficiary

This is an irrevocable designation of an insurance policy making it payable to a funeral home or to the estate of the deceased for purposes of funeral

expenses. This action must prevent the person from accessing the cash surrender value. Irrevocable designation of beneficiary to the funeral home is preferable to designation of the estate as beneficiary or absolute assignment.

a. The designation may be made when the policy is taken out, or

b. The beneficiary may be irrevocably changed by a rider filed with the insurance company.

c. Verify with the insurance company that:

(1) The designation has been filed with the company,

(2) The designation is irrevocable, and

(3) The client cannot access the cash surrender value of the policy.

d. The services purchased do not have to be selected in advance.

3. Absolute assignment

Absolute assignment is a change in ownership. Absolute assignment of a deferred or single premium annuity or other insurance policy to a funeral home can be made in exchange for burial services.

4. Availability

An irrevocable burial asset is not available and is not a countable resource. Exclude the entire value from countable resources, not just $1500.

a. If the total value of irrevocable burial assets equals or exceeds $1500, the burial exclusion is used up. No additional assets can be excluded under burial exclusion.

b. If there is any amount of exclusion left after deducting all irrevocable burial arrangements from $1500, continue to the next excludable item, XIII.C.

REISSUED 11/01/11 – CHANGE NO. 17-11

(XIII.)

C. Face Value of Life Insurance Which Generates a Cash Surrender Value

After deducting irrevocable burial arrangements, if the total face value of all life insurance policies which generate a CSV owned by the a/r or a financially responsible person does not exceed $10,000:

1. Deduct the face value of all life insurance policies that generate a CSV which insure the life of that individual from the amount left in the individual’s $1500 burial exclusion. Do not deduct the face value of life insurance policies that insure the life of another individual.

2. Face value of life insurance policies that generate a CSV is not a countable resource, but it must be applied to the burial exclusion.

3. If the total face value of all life insurance policies that generate a CSV equals or exceeds the amount left in the $1500 burial exclusion, the burial exclusion is used up.

4. If there is any amount of exclusion left, continue to the next excludable item, XIII.D.

NOTE: Life insurance and burial insurance policies which do not accrue a cash value are not deducted from burial exclusion and are not a countable

resource. See VII.I.2.a. for treatment of any dividends paid by a term life policy.

D. Revocable Burial Arrangements

After deducting irrevocable burial arrangements and face value of life insurance policies that do not exceed $10,000 which generate a cash value, deduct the value of a revocable burial contract with a funeral home or other revocable trust or annuity established for burial expenses from the amount left in the $1500 burial exclusion.

1. Revocable means the funds are available and can be withdrawn.

2. A revocable trust or annuity which is not limited to payment of burial expenses within the body of the agreement cannot be excluded under burial exclusion policy.

3. Deduct the value of the revocable burial arrangement from the amount left in the $1500 burial exclusion.

REISSUED 11/01/11 – CHANGE NO. 17-11

(XIII.D.)

4. A revocable burial trust may appreciate in value or accumulate interest.

a. Verify the value at application. Once the application is approved, at redeterminations ignore any subsequent increase in value due to interest/accumulation of a revocable burial trust which has been excluded through burial exclusion.

b. If the case is later terminated and a/r reapplies, count the full value of the revocable trust in the verification month.

5. If the value of the revocable burial arrangement exceeds the amount left in the $1500 burial exclusion at application:

a. Burial exclusion is used up; AND

b. Excess amount of the revocable arrangement counts in resources.

6. In the record, document the amount of the revocable arrangement which was counted in resources at point of Medicaid approval and count this amount in resources at review unless the revocable arrangement is changed to irrevocable.

7. If there is any amount of exclusion left, continue to the next excludable item, XIII.E.

E. Cash Surrender Value of Life Insurance

When total face value of all life insurance policies which generate a cash value owned by the a/r or a financially responsible individual exceeds $10,000:

1. After deducting irrevocable burial arrangements and revocable burial arrangements, deduct the cash value of life policies designated for burial on the life of the individual from the amount remaining in that individual’s $1500 burial exclusion.

