594-3 Preneed Funeral Contract is Irrevocable and Not Salable

Effective Date: August 1, 2007

No Previous Policy

If a pre-need funeral contract cannot be revoked and cannot be sold, or cannot be sold without significant hardship (594-2), do not count its value. The individual does not have access to it.

Any portion of the contract that represents burial funds reduces the $1,500 maximum burial fund exclusion (592).

Any portion of the contract that represents the purchase of burial spaces has no effect on the burial funds exclusion. (591)

Irrevocable, not salable pre-need funeral contracts and transfer of asset policy (575)

If the contract lists the specific spaces and services purchased and states the cost of each, decide if the individual costs add up to the total amount the individual paid for the contract. If the costs of the individual items equal the amount the individual paid for the contract, the individual received fair market value.

Check the contract to decide if the costs of the individual items and services equal the amount paid.

If the cost of items and services are less than the amount the individual paid for the contract, the difference may represent a countable asset to the individual or the transfer of an asset subject to the policy in 575.

If the contract includes a cash payment that is being held for additional services (meaning services not specifically itemized on the contract), and such amount can be refunded to the family if not used at the time of need, that amount may be a resource or a transfer of an asset.

Treat any amount that exceeds the cost of the individual items in the contract as a resource only if the individual can get the money back. Otherwise, treat it as a transfer of assets.