Why and How
Including Important Information for SSI/Medicaid Applicants & Recipients

The Funeral Prearrangement Conference

Below is a description of what you should expect from a prearrangement conference.

The law requires the funeral director to provide the consumer with the following:

1. A General Price List with the current prices for any merchandise, services and facilities offered by the funeral home.
2. A Preneed Itemization Statement that lists the items of merchandise, services and facilities that have been chosen, and the price of each.
3. A Preneed Agreement that outlines all the terms, as well as a consumer’s rights as the Purchaser. It must also state how the principal and interest will be applied to the cost of the funeral services and merchandise at the time they are provided.

Different types of Preneed Agreements

New York State Law mandates that prearrangements with New York funeral firms MUST be REVOCABLE, except for SSI/Medicaid recipients. This means that all prearrangements (except when prepared for Medicaid spend down) may be canceled at any time prior to death and the entire balance, including all accrued interest, must be refunded within ten days of the request.

New York State Law also mandates that preneed burial trusts for applicants or recipients of SSI/Medicaid MUST be IRREVOCABLE. This means that the prearrangement MAY NOT be canceled prior to death. It may, however, be transferred to a different funeral home at any time.

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How Preplanning Works

• Purchaser selects the funeral home of their choice.
• Purchaser meets with a funeral director.
• Purchaser selects desired services and merchandise while reviewing the funeral home’s General Price List.
• Funeral director prepares a fully itemized statement and preneed agreement.
• Both the funeral director and Purchaser sign the documents.
• Purchaser submits a check for the cost of the funeral made payable either to the funeral home or a funeral trust program. If cash is remitted, the Purchaser should obtain a cash receipt at the time of the transaction.
• Purchaser receives copies of all signed documents and a General Price List for retention.
• Within ten days, the funeral director forwards the funds to a funeral trust program (i.e., PrePlanSM) or deposits the money directly into a government backed, interest bearing account in a New York financial institution.
• Within 30 days, the Purchaser should receive acknowledgment in the mail indicating where the money has been deposited.
• Funds are paid directly to the funeral director once the funeral services have been provided.

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Taxation of Preneed Funeral Trusts

The Internal Revenue Service has determined that Purchasers of preneed funeral trusts are responsible for any income tax (if the Purchaser is required to file) resulting from interest earned on the trust account. The funds, although set aside as payment for funeral expenses, always remain the property of the Purchaser. With the exception of irrevocable trusts, a Purchaser always maintains the right to withdraw the funds at any time prior to the performance of the funeral. Although withdrawals are not permitted from irrevocable trusts, the funds may be transferred to a different funeral firm at any time.

A Purchaser should receive a tax information statement each year by January 31st, (i.e., 1099 or K-1Grantor Trust Statement) indicating the amount of interest earned on the account for the previous year. In addition, at any time upon written request, a funeral firm must provide a Purchaser with an accurate balance including principal and accrued interest.

Most funeral firms are extremely knowledgeable concerning all aspects of prepaid funerals in general, specifics on SSI/Medicaid, and often have the added benefit of local Social Services Department relationships which may make this part of the "spend down" process go more smoothly.

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How to Qualify

Any individual who is an applicant or recipient of SSI/Medicaid, and in the "spend down" process, should meet with a funeral director. During a prearrangement conference, the individuals should select which funeral services and merchandise he or she desires as disclosed on a "General Price List." The funeral director will then note these selections on an itemized statement (commonly known as a "Preneed Itemization Statement") which will reflect the current retail value of the merchandise and services selected. The next step is funding the arrangements. Funeral prearrangements will qualify as a prepaid funeral resource exclusion if the funds are placed in an irrevocable prepaid funeral trust account.

Meaning of Irrevocability

A trust which is titled "irrevocable" means that any refund, withdrawal or other disposition of the deposits on account plus accrued interest, for any purpose, will and must legally be refused by the funeral director and/or funeral trust or financial institution.

Payments to Purchasers

Purchasers who have entered into irrevocable burial trusts may only use the funds for payment of funeral services and merchandise upon the death of the intended funeral recipient. Any excess in the trust account after payment of funeral expenses must be returned to the local county Social Services Department in which the intended funeral recipient resided, to be earmarked for indigent burials.

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Requirements

All documentation generated by this process must meet stringent federal and state requirements for resource qualification and funeral service disclosures. Social Services personnel require evidence that the funeral arrangements exist and that they are linked irrevocably to the funding vehicle. Additionally, all of the documentation generated by the funeral home must meet Federal Trade Commission standards for price and itemization disclosure, and all of the provisions of Section 453 of the New York State General Business Law.

Consumer Protections

The 1996 amendment to the Social Services law which allows the creation of irrevocable trusts for applicants/recipients of SSI and/or Medicaid also sets high business and ethical standards for prepaid funeral arrangements. The following consumer protections were built into the law with that amendment.

