Illinois General Assembly - Full Text of HB0295
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Full Text of HB0295  102nd General Assembly




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1    AN ACT concerning prepaid funeral or burial contracts.
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4    Section 5. The Illinois Insurance Code is amended by
5adding Section 245.3 as follows:
6    (215 ILCS 5/245.3 new)
7    Sec. 245.3. Irrevocable assignment of life insurance to a
8funeral home. An insured or any other person who may be the
9owner of rights under a policy of life insurance may make an
10irrevocable assignment of all or a part of his or her rights
11under the policy to a funeral home in accordance with Section
122b of the Illinois Funeral or Burial Funds Act and have an
13individual policy issued in accordance with paragraphs (G),
14(H), and (K) of Section 231.1. Subject to the terms of the
15policy or a contract relating to the policy, including, but
16not limited to, a prepaid funeral or burial contract, an
17irrevocable assignment by an insured or other owner of rights
18under a policy made before or after the effective date of this
19amendatory Act of the 102nd General Assembly is valid for the
20purpose of vesting in the assignee, in accordance with the
21policy or contract as to the time at which it is effective, all
22rights assigned. That irrevocable assignment is, however,
23without prejudice to the company on account of any payment it



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1makes or individual policy it issues in accordance with
2paragraphs (G), (H), and (K) of Section 231.1 before receipt
3of notice of the assignment. The insurance company shall
4within 15 business days notify the funeral home and owner of
5the policy of its receipt of the form. A policy owner who
6executes a designation of beneficiary form pursuant to Section
72b of the Illinois Funeral or Burial Funds Act also
8irrevocably waives and cannot exercise the following rights:
9        (1) The right to collect from the insurance company
10    the net proceeds of the policy when it becomes a claim by
11    death.
12        (2) The right to surrender the policy and receive the
13    cash surrender value of the policy.
14        (3) The right to obtain a policy loan.
15        (4) The right to designate as primary beneficiary of
16    the policy anyone other than as provided in that Act.
17        (5) The right to collect or receive income,
18    distributions, or shares of surplus, dividend deposits,
19    refunds of premium, or additions to the policy.
20    This amendatory Act of the 102nd General Assembly
21acknowledges, declares, and codifies the existing right of
22assignment of interests under life insurance policies.
23    Section 10. The Illinois Funeral or Burial Funds Act is
24amended by changing Sections 1a and 2a and by by adding Section
252b as follows:



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1    (225 ILCS 45/1a)  (from Ch. 111 1/2, par. 73.101a)
2    Sec. 1a. For the purposes of this Act, the following terms
3shall have the meanings specified, unless the context clearly
4requires another meaning:
5    "Beneficiary" means the person specified in the pre-need
6contract upon whose death funeral services or merchandise
7shall be provided or delivered.
8    "Burial spaces" has the meaning ascribed to that term in
920 CFR 416.1231.
10    "Licensee" means a seller of a pre-need contract who has
11been licensed by the Comptroller under this Act.
12    "Outer burial container" means any container made of
13concrete, steel, wood, fiberglass or similar material, used
14solely at the interment site, and designed and used
15exclusively to surround or enclose a separate casket and to
16support the earth above such casket, commonly known as a
17burial vault, grave box or grave liner, but not including a
18lawn crypt as defined in the Illinois Pre-need Cemetery Sales
20    "Parent company" means a corporation owning more than 12
21cemeteries or funeral homes in more than one state.
22    "Person" means any person, partnership, association,
23corporation, or other entity.
24    "Pre-need contract" means any agreement or contract, or
25any series or combination of agreements or contracts, whether



