Medicaid Policy
Medicaid Policy
No Previous Policy
Individual irrevocably places the life insurance policy in a trust
As described in 594-4.3, an individual may revocably assign either the proceeds or ownership of a life insurance policy to a funeral provider to fund a pre-need funeral contract. After revocably assigning a life insurance policy to a funeral provider, the individual may irrevocably transfer ownership of the policy to a trust established by the life insurance company.
If the individual irrevocably places a life insurance policy in the trust, apply the burial trust rules in 596 to the cash value of the policy. The cash value is the asset that the individual placed in the trust.
Review the irrevocable assignment to the trust and the pre-need funeral contract to decide if the individual can direct the use of the life insurance policy.
If the individual does not own or does not have the right to direct the use of the trust assets to meet the individual’s needs, then the cash value of the policy is not a countable resource for the individual. Review the pre-need funeral contract as described in 594-1. A penalty for a transfer of assets could apply if the cash value plus the value of dividend accumulations is more than the values of the burial spaces and services listed in the contract. (575)
If ownership of the policy is irrevocably assigned to the trust, then the dividends are also irrevocably assigned unless there is evidence to the contrary.
The individual may retain the right to change the funeral firm that will provide the burial spaces and services. If so, the cash value is not a countable resource because the individual can only change the funeral provider.
The irrevocable assignment of ownership of the life insurance policy to the trust is an irrevocable arrangement available to meet the individual’s burial needs. Therefore, the face value of the burial funds portion of the contract reduces the available burial exclusion (592-2).
The provider irrevocably places the life insurance policy in a trust
As described in 594-4.4, an individual may irrevocably assign ownership of a life insurance policy to a funeral provider to fund a pre-need funeral contract. After accepting the irrevocable assignment of ownership of the policy, the provider may transfer ownership of the policy to the insurance company’s irrevocable trust.
When the change of ownership form or other document you used to verify the situation, shows that the provider transferred ownership of the policy to the insurance company trust, apply 594-4.4. The arrangement is not a burial trust as described in 596.