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| Public Act 102-0959
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| HB4979 Enrolled | LRB102 22458 KTG 31598 b |
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AN ACT concerning prepaid funeral or burial contracts.
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Be it enacted by the People of the State of Illinois,
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represented in the General Assembly:
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Section 5. The Illinois Insurance Code is amended by |
adding Section 245.3 as follows:
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(215 ILCS 5/245.3 new) |
Sec. 245.3. Irrevocable assignment of life insurance to a |
funeral home. An insured or any other person who may be the |
owner of rights under a policy of life insurance may make an |
irrevocable assignment of all or a part of his or her rights |
under the policy to a funeral home in accordance with Section |
2b of the Illinois Funeral or Burial Funds Act. Subject to the |
terms of the policy or a contract relating to the policy, |
including, but not limited to, a prepaid funeral or burial |
contract, an irrevocable assignment by an insured or other |
owner of rights under a policy made before or after the |
effective date of this amendatory Act of the 102nd General |
Assembly is valid for the purpose of vesting in the assignee, |
in accordance with the policy or contract as to the time at |
which it is effective, all rights assigned. That irrevocable |
assignment is, however, without prejudice to the company on |
account of any payment it makes. The insurance company shall |
within 15 business days notify the funeral home and owner of |
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the policy of its receipt of the form. A policy owner who |
executes a designation of beneficiary form pursuant to Section |
2b of the Illinois Funeral or Burial Funds Act also |
irrevocably waives and cannot exercise the following rights: |
(1) The right to collect from the insurance company |
the net proceeds of the policy when it becomes a claim by |
death. |
(2) The right to surrender the policy and receive the |
cash surrender value of the policy. |
(3) The right to obtain a policy loan. |
(4) The right to designate as primary beneficiary of |
the policy anyone other than as provided in that Act. |
(5) The right to collect or receive income, |
distributions, or shares of surplus, dividend deposits, |
refunds of premium, or additions to the policy. |
This amendatory Act of the 102nd General Assembly |
acknowledges, declares, and codifies the existing right of |
assignment of interests under life insurance policies.
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Section 10. The Illinois Funeral or Burial Funds Act is |
amended by changing Section 2a and by adding Section 2b as |
follows:
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(225 ILCS 45/2a)
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Sec. 2a. Purchase of insurance or annuity.
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(a) If a purchaser selects the purchase of a life |
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insurance policy or
tax-deferred annuity contract to fund the |
pre-need contract, the application
and collected premium shall |
be mailed within 30 days of signing the pre-need
contract.
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(b) If life insurance or an annuity is used to fund a
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pre-need contract,
the seller or provider shall not be named |
as the owner or beneficiary of the
policy or annuity. No person |
whose only insurable interest in the insured is
the receipt of |
proceeds from the policy or in naming who shall receive the
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proceeds nor any trust acting on behalf of such person or |
seller or provider
shall be named as owner or beneficiary of |
the policy or annuity.
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(c) Nothing shall prohibit the purchaser from irrevocably |
assigning
ownership of the policy or annuity used to fund a |
guaranteed price pre-need
contract to a person or trust or |
from irrevocably assigning the benefits of the policy or |
annuity to a funeral home for the purpose of obtaining |
favorable
consideration for Medicaid, Supplemental Security |
Income, or another public
assistance program, as permitted |
under federal law. The seller or contract
provider may be |
named a
nominal owner of the life insurance policy only for |
such
time as it takes to immediately transfer the policy into a
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trust. Except for this purpose, neither the
seller nor the |
contract provider shall be named the owner
or the beneficiary |
of the policy or annuity.
