440.5 Burial Resources

Burial resources include both burial spaces and burial reserves.        

A burial space may be a conventional grave site, crypt, burial drawer, mausoleum, urn, or any other repository for the remains of a deceased person.  A burial space includes necessary and reasonable improvements or additions to the burial space, including but not limited to: 

The CAO will exclude any and all burial spaces, regardless of the number of burial spaces owned.      55 Pa. Code § 178.71

Burial reserves are funds set aside for an individual’s burial.  The funds may be called funeral reserves, funeral agreements, pre-paid funeral agreements, burial funds, burial reserves, or similar names.  These funds are held in a revocable or irrevocable account or trust.       55 Pa. Code § 178.2  

The funds may also be in the form of a prepaid funeral.  A prepaid funeral is an agreement between a person and a funeral home for a funeral paid for in advance. It specifies the services to be provided at the time of the individual’s death. The agreement may include other items and services such as a casket, cemetery plot, flowers, and an obituary.           

The CAO will review a prepaid funeral agreement for fair consideration the same as any other burial reserve.      

NOTE: The CAO will count the interest on reserve as income if it is withdrawn before death.        55 Pa. Code § 178.5

The CAO will verify at application:

A statement from the financial institution or funeral director holding the funds must verify burial reserves.      

 

440.51  Irrevocable Burial Reserve

An irrevocable burial reserve is a fund held under contract with a financial institution or a funeral director.  No part of the fund may be withdrawn before the person’s death. The fund must be used for burial expenses.      

NOTE: The CAO will consider life insurance or personal property (such as stock) designated for burial an irrevocable burial reserve if:         

To be considered irrevocable, burial reserve funds must be deposited with a financial institution or a funeral director.  There must be a written agreement stating that the funds cannot be withdrawn before the death of the individual.  The CAO will review the agreement to determine if the fund is irrevocable.  A fund labeled irrevocable does not necessarily mean it is irrevocable.      

NOTE: Pennsylvania law requires the contract to include a clause allowing a individual to withdraw his money if he moves out of state.  The CAO should consider the funds irrevocable if it meets all other requirements.    

If the CAO cannot determine if a burial reserve is irrevocable, it will send documentation to the Area Manager for review by the Office of General Counsel (OGC).     

The amount of the irrevocable burial reserve affects the amount that can be excluded from a revocable burial reserve.  See Section 440.52, Revocable Burial Reserve.    

55 Pa. Code § 178.5    55 Pa. Code § 178.5(1)      55 Pa. Code § 178.73

 

440.511  Determining whether fair consideration is received for the purchase of an irrevocable burial reserve

An irrevocable burial reserve meets fair consideration requirements if:        

Exception: If the burial reserve is more than 25% higher than the local average cost of burial, the CAO must use good judgment to determine whether the costs of the burial are excessive. The CAO must ask the person for an explanation. If the explanation is not satisfactory, treat the excess funds as a transfer for less than fair market value.           

The individual has received fair consideration if the amount of the irrevocable burial reserve is not more than 25% higher than the local average cost of burial plus unusual costs.  The 25% is to allow for future increases in the cost of burial.           

The CAO must review an irrevocable burial reserve that is more than 25% higher than the established average cost of burial. The review will determine if additional costs are reasonable and if the reserve meets fair consideration requirements.  

When determining the expected cost of burial greater than 25% of the average cost of burial, the CAO considers:           

Example: A man plans to be buried in California because his wife is buried there. 

The CAO must determine whether the extra funds in the irrevocable burial reserve above 25% of the average cost of the local irrevocable burial reserve are reasonable.    

If the CAO decides that the extra funds are reasonable, no further action is necessary.  Note the decision in the case narrative.        

If the CAO determines that the extra funds are not reasonable, the CAO will forward to the Area Manager a copy of the irrevocable burial reserve plus any supporting documentation proving a higher irrevocable burial reserve.  The Area Manager will forward the irrevocable burial reserve and supporting documentation to OGC for review.  OGC will review the situation and provide guidance to the CAO.

If the OGC decision is that the amount of an individual’s irrevocable burial above the 25% is not reasonable, the CAO will:    

NOTE: The OGC may determine that a portion of the excess funds is reasonable.    

Example: Mrs. D established an $18,000 irrevocable burial reserve three months before her admission to an LTC facility and application for MA LTC.  The local average cost of a burial is $6,000.  The local average cost of burial plus 25% is $7,500.  The CAO determined the uncompensated value to be $10,500 ($18,000 - $7,500 = 10,500).  The CAO determines the period of ineligibility using $10,500 divided by the current average daily private pay rate.  The period of ineligibility would begin on the date the person is otherwise eligible for MA LTC. 

