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F-4100 Types of Liquid Resources
Revision 10-3; Effective September 1, 2010
Liquid resources are cash or other assets, which can be converted to cash within 20 workdays.
Examples of resources that are ordinarily liquid are:
- Annuities (see Section F-7000, Annuities)
- Bonds
- Cash
- Financial institutions accounts (including savings, checking and time deposits, also known as certificates of deposit)
- Life insurance policies
- Loans
- Mortgages
- Mutual fund shares
- Promissory notes
- Retirement accounts (including individual retirement accounts and 401(k) accounts)
- Stocks
- Trusts, including revocable trusts and trusts in which the person can direct the use of the funds
Presume that these assets (and similar financial accounts and instruments) can be converted to cash within 20 workdays and are countable as resources. However, some liquid resources are not convertible to cash within 20 working days due to prevailing conditions of the assets. For example, the liquidity of U.S. savings bonds occurs after a minimum of one year. You can redeem them anytime after that time period.
F-4110 Cash
Revision 09-4; Effective December 1, 2009
Cash is a countable resource. Accept the person’s word for the amount of cash on hand.
See Appendix XVI, Documentation and Verification Guide
F-4120 Bank Accounts
Revision 20-1; Effective March 1, 2020
A person’s bank balance, as of 12:01 a.m. on the first day of the month for which eligibility is being tested, is a countable resource.
Reduce the bank account balance by the amount of any funds encumbered before 12:01 a.m. on the first day of the month. See Section F-1311, Encumbered Funds.
Verify the bank account balance with:
- bank statements reflecting balances as of 12:01 a.m. for the first day of the appropriate month(s);
- Form H1239, Request for Verification of Bank Accounts (HHSC does not pay financial institutions to complete the form);
- a letter from the financial institution that provides the balance(s) as of 12:01 a.m. for the first day of the appropriate month(s);
- contact by phone with an employee of the financial institution using phone contact documentation; or
- written follow-up if unable to obtain information by phone or if the information obtained by phone makes the person ineligible.
The verification must include all of the following:
- name of the financial institution;
- complete account number(s); and
- amount of the balance as of 12:01 a.m. for the appropriate test month(s).
If the verification provided does not include the required information listed above, send Form H1020, Request for Information or Action to request the missing information.
Note: An account reported as closed by the applicant or recipient must be verified as having a $0 balance for the appropriate test month(s).
Related Policy
Documentation and Verification Guide, Appendix XVI
Failure to Provide Missing Information, B-6510
Points in Time for Establishing Resources Values, F-1310
Encumbered Funds, F-1311
Nursing Facility Payments and Refunds, F-1312
Administrative Procedures of Transfers of Nominal Amounts, I-3600
Consideration of AVS Information, R-3744
F-4121 Joint Bank Accounts
Revision 09-4; Effective December 1, 2009
If a person has a joint bank account and can legally withdraw funds from it, all the funds in the account are considered a resource to the person.
If two or more eligible persons have a joint account with unrestricted access, the department considers that each owns an equal share of the funds. Eligible persons include any Qualified Medicare Beneficiaries (QMB) and Medicaid persons.
This equal ownership [principle] also applies when income is being diverted from the eligible spouse to the ineligible spouse and when income is deemed from an ineligible spouse or parent. In spousal diversion cases after the initial 12-month eligibility period, if the account has not been separated, the funds in the account are divided equally between the spouses for resource eligibility purposes beginning with the 13th month.
If a person is determined ineligible because of excess funds in a joint account, the person must be allowed an opportunity to disprove the presumed ownership of all or part of the funds. He must also be allowed to disprove ownership of joint accounts that do not currently affect his eligibility but may in the future.
Transfer-of-resources policy does not apply when a person changes a joint bank account to establish separate accounts in order to reflect correct ownership of and access to the funds.
In determining whether a person has successfully disproved ownership of funds, the department considers the following information.