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(d) If a life insurance policy or annuity contract is used |
to fund a
pre-need contract, except for guaranteed price |
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contracts permitted in Section
4(a) of this Act, the pre-need |
contract must be revocable, and any
assignment
provision in |
the pre-need contract must contain the following disclosure in |
12
point bold type:
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THIS ASSIGNMENT MAY BE REVOKED BY THE ASSIGNOR OR |
ASSIGNOR'S SUCCESSOR OR, IF
THE ASSIGNOR IS ALSO THE INSURED |
AND DECEASED, BY THE REPRESENTATIVE OF THE
INSURED'S ESTATE |
BEFORE THE RENDERING TO THE CEMETERY SERVICES OR GOODS OR
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FUNERAL SERVICES OR GOODS. IF THE ASSIGNMENT IS REVOKED, THE |
DEATH BENEFIT
UNDER THE LIFE INSURANCE POLICY OR ANNUITY |
CONTRACT SHALL BE PAID IN ACCORDANCE
WITH THE BENEFICIARY |
DESIGNATION UNDER THE INSURANCE POLICY OR ANNUITY
CONTRACT.
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(e) Sales proceeds shall not be used to purchase life |
insurance policies
or tax-deferred annuities unless the |
company issuing the life insurance
policies or tax-deferred |
annuities is licensed with the Illinois Department of
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Insurance, and the insurance producer or annuity seller is |
licensed to do
business in the State of Illinois.
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(Source: P.A. 92-419, eff. 1-1-02.)
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(225 ILCS 45/2b new) |
Sec. 2b. Irrevocable designation of beneficiary of |
existing life insurance. |
(a) In accordance with Section 245.3 of the Illinois |
Insurance Code, an insured or any other person who may be the |
owner of rights under an existing policy of life insurance may |
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make an irrevocable assignment of all or a part of his or her |
rights under the policy to a provider in consideration for |
signing a guaranteed pre-need contract for the purpose of |
obtaining favorable consideration for Medicaid, Supplemental |
Security Income, or another public assistance program. The |
form that shall effectuate the irrevocable assignment and |
thereby provide for the irrevocable designation of beneficiary |
of one or more life insurance policies, which shall comply |
with all applicable federal laws and regulations, shall be |
prepared by the Department of Healthcare and Family Services |
under paragraph (4) of subsection (c) of Section 3-1.2 of the |
Illinois Public Aid Code or such form, approved in advance by |
the Department of Healthcare and Family Services, that has |
been prepared by an insurance company licensed to operate in |
the State of Illinois. The insured or any other person who may |
be the owner of rights under an existing policy of life |
insurance shall sign a guaranteed pre-need contract with the |
provider that describes the cost of the funeral goods and |
services to be provided upon the person's death, up to $7,248, |
except that any portion of a contract that clearly represents |
the purchase of burial space, as that term is defined for |
purposes of the Supplemental Security Income program, is |
exempt regardless of value. This amount shall be adjusted |
annually by the Department of Human Services for any increase |
in the Consumer Price Index. The guaranteed pre-need contract |
must provide a complete description and cost of the goods and |
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services and any cash advances. More than one policy may be |
subject to this Section if the total face value of the policies |
is necessary to pay the amount described in the guaranteed |
pre-need contract with the provider. All policies shall be |
listed on the form. The insured or any other person who may be |
the owner of rights under an existing policy of life insurance |
shall be given a copy of the executed form. The licensee shall |
retain copies for inspection by the Comptroller and shall |
report annually to the Comptroller the following: the name of |
the insured, the insurance policy number, the amount of the |
guaranteed pre-need contract, the current value of the policy |
or benefits designated, and the name of the insurance company |
issuing the policy. |
(b) The insured or any other person who may be the owner of |
rights under an existing policy of life insurance shall |
acknowledge that by making this assignment irrevocable, the |
policy cannot be canceled, although it does not affect the |
right of the policy owner to cancel the insurance policy |
within the examination period provided under the policy. |
(c) No commission may be sought or received in connection |
with any cash advance allowance included in the guaranteed |
pre-need contract. |
(d) For guaranteed pre-need contracts with cash advances, |
the contract shall include a disclosure, in 12 point bold type |
and located immediately above such cash advance allowance, |
that states: "No interment, inurnment, or entombment right has |
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been selected or reserved with this allowance; cash advances |
are merely an allowance toward the then-current costs for the |
involved items, to be purchased after death. Burial space |
allowances may only be excluded from resources under Medicaid |
if a separate contract is executed for such burial space with a |
cemetery." |
(e) Upon the death of the insured, the proceeds of the life |
insurance policies subject to this Section shall be paid to |
the provider, who shall apply such proceeds in the following |
order or priority: |