NOTE: The OGC may determine that a portion of the excess funds is reasonable.    

Example: Mrs. D established an $18,000 irrevocable burial reserve three months before her admission to an LTC facility and application for MA LTC.  The local average cost of a burial is $6,000.  The local average cost of burial plus 25% is $7,500.  The CAO determined the uncompensated value to be $10,500 ($18,000 - $7,500 = 10,500).  The CAO determines the period of ineligibility using $10,500 divided by the current average daily private pay rate.  The period of ineligibility would begin on the date the person is otherwise eligible for MA LTC. 

55 Pa. Code § 178.5

440.512  Determining average cost of burial at the CAO

Each CAO is responsible for figuring the average cost of burial in their county. This amount will vary by county. Individuals should contact the local CAO to verify the local amount before purchasing an irrevocable burial.

Periodically, the CAO should ask the local funeral homes for the average cost for a burial. These amounts can then be averaged to figure if the current burial limit needs adjusted. The CAO can decide to adjust the amount, but must let the Bureau of Policy know the new amount.

440.52  Revocable Burial Reserve

A revocable burial reserve is a fund held by a financial institution or funeral director and designated for burial expenses, but that may be withdrawn before the individual’s death.     

The CAO will record:

The CAO will review bank books, contacts or other documents to determine if the person has money identifiably set aside for burial.  A review of the account or agreement terms should reveal the conditions for its establishment and whether it is revocable or irrevocable.           

NOTE: The money in a burial reserve must be clearly designated as set aside for burial.       

The CAO will exclude up to $1,500 held in a revocable burial reserve as follows:  

1.      $1,500 is the maximum exclusion for each individual.

2.      Subtract from the $1,500 a maximum exclusion of one of the following owned by the individual:

NOTE: Count cash value excluded when determining the value of life insurance when determining how much of a revocable burial reserve may be excluded.         

3.      Exclude the remaining amount, up to $1,500 maximum.

4.      Count the remaining value of the burial reserve as a resource.          

NOTE: Do not count as a resource any increase in the value of an excluded burial reserve from accumulated interest or appreciation.          

5.      Determine at application and at each renewal if the individual used part of the revocable burial reserve or added interest for a purpose other than burial. 

6.      If part of the revocable burial reserve or interest was used for any purpose other than burial, verify the amount used and the withdrawal date.  No further action is required if the amount was used before the look-back date.

7.      Add any amount withdrawn from the burial reserve to other countable resources as of the date the money from the burial fund was withdrawn:

8.      Use Section 440.85 to calculate and impose a penalty period for the disposal of assets without receiving fair consideration. 

 

Example 1:

Life insurance (L.I.) total face value of $1,000

Revocable burial reserve of $1,000

 

Computation:

  $1,500 (max exclusion)

 -$1,000 (face value of L.I. under $1,500)

     $500 exclusion

              

              Revocable Burial Reserve of $1,000

                                   Minus exclusion of $500

Countable Revocable Burial Reserve = $500      

 

Example 2:

Life insurance (L.I.) total face value of $2,500

Cash surrender value of L.I. is $1,200

Revocable burial reserve of $1,500

 

Computation:

  $1,500 (max exclusion)

 -$1,000 (cash value of L.I. up to $1,000)

                             $500 exclusion

      

Revocable Burial Reserve of  $1,500

Minus Exclusion of $500

                       Countable Revocable Burial Reserve = $1,000   

 

Example 3:

Life insurance (L.I.) total face value of $2,000

Cash surrender value of L.I. is $700

Irrevocable burial reserve (IBR) of $1,000

Revocable burial reserve of $1,000

    

Computation:

           $1,500 (max exclusion)

             -$1,700 (cash value L.I. plus IBR ($700 + $1,000))

             $0 irrevocable

    

There is no amount that can be excluded from the Revocable Burial Reserve.

The entire Revocable Burial Reserve of $1,000 is a countable resource.

 

Example 4:

Life insurance (L.I.) total face value of $2,000

Cash surrender value of L.I. is $700

Irrevocable burial reserve (IBR) of $500

Revocable burial reserve of $1,000

     

Computation:

$1,500 (max exclusion)

 - $1,200 (cash value L.I. plus IBR ($700 + $500)

    $300 exclusion

    

Revocable Burial Reserve of $1,000

Minus exclusion of $300

Countable Revocable Burial Reserve = $700      

 

 See Appendix B for a Revocable Burial Reserve computation worksheet.  

 55 Pa. Code § 178.73

 

 

Issued March 12, 2012