16 Del. Admin. Code § 20000-20340
Insured is the individual whose life is covered by the policy.
Beneficiary is the individual who receives the proceeds upon the insured's death.
Owner is the individual who is designated as the owner on the policy or by the insurance company.
Face Value (FV) is the amount of basic death benefit contracted for at the time the policy is purchased.
Cash Surrender Value (CSV) is a form of equity value that is acquired over time. The owner of a policy can obtain its CSV only by turning the policy in for cancellation before it matures or the insured dies. A loan against a policy reduces its CSV.
Dividends are shares of company earnings paid to the policy owner. The dividends are not income but the interest on dividends is income.
Dividend Additions are amounts of insurance purchased with dividends and added to the policy, increasing its death benefit and CSV. The table of CSV's that comes with a policy does not reflect the added CSV of any dividend additions.
Dividend Accumulations are dividends that the policy owner has constructively received but left in the hands of the insurance company to accumulate at interest, like money in a bank account. They are not a value of the policy; the owner can obtain them at any time without affecting the policy's FV or CSV.
Dividend accumulations cannot be excluded from resources under the life insurance exclusion, even if the policy that pays the accumulations is excluded from resources. Dividend accumulations are a separate resource (they are not considered as an increase in CSV) and must be designated as burial funds separate from the life insurance policy itself. Unless they can be designated and excluded as burial funds, they are a countable resource.
Life insurance is only considered a resource if the applicant is the owner of policy. A life insurance policy is an excluded resource if its FV and the FV of any other life insurance policies the individual owns total $1500 or less.
The policy/policies original face value(s) is considered when determining if the cash surrender value of a policy is countable. Do not include the FV of dividend additions. If the original face value of the policy/policies exceeds $1500, the cash surrender value, including the CSV of dividend additions, is counted toward the applicant's total resources. Applicants have the option to designate life insurance for burial or to retain it as a liquid resource. The individual can also designate any dividend accumulations on the life insurance policy.
Some life insurance companies offer to pay the owner of a life insurance policy money that would normally go to the beneficiary of the policy after the death of the insured. These payments are referred to as "accelerated life insurance payments". Some payments are made as a lump sum, others are paid out monthly. The plans vary from company to company but they all involve early payout of some or most of the proceeds of the policy to the insured.
Since these accelerated life insurance payments can be used to meet food, clothing, or shelter needs, the payments are income in the month received and a resource if retained into the following month. The receipt of an accelerated payment is not treated as a conversion of a resource. This is because the individual receives proceeds from the policy and not the policy's resource value-which is its cash surrender value. Accelerated payments are not "benefits" for purposes of the requirement to file for other benefits. We do not require a policyholder to apply for accelerated payments as a condition of eligibility.
The $1500 burial funds allowance is reduced by the FV of any life insurance policy or policies excluded under the life insurance exclusion. A total of $1500 FV life insurance is excluded as a resource but must be considered if the individual wants to designate other revocable burial funds. If the individual has burial funds in an irrevocable arrangement, then the maximum $1500 burial allowance is reduced by the face value of any life insurance that has been excluded as a resource AND any amount held in an irrevocable arrangement.
SEE:
Section 20340.2 - Burial Allowance
Section 20340.4 - Life Insurance Funded Burial Contracts
Section 20340.5 - Irrevocable Funeral Arrangements
If a Medicaid applicant is the beneficiary of another's life insurance, upon death of the insured, the proceeds that are not used to pay for last medical or burial expenses of the deceased would be considered as income for the applicant in the month of receipt. If an expense has been incurred but not yet paid, assume the individual will pay the expense and do not count the death benefit as a resource until the second calendar month following the month of receipt.
We can exclude up to $1500 each in funds set aside for the burial expenses of the individual and the individual's spouse. This exclusion is separate from and in addition to the burial space exclusion.
The $1500 burial allowance may consist of revocable burial contracts, burial trusts, other burial arrangements, cash, accounts, or other financial instruments (documents which have a definite cash value).
The $1500 burial allowance is reduced by:
An individual can have BOTH an irrevocable burial trust or a funeral funded by an irrevocable assignment of ownership AND separate life insurance with a face value of $1500 or less. If the funeral arrangement is revocable or the individual has designated burial funds, the life insurance of $1500 or less must also be counted toward the $1500 burial allowance. If the face value of life insurance exceeds $1500, the CSV is a countable resource.
The $1500 burial exclusion applies only to funds set aside for burial expenses that are kept separate from all other resources not intended for burial of the individual (or spouse) and that are clearly designated as set aside for the individual's (or spouse's) burial expenses. If excluded burial funds are mixed with resources not intended for burial, the exclusions will not apply to any portion of the funds.
Remember that a burial fund, such as a certificate of deposit, can include both designated, excludable burial funds (up to $1500) and non-excluded burial funds. For example, an applicant has a $2500 CD which is designated for burial. All of the CD's value is burial-related; however, the maximum burial allowance is $1500. This means that $1500 are excludable burial funds and $1000 are non-excluded burial funds. The $1000 is countable toward the liquid resource limit.
Current recipients who have been eligible since 7/11/90 who have had burial funds excluded which do not meet all the new requirements must convert or separate such funds to meet these requirements unless there is an impediment to such conversion or separation; i.e., a circumstance beyond the individual's control which makes the conversion/separation impossible or impracticable. For as long as such impediment exists, the burial funds will continue to be excluded if the individual remains otherwise eligible for the exclusion.
A declarative designation statement must be signed by the applicant/representative in order for funds to be excluded. In cases where funds are not designated for burial, the funds may be excluded as of the first day of the month in which the applicant/representative signs the Burial Designation Statement. Within 30 days from the date the statement is signed, documentary evidence must be submitted that funds have been set aside. A copy of the documentary evidence must be made a permanent part of the case record.
