4 Abbreviations AFB………………..Annuity-Funded Burial BFE………………..Burial Fund Exclusion CSA………………..Cremation Society Agreement CSV………………..Cash Surrender Value FV………………...Face Value IBA…………………Irrevocable Burial Agreement IFB…………………Insurance-Funded Burial LI…………………...Life Insurance RBA………………...Revocable Burial Agreement
5 Definitions Face Value (FV): Amount of the basic death benefit at the time a life insurance policy is purchased. Cash Surrender Value (CSV): Amount the policy owner would receive if the policy were cashed in. Includes dividends and interest earned on the premiums less any loan and/or early withdrawal charges. Value increases with time.
7 Burial Space A burial space is a repository for the remains of the deceased. Vault Cemetery Plot Crypt Mausoleum Urn Niche
8 Burial Space Items Burial space items are things used at the burial space. Markers/Headstones Engraving Opening/Closing Perpetual Care Casket
9 BS and BSI - Exclusion Exclude one burial space and all burial space items for: The client Spouse Parent (s) Child or step-child (of any age) Sibling Spouses of the above
10 BS and BSI - What to Know Must be paid in full to be excluded. Cannot be duplicated. Duplicates in an IBA, RBA, CSA or purchased separately are counted toward the asset limit. Duplicates in an IFB or AFB are an asset transfer. If purchased for non-family member the value is an asset transfer.
11 Term Life Insurance FV is the death benefit. Does not accumulate CSV or dividends. Not counted in asset total.
12 Non –Term Life Insurance (LI) FV is the death benefit. Generates CSV. May generate dividends. CSV and dividend accumulations counted in asset total unless designated to the BFE.
13 Life Insurance-Funded Burial (IFB) Face Value (FV) of policy, or death benefit, paid to funeral provider in exchange for agreed-upon goods and services. CSV no longer available. Evaluate as a burial fund.
14 Annuity-Funded Burials (AFB) Similar to an insurance-funded burial. Annuity CSV irrevocably designated to a funeral provider in exchange for agreed-upon goods and services. Income from the annuity is no longer available. Evaluate as a burial fund.
15 IFB/AFB – What to Know Irrevocable designation to contract must be attached or the value of the contract is an asset transfer. Must have the owner’s estate as the contingent beneficiary. Determine if the burial has been adequately compensated. The statement of goods and services must be for an amount greater than or equal to: Face value if LI or Annuity converted to IFB or AFB. Purchase price if directly purchased as an IFB or AFB.
16 Burial Agreements Contract between client and funeral provider. Client deposits specific amount with a funeral provider to be used for agreed-upon funeral expenses, professional services, burial spaces and/or burial space items. Many types - –Irrevocable –Revocable –Cremation Society Agreement
17 Revocable Burial Agreements (RBA) Death benefit is available to client at any time. Client can request cash back from funeral provider.
18 Irrevocable Burial Agreement (IBA) Death benefit is payable to the funeral director at the time of the client’s death. Client may only with draw funds above $2000 per Minnesota State Law.
19 Cremation Society Agreement (CSA) Funds are pre-paid for burial through a cremation society. Can be irrevocable or revocable but regardless are evaluated the same way for health care programs.
20 Burials Agreements – What to Know Determine if the burial has been adequately compensated. The statement of goods and services must be for an amount greater than or equal to purchase price. Can be purchased for: Client Spouse Health care eligible dependent child
21 Basic Goods and Services –Basic Services of Funeral Director/Staff –Embalming and other preparations of the body –Visitation at the funeral chapel or other facility –Funeral service at the funeral chapel or other facility –Memorial service at the funeral chapel or other facility –Graveside service –Transfer of remains to funeral home –Funeral Coach, Sedans, Limousine –Service Vehicle –Cemetery Charges –Acknowledgement cards –Register book –Services folders or Prayer cards –Forwarding or receiving of remains –Immediate burial –Direct cremation
22 Cash Advance Items –Certified copies of death certificates. –Motor escort. –Clergy. –Music. –Flowers. –Obituary notices. –Crematory Charges. –Shipping.
23 Goods and Services – What to Know Itemized statement of goods and services must be provided for IFB, AFB, IBA, RBA and CSA contracts. Duplicated goods and services are: Counted in asset total if in an IBA, RBA or CSA. An asset transfer if in an IFB or AFB. Cost of good/service must be within the normal and customary charges for that trade area. Cash advance items in an: IBA, RBA and CSA are counted toward the asset total. IFB and AFB are unavailable and not counted.