- If the source of the funds and all deposits are the person's money, but withdrawals are not made or used for the person's benefit, the department considers that the account is owned by the person.
- If the source of the funds and deposits are from all the joint owners, but withdrawals are not made or used to benefit all joint owners, the department evaluates deposits and withdrawals to determine the amount owned by the person.
- If the source of the funds and deposits are from individuals other than the person, and the withdrawals are used to benefit individuals other than the person, the department considers the disproval of ownership successful. In the same situation for source and deposit of funds, if withdrawals are used for the person's benefit, ownership of the funds may still be successfully disproved. However, the department considers any cash contributions as a potential source of income.
An example of an acceptable rebuttal of ownership of funds is when an account reflects a fiduciary relationship. See Section F-1232, Fiduciary Agent.
Note: Disproval of ownership policy applies to accounts in which there is no co-owner, but the person can show he does not own all of the funds, provided the funds are duly separated.
See Section E-3332, Income from Joint Bank Accounts, regarding treatment of income in these cases.
If a person wishes to disprove full or partial ownership, send him a form specifying the documentation needed and the date by which he is expected to provide it. Keep a copy of the form in the case record. Allow the person up to 30 days to provide:
- completed, signed and dated Form H1299, Request for Joint Bank Account Information; and
- evidence of a change in the account designation to remove the person's name from the account, restrict the person's access to the funds or establish separate accounts.
Notes:
- If eligibility is affected, the items must be received prior to certification. If eligibility is not affected, do not delay certification pending receipt of the items.
- If the person has been given time to disprove ownership and redesignate an account, monitor for compliance within the period specified.
- If either the person or the co-holder is mentally incompetent or a minor, obtain the statement from a knowledgeable third party.
Reference: Refer to Section E-3332, Income from Joint Bank Accounts, regarding interest and deposits by co-holders of a joint account.
See Appendix XVI, Documentation and Verification Guide; Appendix XXV, Accessibility to Income and Resources in Joint Bank Accounts; and Section E-3331, Interest and Dividends, for treatment of income.
F-4122 Time Deposits
Revision 09-4; Effective December 1, 2009
The resource value of a time deposit is the net amount due after penalties are imposed for early withdrawal. If the funds cannot be withdrawn before maturity, the time deposit is not a resource until it matures. Time deposits include, but are not limited to, certificates of deposit, savings certificates and individual retirement accounts (IRAs).
A time deposit is a contract between an individual and a financial institution whereby the individual deposits funds for a specified period. In return, the financial institution agrees to pay an interest rate higher than the passbook rate.
The availability of funds is the controlling factor in determining whether a time deposit is a resource. Examine the person's time deposit certificate to determine when the funds can be withdrawn and which penalties to impose. Subtract the amount of the penalties from the total value to determine resource value.
If the person is a co-owner of a time deposit, use the procedures for jointly-owned resources.
The following information must be included in the case record documentation:
- name of financial institution and account number,
- account accessibility by person,
- cash value as of 12:01 a.m. on the first day of the appropriate month, and
- source of verification.
For applications, verify the account balance for the appropriate month(s). For redeterminations, use the most recent monthly bank statement, unless something indicates that the person may have exceeded the resource limit on the first day of the review month. Verify balance, name of financial institution and account number.
Note: If the statements are not received monthly and the statement does not cover the appropriate month, use other verification. There may be a penalty for early withdrawal.
A time deposit that is closed does not have to be reverified at subsequent redeterminations.
Sources of verification include:
- bank statements,
- completed Form H1239, Request for Verification of Bank Accounts,
- letter from the financial institution, and
- documented telephone contact with a knowledgeable source at the financial institution.
If a person cannot make an early withdrawal of the funds, verify and document the restriction. Also document the date that the time deposit matures. If maturity occurs before the next periodic review, schedule a special review.