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1funded by trust deposits or life insurance policies or
2annuities, which has for a purpose the furnishing or
3performance of funeral services or the furnishing or delivery
4of any personal property, merchandise, or services of any
5nature in connection with the final disposition of a dead
6human body. Nothing in this Act is intended to regulate the
7content of a life insurance policy or a tax-deferred annuity.
8    "Provider" means a person who is obligated for furnishing
9or performing funeral services or the furnishing or delivery
10of any personal property, merchandise, or services of any
11nature in connection with the final disposition of a dead
12human body.
13    "Purchaser" means the person who originally paid the money
14under or in connection with a pre-need contract.
15    "Sales proceeds" means the entire amount paid to a seller,
16exclusive of sales taxes paid by the seller, finance charges
17paid by the purchaser, and credit life, accident or disability
18insurance premiums, upon any agreement or contract, or series
19or combination of agreements or contracts, for the purpose of
20performing funeral services or furnishing personal property,
21merchandise, or services of any nature in connection with the
22final disposition of a dead human body, including, but not
23limited to, the retail price paid for such services and
24personal property and merchandise.
25    "Purchase price" means sales proceeds less finance charges
26on retail installment contracts.



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1    "Seller" means the person who sells or offers to sell the
2pre-need contract to a purchaser, whether funded by a trust
3agreement, life insurance policy, or tax-deferred annuity.
4    "Trustee" means a person authorized to hold funds under
5this Act.
6(Source: P.A. 92-419, eff. 1-1-02.)
7    (225 ILCS 45/2a)
8    Sec. 2a. Purchase of insurance or annuity.
9    (a) If a purchaser selects the purchase of a life
10insurance policy or tax-deferred annuity contract to fund the
11pre-need contract, the application and collected premium shall
12be mailed within 30 days of signing the pre-need contract.
13    (b) If life insurance or an annuity is used to fund a
14pre-need contract, the seller or provider shall not be named
15as the owner or beneficiary of the policy or annuity. No person
16whose only insurable interest in the insured is the receipt of
17proceeds from the policy or in naming who shall receive the
18proceeds nor any trust acting on behalf of such person or
19seller or provider shall be named as owner or beneficiary of
20the policy or annuity.
21    (c) Nothing shall prohibit the purchaser from irrevocably
22assigning ownership of the policy or annuity used to fund a
23guaranteed price pre-need contract to a person or trust or
24from irrevocably assigning the benefits of the policy or
25annuity to a funeral home for the purpose of obtaining



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1favorable consideration for Medicaid, Supplemental Security
2Income, or another public assistance program, as permitted
3under federal law. The seller or contract provider may be
4named a nominal owner of the life insurance policy only for
5such time as it takes to immediately transfer the policy into a
6trust. Except for this purpose, neither the seller nor the
7contract provider shall be named the owner or the beneficiary
8of the policy or annuity.
9    (d) If a life insurance policy or annuity contract is used
10to fund a pre-need contract, except for guaranteed price
11contracts permitted in Section 4(a) of this Act, the pre-need
12contract must be revocable, and any assignment provision in
13the pre-need contract must contain the following disclosure in
1412 point bold type:
23    (e) Sales proceeds shall not be used to purchase life
24insurance policies or tax-deferred annuities unless the
25company issuing the life insurance policies or tax-deferred
26annuities is licensed with the Illinois Department of



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1Insurance, and the insurance producer or annuity seller is
2licensed to do business in the State of Illinois.
3(Source: P.A. 92-419, eff. 1-1-02.)
4    (225 ILCS 45/2b new)
5    Sec. 2b. Irrevocable designation of beneficiary of
6existing whole life insurance.
7    (a) In accordance with Section 245.3 of the Illinois
8Insurance Code, an insured or any other person who may be the
9owner of rights under an existing policy of whole life
10insurance may make an irrevocable assignment of all or a part
11of his or her rights under the policy to a provider in
12consideration for signing a guaranteed pre-need contract for
13the purpose of obtaining favorable consideration for Medicaid,
14Supplemental Security Income, or another public assistance
15program. The form prepared by the Department of Healthcare and
16Family Services under paragraph (4) of subsection (c) of
17Section 3-1.2 of the Illinois Public Aid Code or by the
18insurance company shall provide for an irrevocable designation
19of beneficiary of one or more life insurance policies. The
20insured or any other person who may be the owner of rights
21under an existing policy of whole life insurance shall sign a
22guaranteed pre-need contract with the provider that describes
23the cost of the funeral goods and services to be provided upon
24the person's death, up to $6,774, in addition to the purchase
25of burial spaces. This amount shall be adjusted annually by