(1) first, to the provider in an amount equal to the |
lesser of: |
(A) the amount of the guaranteed pre-need contract |
for payment of all services, goods, and cash advances |
in the amounts indicated on the pre-need contract; or |
(B) the actual value of the services, goods, and |
cash advances, not to exceed the amounts indicated in |
the pre-need contract; |
(2) second, to the State of Illinois, up to an amount |
equal to the total medical assistance paid on behalf of |
the insured; and |
(3) third, payment of proceeds to a secondary |
beneficiary (if any) listed on the policy, or to the |
estate of the decedent if no secondary beneficiary is |
named on the policy in the event the proceeds exceed the |
amount of the pre-need contract for payment of all |
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services, goods and cash advances in the amounts indicated |
on the pre-need contract and the total medical assistance |
paid on behalf of the insured. |
(f) The provider shall receive and disburse these proceeds |
notwithstanding any other prohibition in law against serving |
as a trustee. The provider shall promptly deposit these funds |
into a non-interest bearing checking or share account that has |
been established to receive proceeds of this type. These |
proceeds shall not be commingled with any other account of the |
provider. The account may contain the funds of more than one |
client. The provider may disburse these funds to itself for |
goods and services. The provider shall maintain a ledger |
indicating the amount of proceeds received and the |
disbursement of those proceeds. A copy of this ledger shall be |
provided to the Comptroller and the Department of Healthcare |
and Family Services, and to the estate or heirs of the insured, |
as applicable, if requested by them. For the purpose of this |
Section, the providers who receive and disburse these proceeds |
from life insurance policies shall be funeral homes. |
(g) Further assignment. The rights and obligations of the |
provider subject to the irrevocable designation of beneficiary |
may be assigned to another provider upon the choice of the |
insured or the approved representative or the power of |
attorney for property of the insured, or upon the insolvency |
or bankruptcy of the provider. The assignee provider shall: |
(i) be bound to the terms of the irrevocable designation of |
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beneficiary and the associated guaranteed pre-need contract; |
(ii) notify the insurance company or companies of the |
assignment; (iii) notify the Department of Healthcare and |
Family Services of the change in provider; and (iv) retain a |
copy of the assignment for inspection by the Comptroller.
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Section 15. The Illinois Public Aid Code is amended by |
changing Section 3-1.2 as follows:
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(305 ILCS 5/3-1.2) (from Ch. 23, par. 3-1.2)
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Sec. 3-1.2. Need. |
(a) Income available to the person, when added to
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contributions in money, substance, or services from other |
sources,
including contributions from legally responsible |
relatives, must be
insufficient to equal the grant amount |
established by Department regulation
for such person. In |
determining earned income to be taken into account, |
consideration
shall be given to any expenses reasonably |
attributable to the earning of
such income. If federal law or |
regulations permit or require exemption
of earned or other |
income and resources, the Illinois Department shall
provide by |
rule and regulation that the amount of income to be
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disregarded be increased (1) to the maximum extent so required |
and (2)
to the maximum extent permitted by federal law or |
regulation in effect
as of the date this amendatory Act |
becomes law. The Illinois Department
may also provide by rule |
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and regulation that the amount of resources to
be disregarded |
be increased to the maximum extent so permitted or required. |
(b) Subject to federal approval, resources (for example, |
land, buildings, equipment, supplies, or tools), including |
farmland property and personal property used in the |
income-producing operations related to the farmland (for |
example, equipment and supplies, motor vehicles, or tools), |
necessary for self-support, up to $6,000 of the person's |
equity in the income-producing property, provided that the |
property produces a net annual income of at least 6% of the |
excluded equity value of the property, are exempt. Equity |
value in excess of $6,000 shall not be excluded. If the |
activity produces income that is less than 6% of the exempt |
equity due to reasons beyond the person's control (for |
example, the person's illness or crop failure) and there is a |
reasonable expectation that the property will again produce |
income equal to or greater than 6% of the equity value (for |
example, a medical prognosis that the person is expected to |
respond to treatment or that drought-resistant corn will be |
planted), the equity value in the property up to $6,000 is |
exempt. If the person owns more than one piece of property and |
each produces income, each piece of property shall be looked |
at to determine whether the 6% rule is met, and then the |
amounts of the person's equity in all of those properties |
shall be totaled to determine whether the total equity is |
$6,000 or less. The total equity value of all properties that |
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is exempt shall be limited to $6,000.