24 Other Assets Liquid assets may be designated to the BFE if there are no other burial assets available. Liquid Assets include: CSV of Non-term Life Insurance Stocks Bonds Accounts Retirement Funds
25 Other Assets Liquid assets designated to the BFE must be kept separate from other funds if possible. Clients designated liquid assets to the BFE must provide a written statement that the assets will only be used for that purpose.
27 Purpose The purpose of the Burial Fund Exclusion (BFE) is: To allow for burial planning. A means to maintain or reduce assets to program levels.
28 What Is the BFE? Allows the client to set aside (or designate) up to $1500 * in assets to cover certain burial expenses for: Themselves Spouse Children eligible for health care program * Designated assets and accumulated interest earned are excluded from the asset total.
29 Determining the BFE There are 4 steps to complete when determining what can be designated to the BFE. Determine if: 1. LI and IFB policies can be designated. 2. IFB, AFB and IBA agreements can be designated. 3. RBA and CSA agreements can be designated. 4. Other Designated Assets can be designated.
30 BFE Step 1 Total the FV of all LI and IFB policies. If FV is equal to or less than $1500 –Apply total FV of LI and IFB policies to the BFE. –IFB is unavailable and not used in Step 2. FV is greater than $1500 –Apply the CSV of all LI policies to the client’s asset total. –IFB values will be used in Step 2.
31 BFE Step 1- Example 1 Glenda owns an LI policy with a FV of $200 and has an IFB with a FV of $1,300. The CSV of the LI is $1,000 and the IFB has a death benefit of $4,000. Total the FV. $200 + $1,300 = $1,500 Apply the $1,500 of FV to the BFE because the FV of all policies is <= $1500. The CSV is excluded and the IFB is unavailable as counted assets.
32 BFE Step 1- Example 2 Craig owns a life insurance policy with a FV of $5,000 and a CSV of $400. He also has an IFB with a FV of $2,000. Total the FV. $5,000 + $2,000 = $7,000 Apply the $400 of the LI CSV to the asset total because the FV of all policies is > $1500. The IFB will be used in Step 2.
33 BFE Step 2 Determine if IFB*, AFB and/or IBA can be designated to the BFE. Using agreements purchased for the same person process in the order of the date purchased. * Do not use IFB if used in step 1.
34 BFE Step 2a Apply the value of burial services in an IFB or AFB to the remaining BFE not used in Step 1 or Step 2b. The remaining burial services and cash advance items in remaining IFB and AFB are unavailable. Reminder: BFE cannot exceed $1,500.
35 BFE Step 2a - Example Charlotte has a LI with a FV of $500. She also owns an AFB with burial services totaling $3,000 and one burial space. LI FV = $500. Designate that amount to the BFE. $1500 - $500 = $1,000 of BFE remaining Apply $1000 of the $3000 of the AFB burial services to the BFE. $1,000 - $1,000 = $0 of BFE remaining The remaining $2,000 in services is unavailable.
36 BFE Step 2b Apply the value of burial services in an IBA to the remaining BFE not used in Step 1 or Step 2a. Up to a grand total of $2,000 of all IBAs for a person can be unavailable. (Any amount designated to the BFE is part of that total unavailable amount.) Count any amount over the $2,000 toward the owner’s asset total. Reminder: BFE cannot exceed $1,500.
37 BFE Step 2b - Example Pierre owns 2 IBAs. IBA 1 was purchased August 1995 and has burial services of $2,000. IBA 2 was purchased in May 1995 and has non-duplicated burial services of $1,500. Apply the May 1995 $1,500 IBA burial services to the BFE first. $1500 - $1500 = $0 BFE remaining. $2000 State limit - $1,500 = $500 state limit remaining $500 of the August 1995 IBA burial services is unavailable $500 state limit - $500 of IBA = $0 state limit remaining The remaining $1500 of IBA burials services is counted toward Pierre’s asset total.
38 BFE Step 3 Determine if RBA and CSA agreements can be designated to the BFE. Apply the value of burial services in an RBA or CSA to the remaining BFE not used in Step 1, Step 2a or 2b. Using agreements purchased for the same person process in the order of the date purchased. Count any amount not designated to the BFE toward the client’s asset total. Reminder: BFE cannot exceed $1,500.
39 BFE Step 3 - Example Rohan has $500 of BFE remaining after Step1 and Step 2 have been completed. He has an RBA with burial services totaling $2,600. Apply $500 of the RBA burial services to to the remaining $500 of BFE. $2,100 of burial services in the RBA remain. Count the $2,100 toward Rohan’s asset total.
40 BFE Step 4 Determine if other liquid assets can be designated to the BFE. Apply the value of liquid assets to the remaining BFE not used in Step 1, Step 2a, Step 2b or Step 3. Client can choose what liquid assets to designate. Reminder: BFE cannot exceed $1,500.