F-4123 Patient Trust Funds
Revision 18-1; Effective March 1, 2018
A person may authorize a long-term care facility to manage his funds. The facility then acts as a fiduciary agent, using the funds only for the person's personal needs. The money in a patient trust fund is a countable resource.
See Appendix XVI, Documentation and Verification Guide.
Some facilities call the patient trust fund a "petty cash fund" and do not keep a ledger. In this case, check with a bookkeeper or other nursing home staff to determine if any funds are being held for a person.
Note: If a facility does not keep patient funds, record the fact that no patient trust fund exists. Use discretion to verify at applications or redeterminations that the facility does not maintain patient funds.
See Section F-1312, Nursing Facility Refunds.
F-4124 Debit Accounts
Revision 13-4; Effective December 1, 2013
A debit card allows individuals electronic access to their personal funds. Debit cards can be attached to a bank account or can be preloaded with an individual user’s funds. Prepaid or preloaded debit cards can also be established with direct deposit of an individual’s wages.
Government benefits payments may be direct deposited to a debit card.
The most common prepaid debit cards used for deposit of government benefits, which do not have a separate account attached, include:
- electronic benefit transfer (EBT) card accounts for TANF cash benefits;
- TWC UI Visa® Debit Card issued by US Bank for unemployment insurance benefits (UIB);
- Texas Debit Card issued by Wells Fargo® Bank, N.A. for child support payments through the Office of Attorney General (OAG);
- debit cards for direct deposit of child support payments from other states; and
- Direct Express® Debit MasterCard® issued by Comerica Bank exclusively for direct deposit of Social Security, Retirement, Survivors and Disability Insurance (RSDI) or Supplemental Security Income (SSI) benefits payments.
Wage payments may also be direct deposited to a debit card.
Some prepaid debit cards used for deposit of wage payments, which do not require a separate account, include:
- ACE Elite Visa® Prepaid Debit Card,
- Green Dot Prepaid Debit Card,
- NetSpend® Prepaid Debit Card,
- Prepaid Visa® RushCard, and
- Walmart MoneyCard.
This list is not intended to be all inclusive as more agencies and businesses move toward the use of debit cards to issue benefits.
These types of cards function like prepaid debit cards and are not attached to a checking/savings account, so the requirement to provide the complete account number is not applicable. The number on the front of the debit card is not considered an account number. Do not copy or image the actual debit card.
The remaining cash value of the debit card as of 12:01 a.m. on the first day of the month following the month of the income deposit is a countable resource.
Account inquiry is accessible to:
- TANF recipients, by calling the Lone Star Help Desk automated voice response system at 1-800-777-7328 (1-800-777-7EBT);
- UIB recipients, online at https://www.usbankreliacard.com/ or at any automated teller machine (ATM) free of charge;
- child support recipients in some states, online at www.eppicard.com*; and
- Social Security recipients, online at www.USDirectExpress.com, by calling 1-888-741-1115, or balance information may be obtained free of charge at any ATM that displays the MasterCard® logo.
* Some states do not use the EPPICard for child support payments.
Verify the debit card balance with:
- debit card statements, such as a printout from a website;
- telephone contact with an employee of the financial institution using telephone contact documentation; or
- the client’s statement, when client declaration is allowed.
When it involves a Social Security recipient, the specialist must also verify and document whether the person has a Direct Express® debit card or similar debit card that does not have a bank account number attached, or an Electronic Transfer Account (ETA) that is attached to a bank account and has an account number that must be verified. Follow policy in Section F-4120, Bank Accounts, when a person has an ETA.
For a debit card, the following information must be in the case record:
- Name and address of the financial institution that issued the debit card
- Last four digits of the debit card number
- Amount of the balance as of 12:01 a.m. for the appropriate month(s)
If the verification that the person provides does not meet the three criteria listed, ask explicitly for the information that is missing.
Note: Direct Express® does not allow other income to be deposited, does not pay interest, and does not require a checking/savings account. It does allow one card for multiple beneficiaries, if the payee desires it.