Portability

The law allows the consumer to change funeral homes at any time prior to death without effecting the irrevocability of the arrangements themselves. If such a transfer is desired, a new irrevocable preneed agreement with the newly selected funeral home must be generated. The transfer of irrevocable preneed funds may, however, ONLY be made payable to another funeral home, or another funeral trust program.
Additionally, the law permits the beneficiary’s family, at the time of need, to select different goods and services from those originally prearranged. Please note, however, that the funds in the account may only be used for payment of funeral services and merchandise. Any remaining funds in the account after payment of funeral services and merchandise must be remitted by the funeral director to the County Social Services Department.

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Mandatory Contract Disclosures

New York law mandates that every irrevocable preneed agreement contain, in a minimum of 12 point type, the following consumer disclosure:
"New York Law requires this agreement to be irrevocable for applicants for receipt of supplemental security benefits under section two hundred nine of the Social Services Law or of medical assistance under section three hundred sixty-six of the Social Services Law, and for the moneys put into a trust under this agreement to be used only for funeral and burial expenses. If any money is left over after your funeral and burial expenses have been paid, it will go to the county. You may change your choice of funeral home at any time."

All literature promoting prearranged funeral and burial services prepared after January 1, 1997 must contain language disclosing the irrevocable nature of burial trusts established for an applicant or recipient of supplemental security income benefits or medical assistance. Following are some samples of the language that could be used:

"New York State law mandates that all contracts for prefunded funerals executed by applicants for or recipients of Medicaid be irrevocable."
"New York State law mandates that funeral trust funds for Medicaid recipients pay for funeral and burial expenses only. These contracts must be irrevocable."

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Summary of N.Y.S. Irrevocable Trusting Statute (NY Social Services Law, Section 209)

** All preneed funeral agreements for applicants for or recipients of Medicaid must be irrevocable.
** No other type of preneed contract may be irrevocable. All others remain completely revocable for the purchaser, which means monies must be refunded upon demand.
** There will be one irrevocable account with an unlimited dollar amount for SSI/Medicaid applicants or recipients.
** Irrevocable burial trust Purchasers may not receive a refund prior to the death of the beneficiary, at which time the money must either be spent on funeral expenses or be paid to the county Social Services Department.
** All irrevocable accounts must remain portable to any funeral home in any state, and upon the purchaser’s request, the monies must be paid to a newly selected funeral home or funeral trust within ten business days.
** All preneed agreements for applicants for or recipients of SSI/Medicaid must contain a mandatory disclosure regarding the nature of the irrevocability of the contract and the portability aspects.
** All literature printed after January 1, 1997 which promotes prefunded funerals must contain language disclosing the irrevocable nature of preneed agreements executed by applicants for or recipients of SSI/Medicaid.

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Commonly asked questions regarding preneed arrangements for applicants or recipients of SSI/Medicaid.

Can a Medicaid applicant apply life insurance towards an irrevocable funeral trust?
No. Life insurance cannot be used in an irrevocable trust.

Which items are to be excluded from the burial trust?
None. Funeral prearrangements may be completely prefunded.

Which county Social Services Department would receive the overage in an irrevocable trust?
The county in which the Medicaid applicant or recipient resided (most likely the county in which they applied for assistance).

Must I send the overage of existing revocable contracts held by Medicaid recipients to the county Social Services Department?
No. The overage to existing revocable contracts of Medicaid recipients should be returned to the Purchaser.

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Who may authorize a transfer of funds to another funeral home before death occurs?
The Purchaser or their legal representative must authorize a transfer of the irrevocable trust to another funeral home.

Can I create an irrevocable trust if the person is not yet an SSI or Medicaid applicant?
No. Only SSI/Medicaid applicants/recipients may set up irrevocable preneed trusts in New York State.

Can an applicant or recipient change an existing revocable contract to an irrevocable trust?
Yes, but they must sign a new irrevocable preneed agreement.

Does the law affect pre-existing contracts of Medicaid recipients?
No. If a consumer had both a pre-existing agreement and was receiving Medicaid benefits prior to January 1, 1997, their account may remain revocable, and must still be recertified on an annual basis by County Social Services personnel.

Can additional funds be added to an irrevocable trust?
Yes.

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Can irrevocable preneed agreements be modified at time of need?
Yes, but if a less expensive funeral is purchased, the overage must be remitted to the county Social Services Department.

Can we still use the personal needs account to fund the burial trust?
No. The funeral director should not be involved in the use of the Personal Needs Account. A Purchaser of an irrevocable burial trust may still maintain the maximum allowable Medicaid eligibility personal resource level, in addition to the irrevocable trust. That level is currently $3,550 per individual or $5,150 per couple.

Are there disclosures that must be printed on a funeral firm’s advertising materials regarding prearrangements?

Yes. Any promotional material printed must contain language disclosing the irrevocable nature of burial trusts established for individuals receiving or applying for supplemental security income or Medicaid assistance.

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