EXAMPLE: Mr. and Mrs. Blue applied for Medicaid. Mr. Blue has a whole life policy on himself. The face value is $50,000 with a cash value of $2,500. No assets have yet been applied to the burial exclusion. Only $1500 can be applied to Mr. Blue’s burial exclusion and none to Mrs. Blue as she is not the insured.

2. Accept the verbal statement of the policy owner or his representative that the policy is designated for burial.

REISSUED 11/01/11 – CHANGE NO. 17-11

(XIII.E.)

3. If there is any amount of exclusion left, continue to the next item, XIII. F.

4. If burial exclusion is used up:

a. At application, cash surrender value of life insurance policies that exceeds the $1500 burial exclusion limit of a designated policy is a countable resource.

b. At redetermination, the original amount of cash surrender value of life insurance policies when total face value exceeds $10,000 that exceeded the $1500 burial exclusion (counted at application and not excluded as part of the $1500 burial exclusion) continues to count in resources. However, increases in cash surrender value are ignored as long as the policy(s) is designated for burial.

EXAMPLE: Single a/r has one life insurance policy with face value of $13,000. The cash surrender value at application was $3000. The a/r stated it is intended and needed for burial expenses. He has no other resources.

$3000		Cash surrender value of life insurance
- 1500		Burial exclusion (no other burial assets)
$1500		Excess counts in resources

At review the cash value has increased to $3,500. The a/r continues to state that it is needed for burial and has acquired no other assets to be

applied to the burial exclusion. Continue to count only $1500 of cash value as a countable resource. Increases in cash value after Medicaid eligibility begins are disregarded if the policy remains designated for burial expenses; continue to count the original $1500 excess cash value at review.

c. After the disposition of the application, any action which reduces or depletes the cash surrender value of a policy (except to pay the premium),

that is designated for burial expenses, revokes the burial designation. Stop using the cash surrender value as a burial exclusion when:

(1) A loan has been taken against the cash surrender value subsequent to designation; or

(2) The policy has been used as collateral subsequent to the exclusion.

REISSUED 11/01/11 – CHANGE NO. 17-11

(XIII.E.4. c)

(3) A policy is “designated” and action is taken during the application processing period to reduce the value. Do not consider the policy as having been designated for any period of time for which eligibility is being determined.

d. Always count the cash surrender value of policies owned by the a/r and financially responsible spouse/parents which are on the life of someone outside of the budget if the owner’s total life insurance face value exceeds $10,000 for policies which generate a CSV. Examples:

(1) Mr. Brown owns whole life with a face value of $15,000 on himself, whole life with a face value of $1500 on his grandson, and a $1000 term life policy which has no CSV on himself. The total face value of all life policies which generate a CSV owned by Mr. Brown is over $10,000; so cash surrender value is countable.

Only the cash value of the $15,000 whole life policy on Mr. Brown is deducted from his burial exclusion. Neither the $1500 whole life on his grandson nor the $1000 term life is used to reduce the burial exclusion for Mr. Brown.

2) Mrs. Green owns whole life policies with face value of $5,000 each on herself, her spouse, and her granddaughter. Total face value of policies which generate a CSV owned by Mrs. Green exceeds $10,000, so the total cash surrender value of all policies

counts in resources. Current cash surrender value of each policy is $650. No other burial resources are reported. Couple’s checking

account has $100 and savings is $1200. Total countable resources including cash value of policies is $3250. This exceeds the resource limit.

$650 cash value on Mrs. Green’s policy and $650 cash value on policy on Mr. Green can be excluded by applying the $1,500 burial

exclusion for each spouse. ($1,500 - $650 = $850 remaining for burial exclusion for each spouse.)

Total resources are reduced to $1,950 ($100 checking, $1,200 savings + $650 cash value from the policy on the granddaughter).