If an individual has a burial fund that was established prior to application, the value of the burial fund as of the date of application rather than the original amount will be countable toward the resource limit.
A prepaid burial contract is an agreement entered into in which an individual prepays burial expenses and the seller agrees to furnish the burial. A contract must identify and distinguish between funeral services (burial funds) and burial space items.
Funeral services include items and services relative to preparing the body. Such preparation includes, for example, transportation of the body, embalming, cremation, funeral/memorial services, flowers, clothing, etc.
Purchased burial space items are excluded. An item is considered purchased even if the specific model number of the item is not mentioned or is not in existence, since the burial space exclusion applies to any burial space item.
As long as the contractgreement results in the individual's right to the items listed, value at the amount indicated, the requirement for exclusion as a burial space is met - a burial space item is being held for the individual (i.e. there was a purchase). A burial space is "held for" an individual when someone currently has: title to and/or possesses a burial space or a contract with a funeral home for specified burial spaces for the individual's burial. Until the purchase price is paid in full, a burial space is not "held for" an individual under an installment contract if:
the individual does not currently own the space;
the individual does not currently have the right to use the space;
the seller is not currently obligated to provide the space.
If the burial space is not being currently held for an individual under an installment contract, the amounts paid may be considered burial funds rather than burial space items.
A life insurance funded burial contract involves an individual purchasing a life insurance policy on his life and then assigning, revocably or irrevocably, either the proceeds or ownership of the policy to a funeral provider. The purpose of the assignment is to fund a burial contract. The burial contract itself has no resource value. The value of the burial arrangement is the value of the life insurance policy.
The burial space exclusion does not apply if the assignment of ownership is revocable. This is because the funeral provider has not received any payment and no purchase of burial spaces has been made. The burial funds exclusion applies. The resource value is equal to the CSV of the life insurance policy subject to the $1500 burial funds exclusion.
To determine irrevocability a copy of the "irrevocable assignment of ownership" is required along with a complete copy of the policy and burial contract. Any portion of the contract that represents the purchase of a burial space is excluded. The life insurance policy and the burial contract are not resources because the individual no longer owns them. The face value of the burial funds portion of the contract offsets the $1500 burial funds exclusion because the contract represents an irrevocable arrangement available to meet the individual's burial.
Effective January 30, 1992, Delaware law allows the establishment of irrevocable trust accounts for prepaid funerals. The irrevocable trust may represent all funds or any portion of payments made under the burial agreement, contract or plan. The principal sum (excluding accrued interest) may not exceed $5,000. Effective January 1, 2008 the principal sum may not exceed $15,000. Irrevocable trusts established under Title 5, Chapter 34 of the Delaware Code must contain the following mandatory provisions.
11 DE Reg. 1051 (02/01/08)
The trust must include a provision which expressly identifies the trust as irrevocable for the lifetime of the beneficiary.
The trust must include a provision for the alternative disposition of trust funds upon discontinuation of business or inability to provide goods or services in accordance with the terms of the trust.
The trust must include a provision which sets forth that in the event funds paid into the trust are inadequate, at the time of the death of the beneficiary, to cover anticipated funeral expenses, the trustee shall contribute all trust funds toward payment of the actual funeral expenses for the funeral of the beneficiary.
The trust must include a provision which sets forth that in the event the sum held by the trust exceeds the total actual costs of the goods and services for the funeral of the beneficiary, the excess funds shall be paid to the estate of the beneficiary.
The trust must include a provision which sets forth that the trustee may, from time to time, accept periodic monetary contributions to the trust, provided that the principal sum contributed, exclusive of interest earned, shall not exceed $15,000.00.
11 DE Reg. 1051 (02/01/08)
20340.5.6 Maximum Amount
The trust must include a provision which shall state "In no event shall the principal amount of the trust exceed $15,000.00 plus interest".
Once an irrevocable trust is executed in conjunction with a burial contract, the funds are not available to the buyer. Any written request for a refund of money is no longer an option. The irrevocable trust arrangement will offset the $1500 burial allowance. This is effective for irrevocable trust arrangements executed on or after January 30, 1992.
11 DE Reg. 1051 (02/01/08)
Upon application, any burial funds which exceed $1500 must be counted toward the recipient's $2000 resource limit.
Mrs. Jones has a prepaid burial contract of which $2000 is countable and no life insurance.
| $2000 | countable prepaid burial contract |
| -$1500 | burial exclusion |
| = 500 | countable resource |
The excess $500 must be counted toward her resources. As long as her total resources (including the excess $500) do not exceed the current applicable SSI resource limit, the recipient would remain eligible.
Any designated burial funds used for another purpose will be counted as income in the month withdrawn. The penalty for using excluded burial funds for some other purpose applies only to those whose resources would have been over the limit without benefit of this exclusion. The budgeting of this additional income could result in the recipient exceeding the monthly income limit. As a result, Medicaid benefits would be terminated.
Interest and other accruals on the $1500 burial funds and spaces is excluded from countable income and resources. Interest on and appreciation in value of an excluded burial fund are excluded if left to accumulate and become part of the excluded fund. In the event the recipient loses Medicaid eligibility, the appreciated value (accrued interest) will be counted toward the resource limit upon reapplication.
If someone has a burial fund that is less than the $1,500 limit, the recipient can add funds to it to bring it up to the $1,500 limit. The money added would have to be from the recipient's personal needs money or other liquid resources. The recipient couldn't divert patient pay or accept money from friends/relatives to place in the account. Contributions from friends/relatives would be considered income.
16 Del. Admin. Code § 20000-20340