Prepaid Funeral Resource Exclusion
How to Qualify
Any individual, who is an applicant or recipient of SSI/Medicaid, and in the “spend down” process, should meet with a funeral director. During a prearrangement conference, the individuals should select which funeral services and merchandise he or she desires as disclosed on a “General Price List.” The funeral director will then note these selections on an itemized statement (commonly known as a “Preneed Itemization Statement”), which will reflect the current retail value of the merchandise and services selected. The next step is funding the arrangements. Funeral prearrangements will qualify as prepaid funeral resource exclusion if the funds are placed in an irrevocable prepaid funeral trust account.
Meaning of Irrevocability
A trust which is titled "irrevocable" means that any refund, withdrawal or other disposition of the deposits on account plus accrued interest, for any purpose, will and must legally be refused by the funeral director and/or funeral trust or financial institution.
Payments to Purchasers
Purchasers who have entered into irrevocable burial trusts may only use the funds for payment of funeral services and merchandise upon the death of the intended funeral recipient. Any excess in the trust account after payment of funeral expenses must be returned to the local county Social Services Department in which the intended funeral recipient resided and received assistance.
All documentation generated by this process must meet stringent federal and state requirements for resource qualification and funeral service disclosures. Social Services personnel require evidence that the funeral arrangements exist and that they are linked irrevocably to the funding vehicle. Additionally, all of the documentation generated by the funeral home must meet Federal Trade Commission standards for price and itemization disclosure, and all of the provisions of Section 453 of the New York State General Business Law.
The 1996 amendment to the Social Services law which allows the creation of irrevocable trusts for applicants/recipients of SSI and/or Medicaid also sets high business and ethical standards for prepaid funeral arrangements. The following consumer protections were built into the law with that amendment.
The law allows the consumer to change funeral homes at any time prior to death without affecting the irrevocability of the arrangements themselves. If such a transfer is desired, a new irrevocable preneed agreement with the newly selected funeral home must be generated. The transfer of irrevocable preneed funds may, however, ONLY be made payable to another funeral home, or another funeral trust program.
Can irrevocable preneed agreements be modified at the time of need?
Some funeral arrangements may be modified at the time of need, however, any remaining funds in an irrevocable account must be returned to the Social Services Department in the county where the beneficiary resided and was receiving assistance.
Mandatory Contract Disclosures
New York law mandates that every irrevocable preneed agreement contain, in a minimum of 12 point type, the following consumer disclosure:
“New York Law requires this agreement to be irrevocable for applicants for receipt of supplemental security benefits under section two hundred nine of the Social Services Law or of medical assistance under section three hundred sixty-six of the Social Services Law, and for the moneys put into a trust under this agreement to be used only for funeral and burial expenses. If any money is left over after your funeral and burial expenses have been paid, it will go to the county. You may change your choice of funeral home at any time.
“All literature promoting prearranged funeral and burial services prepared after January 1, 1997 must contain language disclosing the irrevocable nature of burial trusts established for an applicant or recipient of supplemental security income benefits or medical assistance. Following are some samples of the language that could be used:
“New York State law mandates that all contracts for prefunded funerals executed by applicants for or recipients of Medicaid be irrevocable.”
“New York State law mandates that funeral trust funds for Medicaid recipients pay for funeral and burial expenses only. These contracts must be irrevocable.”
Summary of N.Y.S. Irrevocable Trusting Statute (NY Social Services Law, Section 209)
** All preneed funeral agreements for applicants for or recipients of Medicaid must be irrevocable.
** No other type of preneed contract may be irrevocable. All others remain completely revocable for the purchaser, which means monies must be refunded upon demand.
** There will be one irrevocable account with an unlimited dollar amount for SSI/Medicaid applicants or recipients.
** Irrevocable burial trust Purchasers may not receive a refund prior to the death of the beneficiary, at which time the money must either be spent on funeral expenses or be paid to the county Social Services Department where the beneficiary resided and received assistance.
** All irrevocable accounts must remain portable to any funeral home in any state, and upon the purchaser’s request, the monies must be paid to a newly selected funeral home or funeral trust within ten business days.
** All preneed agreements for applicants for or recipients of SSI/Medicaid must contain a mandatory disclosure regarding the nature of the irrevocability of the contract and the portability aspects.
** All literature printed after January 1, 1997 which promotes prefunded funerals must contain language disclosing the irrevocable nature of preneed agreements executed by applicants for or recipients of SSI/Medicaid.