Burial Assets & Publicly Funded Funeral Expenses To die, to sleep; To sleep, perchance to dream ay, there's the rub: For in that sleep of death what dreams may come, When we have shuffled off this mortal coil, Must give us pause there's the respect That makes calamity of so long life. For who would bear the whips and scorns of time, Th'oppressor's wrong, the proud man's contumely, The pangs of dispriz'd love, the law's delay, The insolence of office, and the spurns That patient merit of th'unworthy takes, When he himself might his quietus make With a bare bodkin? Who would fardels bear, To grunt and sweat under a weary life, But that the dread of something after death, The undiscovere'd country, from whose bourn No traveller returns, puzzles the will, And makes us rather bear those ills we have Than fly to others that we know not of? -Hamlet Burial Assets: SSI & Medicaid Given the recent change to Medicaid treatment of irrevocable funeral trusts announced in the Specialist, we though it would be a good idea to review how various burial assets count and don t count for SSI and Medicaid and review what public funds are available to pay for burial and funeral expenses for low income individuals. The review is confined to SSI and Medicaid because assets (burial or otherwise) aren t typically relevant to the other programs we frequently work with such as FS, WHEAP, SeniorCare etc. Why the Burial Exemption? The SSI and Medicaid programs carve out exceptions for burial asset for a couple of reasons. Everyone requires a funeral and burial arrangements and the exemptions enable recipients to set aside funds for that purpose. The state also has some self interest in allowing individuals to pay for their own funerals so that the state doesn t have to pay for burial and funeral expenses for low income folks. 1
A Note on Spousal Impoverishment These materials focus on burial asset exemptions in non spousal impoverishment situations. The rules regarding burial assets when spousal impoverishment apply are much simpler and generous: Any/all assets designated for burial purposes are exempt. Any unreasonable amount should be supported by documentation of the burial related costs or contract. Burial Space Exclusion Burial spaces are completely exempt, regardless of value. Burial spaces include plots, vaults, caskets, crypts, mausoleums, urns, and niches. Burial spaces also include improvements to burial spaces such as headstones, markers, plaques, and arrangements for opening and closing grave sites. An SSI/MA applicant may also own burial spaces for his or her spouse and immediate family (including children, step children, siblings and parents, as well as any spouses of these persons). So MA/SSI isn t concerned about repositories for a recipient s remains, it concerned with funds set aside to pay for the services relating to the recipient s burial and funeral. What s Exempt? There are several ways a person can set aside funds for their burial/funeral expenses and we will review each of them. As with any asset and MA/SSI eligibility, the key thing the program is concerned about is access to the funds. If you can access the money designated for your burial/funeral expenses and potentially use it for something else (for example shelter and medical expenses) then you re not going to be allowed to set aside very much. 2
$1,500 Burial Fund Exclusion This is evident in the very small amount of money a recipient is allowed to set aside for burial if he or she retains access to the funds. Without any strings attached, a person can set aside $1,500 for their funeral/burial expenses. Called the burial fund exclusion, this is money that a beneficiary places in an account (bank account, trust etc..) and then simply designates as for their burial/funeral. $1,500 Burial Fund Exclusion The funds need to be clearly separated from other household accounts. A person may open an account at a financial institution and request that it be designated and labeled for this purpose. This $1,500 beneficiary exclusion can be reduced if the person has life insurance policies or other forms of burial assets. $1,500 Burial Fund Exclusion Advantage: simple, throw the money into an account named burial fund, no strings attached, money is revocable if you later need it you can take it back Disadvantage: $1,500 doesn t go very far where funerals are concerned 3
Life Insurance Offset One thing to keep in mind. Whole life insurance policies have two values. The face value (the money which is paid out when a person dies) and the cash value (the amount of money the policy holder can get if he/she cashes the policy in prior to the insured passing away). Under MA/SSI rules, the cash value of life insurance policies count as an asset unless the total death benefit of all the policies added to together is not greater than $1,500. Life Insurance Offset Why are we talking about how life insurance is treated as an asset? Because if the policy s death benefit is $1,500 or less, then the $1,500 burial exclusion amount a person can set aside for their burial is reduced by that amount. Example 1 Mrs. Brown has the following resources: $1,000 burial fund in a designated savings account Whole life insurance policy with death benefit of $400 Mrs. Brown has $100 still available for exclusion for burial purposes ($1,500 exclusion - $1,000 burial fund - $400 life insurance death benefit = $100). 4