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1the Department of Human Services for any increase in the
2Consumer Price Index. The guaranteed pre-need contract must
3provide a complete description and cost of the funeral goods
4and services including burial spaces. More than one policy may
5be subject to this Section if the total face value of the
6policies is necessary to pay the amount described in the
7guaranteed pre-need contract with the provider. All policies
8shall be listed on the form. The insured or any other person
9who may be the owner of rights under an existing policy of
10whole life insurance shall be given a copy of the executed
11form. The licensee shall retain copies for inspection by the
12Comptroller and shall report annually to the Comptroller the
13following: the name of the insured, the insurance policy
14number, the amount of the guaranteed pre-need contract, the
15current value of the policy or benefits designated, and the
16name of the insurance company issuing the policy.
17    (b) The insured or any other person who may be the owner of
18rights under an existing policy of whole life insurance shall
19acknowledge that by making this assignment irrevocable, the
20policy cannot be cancelled, although it does not affect the
21right of the policy owner to cancel the insurance policy
22within the examination period provided under the policy.
23    (c) Upon the death of the insured, the proceeds of the life
24insurance policies subject to this Section shall be paid to
25the provider, who shall apply such proceeds in the following
26order or priority:



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1        (1) first, to the provider in an amount equal to the
2    lesser of:
3            (A) the amount of the guaranteed pre-need
4        contract; or
5            (B) the actual value of the funeral and burial or
6        cemetery services and merchandise provided;
7        (2) second, to the State of Illinois, up to an amount
8    equal to the total medical assistance paid on behalf of
9    the insured; and
10        (3) third, payment of proceeds to a secondary
11    beneficiary (if any) listed on the policy, or to the
12    estate of the decedent if no secondary beneficiary is
13    named on the policy in the event the proceeds exceed the
14    lesser of the prearranged costs or actual value of the
15    funeral and burial or cemetery merchandise and services
16    provided and the total medical assistance paid on behalf
17    of the insured.
18    (d) The provider shall receive and disburse these proceeds
19notwithstanding any other prohibition in law against serving
20as a trustee.
21    (e) Further assignment. The rights and obligations of the
22provider subject to the irrevocable designation of beneficiary
23may be assigned to another provider upon the choice of the
24insured or the approved representative or the power of
25attorney for property of the insured, or upon the insolvency
26or bankruptcy of the provider. The assignee provider shall:



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1(i) be bound to the terms of the irrevocable designation of
2beneficiary; (ii) notify the insurance company or companies of
3the assignment; (iii) notify the Department of Healthcare and
4Family Services of the change in provider; and (iv) retain a
5copy of the assignment for inspection by the Comptroller.
6    Section 15. The Illinois Public Aid Code is amended by
7changing Section 3-1.2 as follows:
8    (305 ILCS 5/3-1.2)  (from Ch. 23, par. 3-1.2)
9    Sec. 3-1.2. Need.
10    (a) Income available to the person, when added to
11contributions in money, substance, or services from other
12sources, including contributions from legally responsible
13relatives, must be insufficient to equal the grant amount
14established by Department regulation for such person. In
15determining earned income to be taken into account,
16consideration shall be given to any expenses reasonably
17attributable to the earning of such income. If federal law or
18regulations permit or require exemption of earned or other
19income and resources, the Illinois Department shall provide by
20rule and regulation that the amount of income to be
21disregarded be increased (1) to the maximum extent so required
22and (2) to the maximum extent permitted by federal law or
23regulation in effect as of the date this amendatory Act
24becomes law. The Illinois Department may also provide by rule