REISSUED 11/01/11 – CHANGE NO. 17-11

(XIII)

e. A revocable change of beneficiary to a funeral home designates the policy for burial expenses, but it does not make cash surrender value unavailable to the a/r. After the $1,500 burial exclusion is used up, remaining cash surrender value counts. Count the excess cash surrender value amount at the point it is designated, but ignore increases.

EXAMPLE: Mr. Jones has a whole life policy with face value of $15,000 and no other burial assets. The current cash surrender value on the policy is $2,500. Mr. Jones has changed the beneficiary of the policy to be the local funeral home. The change is revocable. $1,500 of the cash surrender value of the designated policy can be excluded through burial

exclusion, but the remaining $1,000 cash surrender value counts in resources.

5. Increases in Cash Surrender Value

Ignore increases in cash surrender value of a policy(s) designated for burial unless:

a. A loan or withdrawal of cash surrender value occurs; or

b. At redetermination, the a/r has not designated the policy for burial; or

c. Client’s statement of cash surrender value was used to approve application (this is follow up after approval);

6. Verify Outstanding Loans/Withdrawals from Cash Surrender Value.

a. An applicant may designate remaining cash surrender value for burial even if there is an existing loan on the policy or it is collateral on an outstanding loan.

b. If a new loan/cash withdrawal occurs after designation for burial, designated status is lost. That policy cannot be re-designated for burial. Any cash surrender value remaining on that policy counts in resources at that time and in the future. Once the loan is paid off the policy can be re-designated.

F. Dividend Accumulations or Cash/Funds Held in a Bank Account

1. These countable liquid assets may be used to:

a. Purchase burial assets to reduce resources in any amount within the 45/90 day processing time; BUT

b. May only be excluded under burial exclusion when $1,500 burial exclusion will reduce resources and establish eligibility (amount of excess resources is equal to or less than the amount of burial exclusion left after deducting all other burial assets).

REISSUED 11/01/11 – CHANGE NO. 17-11

(XIII.F)

2. If exclusion of amount remaining in burial exclusion is enough to reduce resources:

a. Inform a/r of amount of funds or dividend accumulations which can be designated for burial.

b. Obtain a/r’s verbal statement as to whether he intends to use the funds for burial expenses. This is a verbal designation.

c. Inform the a/r that cash funds intended for burial expenses must not be commingled with other funds. Proof that the funds have been separated within time limits is required to establish eligibility.

d. For an applicant, pend up to 45th or 90th day for documented proof that the funds are not commingled. The applicant’s statement is not sufficient. Refer to MA-2304, Processing the Application.

e. For a recipient, proof must be provided prior to the effective date of termination.

(1) Send a DMA-5097 informing the recipient of the amount of excess resources and that:

(a) A signed or verbal statement that the funds will be designated and separated for burial expenses must be received within the 12 calendar days of the date on the DMA-5097, and

(b) Proof that action has been taken to separate the funds must be provided within 30 calendar days of the date of the DMA-5097.

(2) If the signed statement is not received within 12 calendar days or if proof of separating is not received within 30 days, send a timely notice and terminate the case.

(3) Proof must show, at a minimum that the necessary paper work was submitted to the insurance company or funeral home, or funds held in a bank are designated and separated.

REISSUED 11/01/11 – CHANGE NO. 17-11

(XIII.F.2.e (3))

EXAMPLE: Application on 6/5 for retro May and on-going. Single applicant has one life insurance policy with face value of $1,000 and a savings account with $2,500 which a/r states is intended and needed for burial expenses.

$ 1,500		Burial exclusion
- 1,000		Face value of life insurance
500		Amount left for burial exclusion
$ 2,500		Liquid assets verbally designated for burial
- 500		Amount which can be excluded through burial exclusion
$ 2,000		No excess resources

The entire savings account is designated for burial. It is not commingled with other non-burial assets. Therefore, the client may continue to keep the excluded $500 in the savings account.