Revocable vs. Irrevocable Revocable = although I ve committed the funds to a financial instrument (bank account, trust etc.) if I change my mind I can get the funds out of that financial instrument and do whatever I want with it. I retain control of the funds. Irrevocable = once I ve committed the fund to a financial instrument, I cannot get the funds out of the financial instrument. I may benefit from the funds but I have permanently surrendered control of the funds. Revocable vs. Irrevocable As the relatively small amount of $1,500 makes clear, setting aside revocable funds isn t a very useful way to plan for one s funeral. It might make sense if you have a person who is just slightly over the asset limit for eligibility and needs to set aside some money for funeral expenses. Keeping in mind, eligibility issues aside, the $1,500 is most likely not going to be sufficient for their eventual funeral/burial expenses. Irrevocable Burial Trust Once you start making the money inaccessible you begin to be able to set aside more of it. One of the ways of making the money inaccessible is to establish an irrevocable burial trust. A burial trust is a trust established by the beneficiary naming a bank as a trustee and a funeral home as beneficiary. When the beneficiary passes away, the trustee or trust administrator disburses the funds in the trust to the funeral home to pay for the beneficiary s funeral. The SSI/MA recipient can set aside up to $3,000 of their money in an irrevocable burial trust. 5
New Change A recent modification to the MA rules, effective February 1 2012, expands the amount of funds a recipient can have in an irrevocable burial trust. Now, in addition to the $3,000 that a recipient can place in an irrevocable trust, friends or family can contribute an additional amount up to $1,500 in the trust. So now a beneficiary can have up to $4,500 in an irrevocable burial trust as long as funds in excess of $3,000 are placed in the trust by the recipient s family and friends. Example 2 Emma is applying for Family Care. She contributed $3,400 to an irrevocable burial trust. In addition, her son Larry contributed an additional $900. The principal of the trust totals $4,300. Since any contribution that brings the total trust principal value above $3,000 must be contributed by friends and family, only $3,000 of the amount contributed by Emma is exempt. The additional $400 she contributed is considered an available asset. The $900 contributed by her son is exempt since the total principal amount is under $4,500. Advantages and Disadvantages of an Irrevocable Burial Trust Advantage: can have up to $4,500 excluded for burial vs. $1,500 revocable burial fund; Disadvantages: is irrevocable, lose access to the money, $3,000 or $4,500 goes further than $1,500 but still not a lot when it comes to funeral and burial expenses. 6
Life Insurance Funded Burial Contract Most funerals cost way more than $3,000 or $4,500. A life insurance funded burial contract involves purchasing a life insurance policy and then (revocably or irrevocably) assigning ownership of the policy or the proceeds to a third party, usually a funeral provider. The recipient and the funeral home draw up a list of goods and services (the contract), the recipient purchases a life insurance policy with a sufficient death benefit to pay for the goods and services and then assigns (either revocably or irrevocably) those proceeds to the funeral home. Basically what the person is doing is pre-purchasing their funeral/burial goods and services with the proceeds of a life insurance policy on their life. Revocable It doesn t make a lot of sense for individuals applying for MA/SSI to set up a revocable life insurance funded burial contract. The cash value of a revocable life insurance funded policy in excess of the $1,500 burial exclusion will count as an available asset. Irrevocable If the recipient irrevocably transfers the ownership of the policy to a funeral home or to an organization which will hold the policy in trust for the funeral, the cash value of the life insurance policy will not affect the recipient s eligibility for Medicaid as long as the cash value of the policy does not exceed the amount of the goods and services purchased. The contract must be specific about the cost of each item which is to be provided as part of the funeral. A person should seek the advice of an experienced attorney and/or their preferred funeral service provider for assistance with this option. 7
Example 3 Mr. Atkins has irrevocably assigned the ownership of his life insurance policy to a funeral home to fund a burial contract. The face value (death benefit) and the cash value of the LIFBC is $3,200. The Statement of Funeral Goods and Services shows $3,000 for the pre-arrangement of the funeral. A divestment in the amount of $200 occurred, because the cash value of the LIFBC exceeds the expenses of the prearrangement of the funeral. Advantages and Disadvantages of an Irrevocable Life Insurance Burial Contract Advantage: no limit on the amount of funds excludable for funeral/burial expenses; can actually pay for a person s entire funeral Disadvantages: is irrevocable, lose access to the money Our role Inform clients of the burial asset exclusion rules. If they re a little bit above the SSI/MA eligibility limit, it s ok to inform them of the availability of the $1,500 burial fund and $3,000 irrevocable trust exclusion. For more advanced planning (i.e. Life Insurance Funded Burial Contracts) we can refer them to the Funeral home of their choice, or the yellow pages. In my experience funeral homes, admittedly having a financial interest in doing so, are very familiar with MA/SSI requirements and have products designed to provide excluded funeral services for individuals eligible for MA/SSI. 8