F-4130 Stocks
Revision 10-2; Effective June 1, 2010
The resource value of a share of stock is the closing price on the last business day of the month before the month of redetermination or the last business day of the month before an appropriate “trial” month. For example:
- SPRA month
- Application month
- Prior month
- First eligible month
Shares of stock represent ownership in a corporation. The value of a stock fluctuates from day to day.
Determine the person's ownership of or interest in the stock. Also determine the current market value as of 12:01 a.m. for the appropriate date.
Note: Brokerage fees for selling a person's stocks are not allowable deductions when determining the value of the stocks.
See Section E-3331, Interest and Dividends, for treatment of income.
See Appendix XVI, Documentation and Verification Guide.
F-4140 Bonds
Revision 09-4; Effective December 1, 2009
The cash value of a bond is a countable resource. If a person can convert his bond into cash within 20 workdays, the bond is considered a liquid resource.
A bond is a written obligation to pay a sum of money at a future date.
Municipal and corporate bonds are negotiable instruments and they are transferable. U.S. savings bonds are not transferable, but they may be sold back to the government.
It generally takes seven to 10 days to sell a municipal or corporate bond. Certain U.S. savings bonds, however, must be held for a minimum period from the date of issue before they can be converted into cash. These bonds are not a countable resource during the period they cannot be converted into cash. Once the minimum period is passed, the bonds can be converted within one or two days.
Treat a municipal, corporate or government (other than U.S. savings bond) in the same way that stocks are treated. Depending on demand, the cash value may be more or less than the face value.
Determine ownership and cash value of a U.S. savings bond. (The value depends on the type of bond and the issue date.) Also determine whether the bond is a liquid or nonliquid resource. If the bond is a nonliquid resource, follow up with appropriate action when the minimum retention period has passed.
Certain additional conditions may prevail. For example, Series HH Bonds (for which interest is paid to the owner twice a year) may be cashed only after six months and after the first interest check is received. If the bond is cashed before maturity, there is a penalty.
See Section E-3331, Interest and Dividends, for treatment of income. See Appendix XVI, Documentation and Verification Guide.
F-4150 Promissory Notes, Loans and Property Agreements
Revision 17-4 ; Effective December 1, 2017
This policy applies to an individual who is a creditor and owns an agreement such as a promissory note or a property agreement. A creditor is a seller of property.
A promissory note is a written or oral, unconditional agreement by the purchaser to pay the seller a specific sum of money at a specified time or on demand.
A loan is a transaction whereby one party advances money to another party who promises to repay the debt in full, with or without interest. The terms of the loan may be in writing or they may be an informal oral agreement. A formal written loan agreement is a type of promissory note. A reverse mortgage is treated as a loan. See F-3640 Reverse Mortgage or Home Equity Loan. The money received is not income. It is a resource the month after receipt. See Section E-1750, Proceeds of a Loan.
A property agreement is a pledge or security of a particular property or properties for the payment of a debt or the performance of some other obligation within a specified time. Property agreements on real estate (land and buildings) are generally referred to as mortgages, but may also be called land contracts, contracts for deed or deeds of trust.
Discounting is the advancement of money on a negotiable note or agreement and the deduction of interest or a premium in advance.
For example, a bank may be willing to pay $450 for a $500 promissory note due in one year's time. For a true discounting situation to exist, ownership of the note or agreement must transfer to the discounting agent.
A negotiable, secured promissory note or property agreement is a countable resource. Negotiable means that the owner (lender) has the legal right to sell the instrument (for valuable consideration, such as cash) to anyone. Secured means the instrument identifies a particular asset of at least equal value to the face value of the instrument that can be reclaimed by the seller, should the instrument fall into default. The owner also possesses a transferable interest in the instrument that can be converted to cash and could be subject to a transfer of assets penalty if not retained or spent down properly. The terms of the agreement may be in writing or may be an oral agreement. If the agreement is oral, the person is responsible for furnishing a statement of facts of the agreement signed by the second party. Real property, sold or exchanged for a negotiable note, is not a transfer for less than fair market value if the note is secured by the original property or by another redeemable resource of equal or greater value. A formal written loan agreement is a form of promissory note.