3. If the amount remaining in the burial exclusion is not enough to reduce resources to allowable limit, inform a/r of:

a. The amount of excess resources; AND

b. Methods to reduce it, including purchase of an irrevocable burial asset.

c. Refer to MA-2303, Verification Requirements for Applications.

d. Refer to H. for methods to reduce resources through purchase of burial expenditures.

EXAMPLE: Application taken 6/5 with request for retroactive Medicaid for May and on going. Single applicant owns one policy with face value

of $1,000 and a savings account with $3000 which he states is intended and needed for burial expenses.

$ 1,500		Burial exclusion
- 1,000		Face value of life insurance
$ 500		Amount left for burial exclusion
$ 3,000		Liquid assets intended for burial
- 500		Amount left for burial exclusion
$ 2,500		Countable resources – burial exclusion does not establish eligibility

Applicant is not eligible through application of burial exclusion. Resources must be reduced. One way to reduce resources is to use the liquid assets to purchase a burial asset that is excluded from date of purchase (this cannot be used to establish eligibility for May).

REISSUED 11/01/11 – CHANGE NO. 17-11

(XIII. F)

4. If the applicant dies before the application is made, or before it is disposed, the amount of countable resources excluded for burial expenses is $1,500, regardless of the actual costs of burial.

G. Burial Exclusion Guide

DEDUCT FROM $1,500 BURIAL EXCLUSION (in the following sequence)	IF REMAINING VALUE IS MORE THAN $1,500 (OR AMOUNT REMAINING IN BURIAL EXCLUSION)
Value of Irrevocable Burial Arrangement	Do not count excess as a resource.
Face Value of Insurance which generates a CSV ($10,000 or less total face value) If total face value exceeds $10,000, go to next step.	Reduces $1,500 exclusion
Value of Revocable Burial Contract	Count excess, ignore interest earned once designated and excluded at application.
Cash Value of Life Insurance (total face value over $10,000) If total face value is $10,000 or less, go to next step.	Count excess at application, ignore increases once designated for burial.
Cash or Funds in a Bank Account, CD, stocks/bonds separately identifiable	Count excess. If result is excess resources, a/r must reduce resources.

H. Reduction of Resources Through Burial Expenditures

An a/r with excess resources has the option to reduce resources by using excess liquid assets to obtain a burial asset which does not count in resources. Depending on the type of liquid asset the a/r must reduce, advise the a/r of the following methods to use excess liquid assets for burial costs:

NOTE: The a/r must be expected to receive burial services equivalent to the dollar value of the burial arrangement. Evaluate for transfer of assets if it appears that assets have been transferred without equal compensation.

1. Purchase of an excluded burial asset, such as an irrevocable contract or single premium annuity using cash or other liquid asset; or by adding to the value of an existing irrevocable arrangement.

2. Changing a revocable contract to an irrevocable contract.

REISSUED 11/01/11 – CHANGE NO. 17-11

(XIII. H)

3. Filing a rider on an existing insurance policy, which irrevocably changes the beneficiary to a funeral home, or to the estate of the client for purposes of funeral expenses.

4. Absolutely assigning (change of ownership) whole life insurance to a funeral home in exchange for burial services.

5. Also inform the a/r or the representative that resource eligibility cannot begin until the day that resources are reduced to the resource limit for the budget unit.

EXAMPLE: Application on 6/4. Total reserve is $1500 face value of life insurance and $2500 in savings. Applicant is ineligible until resources are reduced. An irrevocable contract for $2500 is purchased on 6/11.

$ 1500		Burial exclusion
- 2500		Irrevocable burial arrangement 6/11
$ 0		Remaining in savings account
+ 0		Countable value of $1,500 face value
0		Resources

Resource total is reduced on 6/11, and if MN, this case is eligible 6/11.

If CN, case is not eligible until 7/1.

ISSUED 10/01/11 – CHANGE NO. 17-11