Publicly Funded Funeral Expenses So we ve talked about what individuals can do in terms of setting aside their own burial and funeral resources and remaining eligible for SSI/MA but what about SSI/MA eligible individuals who pass away without sufficient resources to pay for their burial and funeral? There is limited assistance available through the Wisconsin Funeral and Cemetery Aids Program. Publicly Funded Funeral Expenses Under this program, certain public assistance recipients may be eligible to have their cemetery and funeral expenses paid for by the state if the recipient's estate does not have sufficient resources to cover these costs. (Wis. Stats. 49.785) Previously, county and tribal economic support agencies processed requests for this assistance and disbursed funds. As of January 1, 2012, due to the Income Maintenance Consortiums, requests for reimbursements must be made to the Enrollment Management Central Application Processing Office. DHS has a very helpful website: http://www.dhs.wisconsin.gov/em/wfcap/index.htm Who is eligible for the Wisconsin Funeral and Cemetery Aids Program? The Department may reimburse cemetery and/or funeral expenses of a person who, on the date of death was any one of the following individuals: Categorically needy EBD related Medicaid recipient. Eligible for Institutional Medicaid at the time of death. All Home and Community Based Waiver recipients (Groups A, B and C). All Medicaid eligible Family Care recipients. Supplemental Security Income (SSI) or SSI State Supplement (SSI- SSP) or SSI MA recipient who was a Wisconsin resident. Parent or caretaker relative receiving BadgerCare Plus with family income that does not exceed 50% of the federal poverty level. 9
Who is not eligible The Department will not reimburse cemetery/funeral expenses for a person who on the date of death was receiving or qualified for: Medicare Buy-In Programs (QMB, SLMB, SLMB+) Medicaid Deductible Medicaid Purchase Plan (MAPP) Family Care Non-MA BadgerCare Plus Benchmark Plan BadgerCare Plus Core Plan The benefit: Cemetery Expenses v. Funeral Expenses The WFCA program can make two separate payments: one for cemetery expenses and one for funeral expenses. It can be a bit confusing because whether an expense is considered a cemetery expense or a funeral expense does not have to do with the nature of the item or service. It has to do with who provides the service. Any items purchased from a funeral home is considered a funeral expense and services purchased from a cemetery are cemetery expenses. Cremation is usually a final disposition and is usually treated as a cemetery expense. When a funeral home provides both funeral services and cremation services, all expenses will be treated as funeral expenses. There is one exception to this policy. Many small, rural cemeteries rely on a funeral home to provide certain goods and services on their behalf (e.g. The outer burial vault, opening and closing of the grave, etc.) Under this circumstance, and only this circumstance, the good or service will be counted as a cemetery expense, even though it is provided by a funeral home. How much are the benefits for cemetery expenses? The state will pay: The lesser of $1,000 or the cemetery expenses that are not paid by the estate of the deceased and by other persons. However, if the total cemetery expenses exceed $3,500 no payment is required. Thus, the most the program will ever pay is $1,000 and they will not pay anything if the total cemetery expenses exceed $3,500. 10
Example 4 The total cemetery expenses are $3,800. The estate is able to pay $2,900, leaving $900 still owed. The provider will not be eligible for reimbursement for any of the cemetery expenses as the expenses exceed the $3,500 cap (unless DHS has found that there are special circumstances). How much are the benefits for funeral expenses? The lesser of $1,500 or the funeral and burial expenses not paid by the estate of the deceased and by other persons. However, if the total funeral and burial expenses exceed $4,500 no payment is required. Thus, the most the program will pay is $1,500 and they will not pay anything if the total cemetery expenses exceed $4,500. (Unless DHS has found that there are special circumstances). Example 5 Total expenses charged by the funeral home are $3,000. The estate is able to pay $2,200 toward the funeral expenses. The provider may be reimbursed for $800 of the funeral expenses. 11
What are special circumstances? Under certain circumstances (for example, over-sized casket or transporting the deceased over long distances), the total expense caps as well as the reimbursement limits applying to funeral and cemetery expenses may be exceeded. The Department of Health and Family Services determines whether circumstances justify exceeding these limits. Who requests reimbursement and how do they do so? Reimbursement is not something that the spouse of the deceased or the representative of the deceased s estate requests. Total funeral and cemetery expenses must be reported by the funeral home, cemetery or crematory, using the "Wisconsin Funeral and Cemetery Aids Program Reimbursement Request form. A request for payment must be made to the Enrollment Management Central Application Processing Office less than 12 months after the death of the recipient. Our Role Similarly to the excluded burial assets we discussed in the previous section, funeral homes and cemeteries are pretty familiar with the WFCA program and automatically make reimbursement requests for eligible individuals. Our role is to simply make clients aware of its existence and its availability up to 12 months following the funeral/burial. 12
Our Role: Local Resources Finally, there may be local resources available in your area available for paying for burial/funeral costs for low income individuals. Veteran Burial Benefits Another option available for some of our clients are VA burial benefits. We should refer folks to Veteran Service Officers for assistance with these benefits but we need to be aware of what s available to know when a referral is appropriate. The benefits we will review are: The VA Burial Allowance Burial in National or State Veteran s cemetery. Funeral with Military Honors What is the VA Burial Allowance VA burial allowances are partial reimbursements of an eligible veteran s burial and funeral costs. When the cause of death is not service related, the reimbursements are generally described as two payments: (1) a burial and funeral expense allowance, and (2) a plot or interment allowance. 13