A negotiable non-secured promissory note or property agreement is a countable resource and a potential transfer of assets. Non-secured means the seller has no recourse to reclaim the original or like resource should the purchaser cease payments. By not securing the note, the seller has purposefully reduced the value of the note. The actual fair market value of the note should be determined and the difference between the actual market value of the note and the value of the original resource is a transfer of assets for less than fair market value. The actual fair market value of the note remains a countable resource. Normal transfer of assets rebuttal policy applies.
See Section E-3331, Interest and Dividends, for the treatment of the interest.
Payment on the principal reduces the transfer penalty. The transfer penalty period is recalculated at each annual review until the expiration of the penalty period falls before the next scheduled annual review. Then a special review should be scheduled accordingly.
A non-negotiable promissory note, loan or property agreement is not a countable resource because it has no marketable value. Non-negotiable means the seller cannot sell or transfer ownership interest in the note, causing the note to have no market value. Therefore, the dollar value of the original resource is considered to be transferred for less than fair market value, subject to normal transfer of asset penalties, if the instrument was created within the look-back period. If payments are being received, the transfer penalty must be reduced based on the amount of principal received. Both the principal and interest are considered as income in the month received. The transfer penalty period is recalculated at each annual review, until the expiration of the penalty period falls before the next scheduled annual review. Then a special review should be scheduled accordingly. Normal transfer of assets rebuttal policy applies.
Note: This transaction is considered a transfer of assets for less than fair market value because the person/authorized representative knew or should have known that transferring ownership of the asset in exchange for a non-marketable note severely lessened the value of the note and in effect automatically reduced the countable assets of the person.
When determining the value of a negotiable promissory note, loan or property agreement, the outstanding principal balance is the countable value unless the person furnishes reliable evidence from a knowledgeable source that the instrument cannot be sold for the amount of the outstanding principal balance. A knowledgeable source is someone recognized as being in the business of purchasing notes.
If a person furnishes evidence to establish a lesser value on a note, the market value established by the knowledgeable source is the countable value of the resource. However, if the person/authorized representative placed any restrictions/encumbrances (such as creating a note with interest due of less than the market value at the time the note was made or the note becomes paid in full at the time of the person's death), then the difference in the current market value and the outstanding principal balance is a transfer of assets for less than fair market value.
Although the seller/person keeps title to the original property until the promissory note, loan or property agreement is paid in full, the original property is not counted as a resource (the value of the negotiable instrument is the resource). The property is not available while the buyer is making a good faith effort (making scheduled payments) in fulfilling the contractual obligation.
A note cannot be excluded under the $6,000/6% policy. This exclusion applies only to real property, or a degree of interest in real property, such as mineral rights.
See Appendix XVI, Documentation and Verification Guide.
F-4160 Prepaid Burial Contracts
Revision 09-4; Effective December 1, 2009
A prepaid (or preneed) burial contract is an agreement in which a person prepays his burial expenses and the seller agrees to furnish the burial.
Burial space items can be excluded only when the contract has been paid in full, or the contract specifies that burial space items are paid before funeral service items, and the refund value equals or exceeds the value of burial space items specified in the contract.
Otherwise, the amount paid toward the contract is treated as burial funds. If the contract has been paid in full or if the contract specifies that burial space items are paid first, burial space items must be separately itemized in the contract for the exclusion to apply.
Note: Paid in full means that the person owes no more payments.
The refund value is the amount that a person would receive upon revocation or liquidation of his burial contract.
A refund value is considered an available resource.
A refund penalty, often 10%, may be assessed for cancellation of a contract.