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1and regulation that the amount of resources to be disregarded
2be increased to the maximum extent so permitted or required.
3    (b) Subject to federal approval, resources (for example,
4land, buildings, equipment, supplies, or tools), including
5farmland property and personal property used in the
6income-producing operations related to the farmland (for
7example, equipment and supplies, motor vehicles, or tools),
8necessary for self-support, up to $6,000 of the person's
9equity in the income-producing property, provided that the
10property produces a net annual income of at least 6% of the
11excluded equity value of the property, are exempt. Equity
12value in excess of $6,000 shall not be excluded. If the
13activity produces income that is less than 6% of the exempt
14equity due to reasons beyond the person's control (for
15example, the person's illness or crop failure) and there is a
16reasonable expectation that the property will again produce
17income equal to or greater than 6% of the equity value (for
18example, a medical prognosis that the person is expected to
19respond to treatment or that drought-resistant corn will be
20planted), the equity value in the property up to $6,000 is
21exempt. If the person owns more than one piece of property and
22each produces income, each piece of property shall be looked
23at to determine whether the 6% rule is met, and then the
24amounts of the person's equity in all of those properties
25shall be totaled to determine whether the total equity is
26$6,000 or less. The total equity value of all properties that



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1is exempt shall be limited to $6,000.
2    (c) In determining the resources of an individual or any
3dependents, the Department shall exclude from consideration
4the value of funeral and burial spaces, funeral and burial
5insurance the proceeds of which can only be used to pay the
6funeral and burial expenses of the insured and funds
7specifically set aside for the funeral and burial arrangements
8of the individual or his or her dependents, including prepaid
9funeral and burial plans, to the same extent that such items
10are excluded from consideration under the federal Supplemental
11Security Income program (SSI). At any time after submitting an
12application for medical assistance and before a final
13determination of eligibility has been made by the Department,
14an applicant may use available resources to purchase one of
15the prepaid funeral or burial contracts exempted under this
17    Prepaid funeral or burial contracts are exempt to the
18following extent:
19        (1) Funds in a revocable prepaid funeral or burial
20    contract are exempt up to $1,500, except that any portion
21    of a contract that clearly represents the purchase of
22    burial space, as that term is defined for purposes of the
23    Supplemental Security Income program, is exempt regardless
24    of value.
25        (2) Funds in an irrevocable prepaid funeral or burial
26    contract are exempt up to $6,774 $5,874, except that any



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1    portion of a contract that clearly represents the purchase
2    of burial space, as that term is defined for purposes of
3    the Supplemental Security Income program, is exempt
4    regardless of value. This amount shall be adjusted
5    annually for any increase in the Consumer Price Index. The
6    amount exempted shall be limited to the price of the
7    funeral goods and services to be provided upon death. The
8    contract must provide a complete description of the
9    funeral goods and services to be provided and the price
10    thereof. Any amount in the contract not so specified shall
11    be treated as a transfer of assets for less than fair
12    market value.
13        (3) A prepaid, guaranteed-price funeral or burial
14    contract, funded by an irrevocable assignment of a
15    person's life insurance policy to a trust or a funeral
16    home, is exempt. The amount exempted shall be limited to
17    the amount of the insurance benefit designated for the
18    cost of the funeral goods and services to be provided upon
19    the person's death. The contract must provide a complete
20    description of the funeral goods and services to be
21    provided and the price thereof. Any amount in the contract
22    not so specified shall be treated as a transfer of assets
23    for less than fair market value. The trust must include a
24    statement that, upon the death of the person, the State
25    will receive all amounts remaining in the trust, including
26    any remaining payable proceeds under the insurance policy



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1    up to an amount equal to the total medical assistance paid
2    on behalf of the person. The trust is responsible for
3    ensuring that the provider of funeral services under the
4    contract receives the proceeds of the policy when it
5    provides the funeral goods and services specified under
6    the contract. The irrevocable assignment of ownership of
7    the insurance policy must be acknowledged by the insurance
8    company.
9        (4) Existing life insurance policies are exempt if
10    there has been an irrevocable declaration of proceeds at
11    the death of the insured in compliance with this
12    subsection. A person shall sign a contract with a funeral
13    home that describes the cost of the funeral goods and
14    services to be provided upon the person's death, up to
15    $6,774, in addition to the purchase of burial spaces. This
16    amount shall be adjusted annually for any increase in the
17    Consumer Price Index. The contract must provide a complete
18    description of the funeral goods and services and burial
19    spaces to be provided and the price thereof. The person
20    shall sign an irrevocable designation of beneficiary form
21    declaring that any amounts payable from the policies not
22    used for funeral goods and services or burial spaces as
23    set forth in the contract shall be received by the State,
24    up to an amount equal to the total medical assistance paid
25    on behalf of the person; any funds remaining after payment
26    to the State shall be paid to a secondary beneficiary (if