Who is eligible for the VA allowance A person may be eligible for a VA burial allowance if: The person paid for a veteran s burial or funeral AND The person has not been reimbursed by another government agency or some other source such as the deceased veteran s employer AND The veteran was discharged under conditions other than dishonorable In addition, at least one of the following conditions must be met: The veteran died because of a service related disability OR The veteran was receiving VA pension or compensation at the time of death OR The veteran was entitled to receive VA pension or compensation but decided not to reduce his/her military retirement or disability pay or The veteran died in a VA hospital or while in a nursing home under VA contract, or while in an approved state nursing home. How much does the VA burial allowance pay For a service related death, VA will pay up to $2000 toward burial expenses. If the veteran is buried in a VA national cemetery, some or all of the cost of moving the deceased may be reimbursed. For a non service related death, VA will pay up to $700 toward burial and funeral expenses, and a $700 plot interment allowance (if not buried in a national cemetery). Application Unlike The Wisconsin Funeral and Cemetery Aids Program, a person who paid for the funeral/burial can apply for the reimbursement. http://www.vba.va.gov/pubs/forms/vba-21-530- ARE.pdf A copy of the veteran s military discharge document (DD 214), death certificate, funeral and burial bills (indicating that they have been paid in full) should be submitted with the form. 14
State & National VA Cemeteries Eligible veterans can also be buried at no cost in either a State or National VA cemetery. Spouses and dependents can also be buried at state and National VA cemeteries for a small cost. Veterans who elect to be buried in a private cemetery can qualify for a free marker. WI VA Cemetery For the burial of eligible veterans, the cemeteries provide gravesites for casketed or cremated remains, engraved headstones or markers, opening and closing of the graves, and perpetual care free of charge. A fee is charged for interments of eligible veterans' spouses and family members. Where Are the State Veteran s Cemeteries There are 3 state veteran s cemeteries in Wisconsin. The Southern Wisconsin Center in Racine. The Northern Wisconsin Veterans Memorial Cemetery is located three miles south of Spooner. The Wisconsin Veterans Memorial Cemetery is adjacent to the Wisconsin Veteran s home in King. Members of the Home and other eligible veterans from Wisconsin may be buried in the cemetery. 15
What Are the Eligibility Criteria for Burial in A State Veteran s Cemetery? Eligibility is based on military service and Wisconsin residency. Military service: A veteran was discharged or released from active duty other than for training purposes and discharge was under honorable conditions or Members of the Wisconsin National Guard or Reserve components who, during a period of active duty for training, were disabled or died from disease or injury or aggravated in the line of duty during a period of inactive duty training, or A veteran, including National Guard members and Reservists with 20 years of qualifying service, who are entitled to retired pay or would be entitled, if at least 60 years of age. Residency: The veteran was a resident of Wisconsin at the time that (s)he entered military service or The veteran entered service from another state but was a Wisconsin resident for 12 consecutive months after discharge from military services. Or The veteran is a resident of Wisconsin at the time of death whether or not he/she lived in Wisconsin for 12 months. Who Else Besides Veterans Could be Eligible for Burial in a State Cemetery Surviving Spouses and dependent children are eligible for interment even if the veteran is not buried or memorialized in a state veterans cemetery. The interment/burial fee for a spouse/dependent child is $550.00 The burial fee does not apply to the burial of an eligible veteran. National VA Cemetery Eligible veterans can also elect to be buried in a national VA cemetery. Burial benefits available include a gravesite in any of the 131 national cemeteries with available space, opening and closing of the grave, perpetual care, a Government headstone or marker, a burial flag, and a Presidential Memorial Certificate, at no cost to the family. 16
Who is eligible for burial in National cemeteries? Any veteran of the uniformed services who was discharged under conditions other than dishonorable. Spouses and certain dependents Military Funeral Honors Program The Military Funeral Honors Program. The Wisconsin Department of Veteran s Affairs administers the program with assistance from veteran s service organizations, funeral directors and the active and reserve components of the U.S. armed forces. Funeral directors are requested to ask the decedent s family if they would like military representation and/or local VSO support for honors to be provided. Who Is Eligible for MFHP Veterans are eligible for military honors at their funeral if they meet one of the following requirements: Currently serving on active duty or in the Selected Reserve (drilling with a unit) or Discharged from active duty under conditions other than dishonorable or Completed at least one term of enlistment or period of initial service in the Selected Reserve under conditions other than dishonorable or Discharged from the Selected Reserve due to a disability incurred or aggravated in the line of duty. 17