41 BFE Step 4 - Example Helen owns 2 non-term LI policies with a FV total of $2,500 and a CSV total of $1,200. She owns no burial funds and has not designated either of the LI policies to a funeral director. LI FV total > $1500, therefore the FV total cannot be excluded and the CSV of $1,200 must be counted toward Helen’s asset total. Helen may choose to designate the $1,200 of CSV toward the BFE. Helen would still have $300 of BFE remaining.
43 Example 1 Bernie’s asset limit is $3000 and his assets total $5200. His assets include: IBA of $2500 –$300 in itemized burial space items –$2200 in burial services Checking Account of $2700 How can Bernie reduce his assets?
44 Example 1 - Answer Answer: 1. Total assets are $5200. 2. Apply $1500 of services portion of IBA to BFE. 3. $500 of services portion is unavailable. 4. Count remaining $200 for services, since this is over the allowable $2000. 5. Exclude $300 burial space items. 6. Current countable assets are: $5200 - $1500 - $500 - $300 = $2900.
45 Example 2 What if Bernie’s burial agreement in Example 1 had been revocable? 1. First step is the same: apply $1500 of services portion to BFE. 2. The remaining $700 of services portion is counted as an asset. 3. Exclude the $300 burial space items. 4. What are the countable assets? $2700 bank acct + $700 from RBA = $3400.
46 Example 3 Florence has a LI policy with a FV of $1500 that she designated for burial services and a $3000 IBA also intended for services. How can Florence reduce her assets?
47 Example 3 – Answer Answer: 1. Apply the $1500 FV to her BFE. The BFE is met. 2. $2000 of the IBA is considered an unavailable asset. 3. The other $1000 of the IBA is not intended for itemized burial space items, so count it towards her asset total.
48 Example 4 Sadie has a LI policy with a FV of $3500 and a CSV of $3000. She also has a $1000 IBA designated for burial services. How can Sadie reduce her assets?
49 Example 4 - Answer Answer: 1. Apply the $1000 IBA toward the BFE. 2. Count the CSV of $3000 as an asset. 3. Since there is $500 of the BFE remaining, Sadie has 3 options: a. $500 of the CSV may be applied to the BFE. In this instance, the BFE is met. The remaining $2500 CSV is counted as an asset. b. The client may apply $500 of some other asset. c. The client may decide not to fully use the BFE at this time.
50 Example 5 Mabel receives MA. She has the following: Non-term LI policy with a FV of $1000 and CSV of $1200. IFB policy with a FV of $6000. $4000 of burial space items and $2000 for services. How can Mabel reduce her assets?
51 Example 5 - Answer Answer: 1. The total FV = $7000 and cannot be designated to the BFE. 2. Apply $1500 of the services portion of the IFB to the BFE. The BFE is met. 3. $500 of the remaining burial services is an unavailable asset due to the MN state limit. 4. Exclude the $4000 for burial space items. 5. Count $1200 CSV of the LI policy as an asset.
52 Example 6 Elliot applies for MA. He owns the following: $1250 checking account. LI with a FV of $1000. AFB which itemizes $3500 in services and $3000 in burial space items. How can Elliot reduce his assets?
53 Example 6 - Answer Answer: 1. Apply $1000 FV to the BFE. $500 remains in the BFE. 2. Apply $500 of the AFB services portion. BFE is now met. 3. Remaining $3000 in services is unavailable because it is in an AFB. 4. Exclude the $3000 in burial space items.
54 Example 7 Kristin is applying for MA. She owns the following: LI policy with a FV of $1800 and CSV of $800. AFB worth $4000 with $3000 allocated to services and $1000 in burial space items. How can Kristin reduce her assets?
55 Example 7 - Answer Answer: 1. FV of LI is > than $1,500. 2. Apply $1500 of the AFB services portion to the BFE. 3. The remaining $1500 services portion is an unavailable asset. 4. Count $800 CSV of the LI as an asset. 5. Exclude the $1000 allocated to burial space items.
56 Example 8 Sylvia has the following assets: Sylvia purchased a IFB last year in October. It itemizes $1,000 for services and doesn’t include burial space items. The AFB was just purchased last month. It itemizes $1,000 in services (with no duplication) and $3,000 for burial space items. How can Sylvia reduce her assets?
57 Example 8 - Answer Answer: 1. The IFB was purchased first. 2. No duplications of services. 3. $1,500 BFE - $1,000 IFB = $500 remaining in BFE. 4. $1,000 services AFB - $500 BFE = $500 unavailable. 5. $3,000 burial space items AFB is excluded. 6. $0 counted toward asset total.
58 Resources Online course –HCP406E – Burial Fund Exclusion Health Care Programs Manual –HCPM 0909.17