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1    any) listed on the policy, or to the estate of the
2    purchaser if no secondary beneficiary is named on the
3    policy in the event the proceeds exceed the prearranged
4    costs of the funeral home or cemetery merchandise and
5    services and the total medical assistance paid on behalf
6    of the insured. More than one policy may be subject to this
7    subsection if the total face value of the policies is
8    necessary to pay the amount described in the contract with
9    the funeral home; policies that are not necessary to pay
10    the amount described in the contract are not exempt. The
11    Department of Healthcare and Family Services shall adopt
12    rules and forms to implement this Section.
13    (d) Notwithstanding any other provision of this Code to
14the contrary, an irrevocable trust containing the resources of
15a person who is determined to have a disability shall be
16considered exempt from consideration. A pooled trust must be
17established and managed by a non-profit association that pools
18funds but maintains a separate account for each beneficiary.
19The trust may be established by the person, a parent,
20grandparent, legal guardian, or court. It must be established
21for the sole benefit of the person and language contained in
22the trust shall stipulate that any amount remaining in the
23trust (up to the amount expended by the Department on medical
24assistance) that is not retained by the trust for reasonable
25administrative costs related to wrapping up the affairs of the
26subaccount shall be paid to the Department upon the death of



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1the person. After a person reaches age 65, any funding by or on
2behalf of the person to the trust shall be treated as a
3transfer of assets for less than fair market value unless the
4person is a ward of a county public guardian or the State
5Guardian pursuant to Section 13-5 of the Probate Act of 1975 or
6Section 30 of the Guardianship and Advocacy Act and lives in
7the community, or the person is a ward of a county public
8guardian or the State Guardian pursuant to Section 13-5 of the
9Probate Act of 1975 or Section 30 of the Guardianship and
10Advocacy Act and a court has found that any expenditures from
11the trust will maintain or enhance the person's quality of
12life. If the trust contains proceeds from a personal injury
13settlement, any Department charge must be satisfied in order
14for the transfer to the trust to be treated as a transfer for
15fair market value.
16    (e) The homestead shall be exempt from consideration
17except to the extent that it meets the income and shelter needs
18of the person. "Homestead" means the dwelling house and
19contiguous real estate owned and occupied by the person,
20regardless of its value. Subject to federal approval, a person
21shall not be eligible for long-term care services, however, if
22the person's equity interest in his or her homestead exceeds
23the minimum home equity as allowed and increased annually
24under federal law. Subject to federal approval, on and after
25the effective date of this amendatory Act of the 97th General
26Assembly, homestead property transferred to a trust shall no



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1longer be considered homestead property.
2    (f) Occasional or irregular gifts in cash, goods or
3services from persons who are not legally responsible
4relatives which are of nominal value or which do not have
5significant effect in meeting essential requirements shall be
7    (g) The eligibility of any applicant for or recipient of
8public aid under this Article is not affected by the payment of
9any grant under the "Senior Citizens and Disabled Persons
10Property Tax Relief Act" or any distributions or items of
11income described under subparagraph (X) of paragraph (2) of
12subsection (a) of Section 203 of the Illinois Income Tax Act.
13    (h) The Illinois Department may, after appropriate
14investigation, establish and implement a consolidated standard
15to determine need and eligibility for and amount of benefits
16under this Article or a uniform cash supplement to the federal
17Supplemental Security Income program for all or any part of
18the then current recipients under this Article; provided,
19however, that the establishment or implementation of such a
20standard or supplement shall not result in reductions in
21benefits under this Article for the then current recipients of
22such benefits.
23(Source: P.A. 97-689, eff. 6-14-12; 98-104, eff. 7-22-13.)