Note: Effective Sept. 1, 1993, under HB 2499 passed by the 73rd Texas Legislature, a person can irrevocably waive the right to cancel a prepaid burial contract. In these situations, there is no refund value. The prepaid contract is not a countable resource, but its value reduces the $1,500 burial fund exclusion dollar for dollar.
An irrevocable prepaid burial contract owned by the person, but not paid in full, reduces the $1,500 maximum burial fund exclusion by the face value of the contract, with no deduction for the value of burial spaces itemized in the contract.
If a prepaid burial contract is made irrevocable before an application is certified, the contract is considered irrevocable for the month of application and the three prior months.
Use the following procedure to calculate the exclusion for burial space items in a burial contract that contains separately identifiable burial space items/services.
F-4161 Treatment of Refund Penalty
Revision 09-4; Effective December 1, 2009
F-4161.1 No Refund Penalty
Revision 09-4; Effective December 1, 2009
Exclude the total value of the burial space items, which must be itemized in the contract.
F-4161.2 Refund Penalty
Revision 09-4; Effective December 1, 2009
Burial space items must be itemized in the contract.
| Step | Procedure |
|---|---|
| 1 | Divide the total value of burial space items in the contract by the face value of the contract. This is the percentage of the burial space value. |
| 2 | Multiply the refund value of the contract by the percentage from Step 1. This is the dollar amount of excludable burial space items. |
| 3 | Subtract the excludable amount from Step 2 from the refund value. This is the countable value of the contract. |
F-4161.3 Examples of Refund Penalty
Revision 09-4; Effective December 1, 2009
Example 1:
The prepaid burial contract has a face value of $3,000. There was a 10% refund penalty, giving a refund value of $2,700. The value of burial space items is $1,500.
Step 1.
$1,500 ÷ $3,000 = 50%
Step 2.
| Amount | Description |
|---|---|
| $2,700 | refund value |
| x .500 | percentage from Step 1 (round to third decimal place) |
| $1,350 | value of excludable burial space items |
Step 3.
| Amount | Description |
|---|---|
| $2,700 | refund value |
| –1,350 | excludable value from Step 2 |
| $1,350 | countable value of prepaid contract |
Example 2:
The prepaid burial contract has a face value of $2,405. There was a 10% refund penalty, giving a refund value of $2,164.50. The value of burial space items is $1,255.
Step 1.
$1,255 ÷ $2,405 = .5218
Step 2.
| Amount | Description |
|---|---|
| $2,164.50 | refund value |
| x .522 | percentage from Step 1 (round to third decimal place) |
| $1,129.87 | value of excludable burial space items |
Step 3.
| Amount | Description |
|---|---|
| $2,164.50 | refund value |
| –1,129.87 | excludable value from Step 2 |
| $1,034.63 | countable value of prepaid contract |
Note: If there is a refund penalty, but the terms of the contract specify that the burial space items are paid first, exclude the total value of the burial space items that are itemized in the contract. The countable value is the refund amount minus the total value of the itemized burial space items.
The following information must be included in the case record documentation:
- name of funeral home or insurance company, and contract number;
- face value of contract and who owns it;
- current cash value, if owned by the person;
- reason for exclusion, if excluded; and
- source of verification.
Verify purchaser, company name, contract number and beneficiary of contract.
Verify current refund value. If a prepaid burial contract is reported as owned by someone other than the person, verify ownership.
If a prepaid burial contract is owned by someone other than the person, determine whose money was used to purchase the contract and availability of funds to the person.
Sources of verification include the following:
- copy of contract,
- letter from funeral home, and
- contact with funeral home representative.
Although this procedure may be used to complete the case if near the delinquency deadline, immediately follow up with verification by obtaining a copy of the contract or a letter from the funeral home.
Sources for verifying the refund value of a prepaid burial contract are the same as those in the preceding paragraph. In addition to the information required for verifying ownership and accessibility, the actual refund value after penalty involved in liquidation must be indicated on the contract or statement.
