Nancy E Kline

IRREVOCABLE FUND FOR THE EXCLUSIVE PURPOSE OF FUNERAL & BURIAL

Delete this section on page 18 of Medicaid Financial Eligibility Rules for Nursing Home Care in New York State and replace it with the following:

A Medicaid recipient may establish an irrevocable fund for the exclusive purpose of his funeral and burial.  N.Y. Social Services Law section 209 (6)(a); Medicaid Reference Guide, at 365; N.Y. General Business Law Section 453 (1)(d).

An irrevocable pre-need funeral agreement for the Medicaid recipient’s funeral and burial is an exempt resource.  11 OHIP/ADM-4, at 5; Medicaid Reference Guide, at 365 and 366.1

A pre-need funeral agreement is created by paying a funeral parlor, cemetery, or other business for specified merchandise and services which will be provided when the person dies.  11 OHIP/ADM-4, at 2.

Payment may be made with the applicant/recipient’s money, or with the money of a legally responsible relative.  Medicaid Reference Guide, at 365.

The assets of a Medicaid applicant/recipient and the assets of his legally responsible relatives also can be used to create pre-need funeral agreements for family members of the applicant/recipient.  N.Y. Social Services Law section 209 (6)(a); 11 OHIP/ADM-4, at 3.

“Family members” are defined as the applicant/recipient’s spouse, minor children, adult children, step-children, brothers, sisters, parents, and the spouses of those people.  11 OHIP/ADM-4, at 3.

Pre-need funeral agreements for family members of the applicant/recipient had to be revocable, rather than irrevocable, until the New York State Legislature’s passage of the Laws of 2010, chapter 109, sections 15 through 18, on June 8, 2010.  It became effective January 1, 2011.  It added language to include family members under the rules for irrevocable funds.  The changes were made to:
– N.Y. General Business Law section 453 (1)(d)
– N.Y. General Business Law section 453 (3)(f)
– N.Y. Social Services Law section 209 (6) (a), (b), (c) and (d)
– N.Y. Social Services Law section 141 (6).

11 OHIP/ADM-4, pages 2, 3 and 6, and page 365 of the Medicaid Reference Guide advise that effective January 1, 2011, pre-need funeral agreements for a Medicaid applicant/recipient’s family members must be irrevocable if they are established with assets of the applicant/recipient or of his legally responsible relative.

A spouse is a legally responsible relative.  N.Y. Social Services Law section 366 (2)(b)(1); Medicaid Reference Guide at 550.

The irrevocable pre-need funeral agreement for the Medicaid recipient’s family members is an exempt resource.  11 OHIP/ADM-4, at 7; Medicaid Reference Guide, at 365 and 366.1.

If the applicant/recipient’s family member has a revocable pre-paid funeral agreement which was purchased before the applicant/recipient applied for Medicaid, it must be converted to an irrevocable agreement in order to have it treated as an exempt resource.  11 OHIP/ADM-4, at 7; Medicaid Reference Guide at 365, 366 and 366.1.  If the Department of Social Services notifies the applicant/recipient about converting the family member’s revocable agreement to an irrevocable agreement, he has ten days from receipt of the notification to have the account converted; the ten-day period may be extended if more time is needed.  Medicaid Reference Guide, at 366 and 366.1.  If it is not converted to an irrevocable agreement, only the portions of it which are for non-burial space items will be treated as an exempt resource, and only up to $1,500.  11 OHIP/ADM-4, page 7.

If the applicant/recipient himself has a funeral agreement which is revocable, because it was purchased before he applied for Medicaid, he must have the funeral parlor convert it to an irrevocable agreement if he wants the entire amount to be treated as an exempt resource.  Medicaid Reference Guide, at 366.  If he does not have it converted to an irrevocable agreement, then the rules for burial funds for non-burial space items apply rather than the rules for irrevocable accounts.  Medicaid Reference Guide, at 366.  If he files a Medicaid application and has a revocable agreement, and the Department of Social Services notifies him about converting it to an irrevocable agreement, he has ten days from receipt of the notification to have the account converted; the ten-day period may be extended if more time is needed.  Medicaid Reference Guide, at 366.

If any money remains in the irrevocable account after payment of funeral expenses, that money goes to the Department of Social Services.  N.Y. Social Services Law section 141 (6)(c), N.Y. General Business Law section 453 (3)(f).  N.Y. Social Services Law section 141 (6), 11 OHIP/ADM-4, at 6, and Medicaid Reference Guide, at 365, specify that the remaining money must be paid to the Department of Social Services official responsible for arranging indigent burials in the district where the person resided.

There is no dollar limit on the goods and services which may be purchased.  GIS 96 MA/044, at 2; 11 OHIP/ADM-4, Attachment.

However, the applicant/recipient must pay fair market value for the goods and services to be provided, so that payment is not subject to a penalty period for transferring assets.  Medicaid Reference Guide, at 365.  Payment to a funeral director is not an uncompensated transfer, which would result in a penalty period, as long as the applicant/recipient is paying fair market value for customary non-burial space items and burial space items.  11 OHIP/ADM-4, at 6.

The irrevocable pre-need funeral agreement should NOT include food, lodging or transportation expenses for family, friends or guests; if it does, payment for these items will be treated as an uncompensated transfer subject to a penalty period, if made during the look-back period.  11 OHIP/ADM-4, at 6.

Funds are to be placed in an interest-bearing account.  N.Y. Social Services Law section 209 (6); N.Y. General Business Law section 453 (1)(a).  Accumulated interest is not countable income.  N.Y. Social Services Law section 209 (6); 11 OHIP/ADM-4, at 9.

Note that Chapter 557 of the Laws of 2001 amended the following:
– N.Y. General Business Law section 453 (1)
– N.Y. General Business Law section 453 (3)(c)
– N.Y. General Business Law section 453 (3)(e)(iii)
N.Y. General Business Law section 453 (1) provides, among other things, that money for a pre-paid agreement shall be held in trust for the benefit of the funeral parlor, and shall not be comingled with the funeral parlor’s other money until the merchandise is delivered and the services are rendered.  It also discusses requirements for notification and statements.

N.Y. General Business Law section 453 (1)(d) specifies that money paid for a Medicaid applicant/recipient or family member shall be placed in an irrevocable trust.

N.Y. General Business Law section 453 (3)(c) addresses notification requirements for accounts which are not irrevocable.

N.Y. General Business Law section 453 (3)(e)(iii) addresses the issue of the refund of excess money for revocable accounts.

Note that Chapter 78 of the Laws of 2007 amended Chapter 557 of the Laws of 2001 to provide that Chapter 557 expired on June 1, 2012.

Posted 06/09/2012