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(c) In determining the resources of an individual or any |
dependents, the
Department shall exclude from consideration |
the value of funeral and burial
spaces, funeral and
burial |
insurance the proceeds of which can only be used to pay the |
funeral
and burial expenses of the insured and funds |
specifically set aside for the
funeral and burial arrangements |
of the individual or his or her dependents,
including prepaid |
funeral and burial plans, to the same extent that such
items |
are excluded from consideration under the federal Supplemental
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Security Income program (SSI). At any time prior to or after |
submitting an application for medical assistance and before a |
final determination of eligibility has been made by the |
Department, an applicant may use available resources to |
purchase one of the prepaid funeral or burial contracts |
exempted under this Section. |
Prepaid funeral or burial contracts are exempt to the |
following extent:
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(1) Funds in a revocable prepaid funeral or burial |
contract are exempt up to $1,500, except that any portion |
of a contract that clearly represents the purchase of |
burial space, as that term is defined for purposes of the |
Supplemental Security Income program, is exempt regardless |
of value. |
(2) Funds in an irrevocable prepaid funeral or burial |
contract are exempt up to $7,248 $5,874, except that any |
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portion of a contract that clearly represents the purchase |
of burial space, as that term is defined for purposes of |
the Supplemental Security Income program, is exempt |
regardless of value. This amount shall be adjusted |
annually for any increase in the Consumer Price Index. The |
amount exempted shall be limited to the price of the |
funeral goods and services to be provided upon death. The |
contract must provide a complete description of the |
funeral goods and services to be provided and the price |
thereof. Any amount in the contract not so specified shall |
be treated as a transfer of assets for less than fair |
market value. |
(3) A prepaid, guaranteed-price funeral or burial |
contract, funded by an irrevocable assignment of a |
person's life insurance policy to a trust or a funeral |
home, is exempt. The amount exempted shall be limited to |
the amount of the insurance benefit designated for the |
cost of the funeral goods and services to be provided upon |
the person's death. The contract must provide a complete |
description of the funeral goods and services to be |
provided and the price thereof. Any amount in the contract |
not so specified shall be treated as a transfer of assets |
for less than fair market value. The trust must include a |
statement that, upon the death of the person, the State |
will receive all amounts remaining in the trust, including |
any remaining payable proceeds under the insurance policy |
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up to an amount equal to the total medical assistance paid |
on behalf of the person. The trust is responsible for |
ensuring that the provider of funeral services under the |
contract receives the proceeds of the policy when it |
provides the funeral goods and services specified under |
the contract. The irrevocable assignment of ownership of |
the insurance policy must be acknowledged by the insurance |
company. |
(4) Existing life insurance policies are exempt if |
there has been an irrevocable assignment in compliance |
with Section 2b of the Illinois Funeral or Burial Funds |
Act. A person shall sign a contract with a funeral home, |
which is licensed under the Illinois Funeral or Burial |
Funds Act, that describes the cost of the funeral goods |
and services to be provided upon the person's death, up to |
$7,248, except that any portion of a contract that clearly |
represents the purchase of burial space, as that term is |
defined for purposes of the Supplemental Security Income |
program, is exempt regardless of value. This amount shall |
be adjusted annually for any increase in the Consumer |
Price Index. The contract must provide a complete |
description of the goods and services and any cash |
advances to be provided and the price thereof. The person |
shall sign an irrevocable designation of beneficiary form |
declaring that any amounts payable from the policies not |
used for goods and services and any cash advances as set |
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forth in the contract shall be received by the State, up to |
an amount equal to the total medical assistance paid on |
behalf of the person; any funds remaining after payment to |
the State shall be paid to a secondary beneficiary (if |
any) listed on the policy, or to the estate of the |
purchaser if no secondary beneficiary is named on the |
policy in the event the proceeds exceed the prearranged |
costs of merchandise and services and any cash advances |
and the total medical assistance paid on behalf of the |
insured. More than one policy may be subject to this |
subsection if the total face value of the policies is |
