Illinois General Assembly - Full Text of HB4979
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Full Text of HB4979  102nd General Assembly

HB4979enr 102ND GENERAL ASSEMBLY

  
  
  

 


 
HB4979 EnrolledLRB102 22458 KTG 31598 b

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. Subject to the
13terms of the policy or a contract relating to the policy,
14including, but not limited to, a prepaid funeral or burial
15contract, an irrevocable assignment by an insured or other
16owner of rights under a policy made before or after the
17effective date of this amendatory Act of the 102nd General
18Assembly is valid for the purpose of vesting in the assignee,
19in accordance with the policy or contract as to the time at
20which it is effective, all rights assigned. That irrevocable
21assignment is, however, without prejudice to the company on
22account of any payment it makes. The insurance company shall
23within 15 business days notify the funeral home and owner of

 

 

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1the policy of its receipt of the form. A policy owner who
2executes a designation of beneficiary form pursuant to Section
32b of the Illinois Funeral or Burial Funds Act also
4irrevocably waives and cannot exercise the following rights:
5        (1) The right to collect from the insurance company
6    the net proceeds of the policy when it becomes a claim by
7    death.
8        (2) The right to surrender the policy and receive the
9    cash surrender value of the policy.
10        (3) The right to obtain a policy loan.
11        (4) The right to designate as primary beneficiary of
12    the policy anyone other than as provided in that Act.
13        (5) The right to collect or receive income,
14    distributions, or shares of surplus, dividend deposits,
15    refunds of premium, or additions to the policy.
16    This amendatory Act of the 102nd General Assembly
17acknowledges, declares, and codifies the existing right of
18assignment of interests under life insurance policies.
 
19    Section 10. The Illinois Funeral or Burial Funds Act is
20amended by changing Section 2a and by adding Section 2b as
21follows:
 
22    (225 ILCS 45/2a)
23    Sec. 2a. Purchase of insurance or annuity.
24    (a) If a purchaser selects the purchase of a life

 

 

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1insurance policy or tax-deferred annuity contract to fund the
2pre-need contract, the application and collected premium shall
3be mailed within 30 days of signing the pre-need contract.
4    (b) If life insurance or an annuity is used to fund a
5pre-need contract, the seller or provider shall not be named
6as the owner or beneficiary of the policy or annuity. No person
7whose only insurable interest in the insured is the receipt of
8proceeds from the policy or in naming who shall receive the
9proceeds nor any trust acting on behalf of such person or
10seller or provider shall be named as owner or beneficiary of
11the policy or annuity.
12    (c) Nothing shall prohibit the purchaser from irrevocably
13assigning ownership of the policy or annuity used to fund a
14guaranteed price pre-need contract to a person or trust or
15from irrevocably assigning the benefits of the policy or
16annuity to a funeral home for the purpose of obtaining
17favorable consideration for Medicaid, Supplemental Security
18Income, or another public assistance program, as permitted
19under federal law. The seller or contract provider may be
20named a nominal owner of the life insurance policy only for
21such time as it takes to immediately transfer the policy into a
22trust. Except for this purpose, neither the seller nor the
23contract provider shall be named the owner or the beneficiary
24of the policy or annuity.
25    (d) If a life insurance policy or annuity contract is used
26to fund a pre-need contract, except for guaranteed price

 

 

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1contracts permitted in Section 4(a) of this Act, the pre-need
2contract must be revocable, and any assignment provision in
3the pre-need contract must contain the following disclosure in
412 point bold type:
5    THIS ASSIGNMENT MAY BE REVOKED BY THE ASSIGNOR OR
6ASSIGNOR'S SUCCESSOR OR, IF THE ASSIGNOR IS ALSO THE INSURED
7AND DECEASED, BY THE REPRESENTATIVE OF THE INSURED'S ESTATE
8BEFORE THE RENDERING TO THE CEMETERY SERVICES OR GOODS OR
9FUNERAL SERVICES OR GOODS. IF THE ASSIGNMENT IS REVOKED, THE
10DEATH BENEFIT UNDER THE LIFE INSURANCE POLICY OR ANNUITY
11CONTRACT SHALL BE PAID IN ACCORDANCE WITH THE BENEFICIARY
12DESIGNATION UNDER THE INSURANCE POLICY OR ANNUITY CONTRACT.
13    (e) Sales proceeds shall not be used to purchase life
14insurance policies or tax-deferred annuities unless the
15company issuing the life insurance policies or tax-deferred
16annuities is licensed with the Illinois Department of
17Insurance, and the insurance producer or annuity seller is
18licensed to do business in the State of Illinois.
19(Source: P.A. 92-419, eff. 1-1-02.)
 