F-4170 Burial Contracts Funded by Life Insurance
Revision 12-3; Effective September 1, 2012
If life insurance is used to fund a burial contract, the person owns a life insurance policy. The contract has no value and is merely an instrument that explains the burial arrangement. Because the person purchased insurance and not the actual funeral service or merchandise items that may be listed in a burial arrangement, the person does not own the funeral service or merchandise items. The burial space items are treated differently based on the assignment of a burial contract funded by life insurance.
Some burial arrangements funded with life insurance have the life insurance ownership or proceeds assigned to a funeral director or home or a trust-type instrument. These assignments may be either revocable or irrevocable.
Ownership of a life insurance policy can be transferred or assigned to a funeral home without a transfer penalty if a prearranged contract provides burial services to the person. If a prearranged contract does not exist at the time of transfer, consider the cash value as a transfer of assets and explore a transfer penalty. See Chapter I, Transfer of Assets.
F-4171 Revocable Assignment
Revision 09-4; Effective December 1, 2009
If the assignment is revocable, the life insurance cash value is an accessible resource. Therefore, if the face value exceeds $1,500, the cash value is a countable resource. The burial space items are not excluded, but the $1,500 designated burial fund exclusion may apply.
Example: A person purchases a $3,000 face-value life insurance policy to fund a burial arrangement. The life insurance policy has a cash value of $1,800. The proceeds of the life insurance policy are revocably assigned to Sleepyhollow funeral director. The burial arrangement includes a casket for $1,200, a vault for $500, grave opening and closing costs for $100 and service items (transportation, flowers, clothing, use of chapel) for $1,200.
The burial space items are not excluded. The face value of the life insurance policy exceeds $1,500; therefore, the cash value is a countable resource that is accessible because the assignment is revocable. The $1,800 cash value is designated for burial and $1,500 is excluded. The remaining $300 is a countable resource.
F-4172 Irrevocable Assignment
Revision 09-4; Effective December 1, 2009
If assignment of ownership is irrevocable, the life insurance is not a resource because it is no longer owned by the person. The prepaid burial contract also is not a resource because it has no value independent of the life insurance policy. If the terms of the contract itemize the burial space items that have been purchased, the value of those items is disregarded in determining the amount of the irrevocable arrangement that reduces the $1,500 allowable burial fund exclusion.
If an irrevocably assigned, insurance-funded, prepaid burial contract is paid in full, HHSC automatically assumes that burial space items would be provided to the person, and the value of those items is disregarded in determining the amount of the irrevocable arrangement that reduces the $1,500 allowable burial fund exclusion.
Irrevocable assignment of life insurance policy ownership to the funeral home or director or to a trust-type instrument is not a transfer of resources.
An irrevocable prepaid burial contract for the person's burial, which is in force and which is owned by someone other than the person, whether paid in full or not, reduces the $1,500 maximum burial fund exclusion by the face value of the contract, with no deduction for the value of burial spaces itemized in the contract.
If a prepaid burial contract is made irrevocable before an application is certified, the contract is considered irrevocable for the month of application and the three prior months.
Example: Taking the above situation, the ownership is irrevocably assigned. The insurance-funded prepaid burial contract is paid in full or the terms of the contract indicate that the burial space items are actually owned by the person and that the provider is obligated to provide the items to the person upon request rather than only at the time of death.
The $1,200-casket + $500 vault + $100 grave opening and closing total $1,800. The $1,500 allowable for a designated burial fund is reduced by the $1,200 irrevocable funeral service arrangement. Up to $300 in additional designated burial funds is allowed for exclusion.
| Amount | Description |
|---|---|
| $3,000 | face value |
| –1,800 | excludable burial space items |
| $1,200 | irrevocable funeral arrangement |
Example: If the terms of the above contract do not obligate the provider to immediately make the burial space items available, the entire $3,000 irrevocable arrangement would be considered as a burial fund and no other funds allowed for exclusion as a designated burial fund.