necessary to pay the amount described in the contract with |
the funeral home; policies that are not necessary to pay |
the amount described in the contract are not exempt. The |
licensed funeral home to which the life insurance policy |
benefits have been irrevocably assigned shall retain |
copies for inspection by the Comptroller and shall report |
annually to the Comptroller the following: the name of the |
insured, the name of the insurance company and policy |
number, an itemized account of the amount of the contract |
for goods and services and any cash advances provided, and |
the current value of the policy of benefits designated |
with a record of all amounts paid back to the State or |
other beneficiary. The Department of Healthcare and Family |
Services shall adopt rules and forms to implement this |
Section. |
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(d) Notwithstanding any other provision of this Code to |
the contrary, an irrevocable trust containing the resources of |
a person who is determined to have a disability shall be |
considered exempt from consideration. A pooled trust must be |
established and managed by a non-profit association that pools |
funds but maintains a separate account for each beneficiary. |
The trust may be established by the person, a parent, |
grandparent, legal guardian, or court. It must be established |
for the sole benefit of the person and language contained in |
the trust shall stipulate that any amount remaining in the |
trust (up to the amount expended by the Department on medical |
assistance) that is not retained by the trust for reasonable |
administrative costs related to wrapping up the affairs of the |
subaccount shall be paid to the Department upon the death of |
the person. After a person reaches age 65, any funding by or on |
behalf of the person to the trust shall be treated as a |
transfer of assets for less than fair market value unless the |
person is a ward of a county public guardian or the State |
Guardian pursuant to Section 13-5 of the Probate Act of 1975 or |
Section 30 of the Guardianship and Advocacy Act and lives in |
the community, or the person is a ward of a county public |
guardian or the State Guardian pursuant to Section 13-5 of the |
Probate Act of 1975 or Section 30 of the Guardianship and |
Advocacy Act and a court has found that any expenditures from |
the trust will maintain or enhance the person's quality of |
life. If the trust contains proceeds from a personal injury |
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settlement, any Department charge must be satisfied in order |
for the transfer to the trust to be treated as a transfer for |
fair market value. |
(e) The homestead shall be exempt from consideration |
except to the extent
that it meets the income and shelter needs |
of the person. "Homestead"
means the dwelling house and |
contiguous real estate owned and occupied
by the person, |
regardless of its value. Subject to federal approval, a person |
shall not be eligible for long-term care services, however, if |
the person's equity interest in his or her homestead exceeds |
the minimum home equity as allowed and increased annually |
under federal law. Subject to federal approval, on and after |
the effective date of this amendatory Act of the 97th General |
Assembly, homestead property transferred to a trust shall no |
longer be considered homestead property.
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(f) Occasional or irregular gifts in cash, goods or |
services from persons
who are not legally responsible |
relatives which are of nominal value or
which do not have |
significant effect in meeting essential requirements
shall be |
disregarded. |
(g) The eligibility of any applicant for or recipient
of |
public aid under this Article is not affected by the payment of |
any
grant under the "Senior Citizens and Disabled Persons |
Property Tax
Relief Act" or any distributions or items of
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income described under subparagraph (X) of paragraph (2) of |
subsection (a) of
Section 203 of the Illinois Income Tax Act.
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(h) The Illinois Department may, after appropriate |
investigation, establish
and implement a consolidated standard |
to determine need and eligibility
for and amount of benefits |
under this Article or a uniform cash supplement
to the federal |
Supplemental Security Income program for all or any part
of |
the then current recipients under this Article; provided, |
however, that
the establishment or implementation of such a |
standard or supplement shall
not result in reductions in |
benefits under this Article for the then current
recipients of |
such benefits.
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(i) The provisions under paragraph (4) of subsection (c) |
are subject to federal approval. The Department of Healthcare |
and Family Services shall apply for any necessary federal |
waivers or approvals to implement by January 1, 2023 the |
changes made to this Section by this amendatory Act of the |
102nd General Assembly. |
(Source: P.A. 97-689, eff. 6-14-12; 98-104, eff. 7-22-13.)
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