20    (225 ILCS 45/2b new)
21    Sec. 2b. Irrevocable designation of beneficiary of
22existing life insurance.
23    (a) In accordance with Section 245.3 of the Illinois
24Insurance Code, an insured or any other person who may be the
25owner of rights under an existing policy of life insurance may

 

 

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1make an irrevocable assignment of all or a part of his or her
2rights under the policy to a provider in consideration for
3signing a guaranteed pre-need contract for the purpose of
4obtaining favorable consideration for Medicaid, Supplemental
5Security Income, or another public assistance program. The
6form that shall effectuate the irrevocable assignment and
7thereby provide for the irrevocable designation of beneficiary
8of one or more life insurance policies, which shall comply
9with all applicable federal laws and regulations, shall be
10prepared by the Department of Healthcare and Family Services
11under paragraph (4) of subsection (c) of Section 3-1.2 of the
12Illinois Public Aid Code or such form, approved in advance by
13the Department of Healthcare and Family Services, that has
14been prepared by an insurance company licensed to operate in
15the State of Illinois. The insured or any other person who may
16be the owner of rights under an existing policy of life
17insurance shall sign a guaranteed pre-need contract with the
18provider that describes the cost of the funeral goods and
19services to be provided upon the person's death, up to $7,248,
20except that any portion of a contract that clearly represents
21the purchase of burial space, as that term is defined for
22purposes of the Supplemental Security Income program, is
23exempt regardless of value. This amount shall be adjusted
24annually by the Department of Human Services for any increase
25in the Consumer Price Index. The guaranteed pre-need contract
26must provide a complete description and cost of the goods and

 

 

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1services and any cash advances. More than one policy may be
2subject to this Section if the total face value of the policies
3is necessary to pay the amount described in the guaranteed
4pre-need contract with the provider. All policies shall be
5listed on the form. The insured or any other person who may be
6the owner of rights under an existing policy of life insurance
7shall be given a copy of the executed form. The licensee shall
8retain copies for inspection by the Comptroller and shall
9report annually to the Comptroller the following: the name of
10the insured, the insurance policy number, the amount of the
11guaranteed pre-need contract, the current value of the policy
12or benefits designated, and the name of the insurance company
13issuing the policy.
14    (b) The insured or any other person who may be the owner of
15rights under an existing policy of life insurance shall
16acknowledge that by making this assignment irrevocable, the
17policy cannot be canceled, although it does not affect the
18right of the policy owner to cancel the insurance policy
19within the examination period provided under the policy.
20    (c) No commission may be sought or received in connection
21with any cash advance allowance included in the guaranteed
22pre-need contract.
23    (d) For guaranteed pre-need contracts with cash advances,
24the contract shall include a disclosure, in 12 point bold type
25and located immediately above such cash advance allowance,
26that states: "No interment, inurnment, or entombment right has

 

 

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1been selected or reserved with this allowance; cash advances
2are merely an allowance toward the then-current costs for the
3involved items, to be purchased after death. Burial space
4allowances may only be excluded from resources under Medicaid
5if a separate contract is executed for such burial space with a
6cemetery."
7    (e) Upon the death of the insured, the proceeds of the life
8insurance policies subject to this Section shall be paid to
9the provider, who shall apply such proceeds in the following
10order or priority:
11        (1) first, to the provider in an amount equal to the
12    lesser of:
13            (A) the amount of the guaranteed pre-need contract
14        for payment of all services, goods, and cash advances
15        in the amounts indicated on the pre-need contract; or
16            (B) the actual value of the services, goods, and
17        cash advances, not to exceed the amounts indicated in
18        the pre-need contract;
19        (2) second, to the State of Illinois, up to an amount
20    equal to the total medical assistance paid on behalf of
21    the insured; and
22        (3) third, payment of proceeds to a secondary
23    beneficiary (if any) listed on the policy, or to the
24    estate of the decedent if no secondary beneficiary is
25    named on the policy in the event the proceeds exceed the
26    amount of the pre-need contract for payment of all

 

 

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1    services, goods and cash advances in the amounts indicated
2    on the pre-need contract and the total medical assistance
3    paid on behalf of the insured.
4    (f) The provider shall receive and disburse these proceeds
5notwithstanding any other prohibition in law against serving
6as a trustee. The provider shall promptly deposit these funds
7into a non-interest bearing checking or share account that has
8been established to receive proceeds of this type. These
9proceeds shall not be commingled with any other account of the
10provider. The account may contain the funds of more than one
11client. The provider may disburse these funds to itself for
12goods and services. The provider shall maintain a ledger
13indicating the amount of proceeds received and the
14disbursement of those proceeds. A copy of this ledger shall be
15provided to the Comptroller and the Department of Healthcare
16and Family Services, and to the estate or heirs of the insured,
17as applicable, if requested by them. For the purpose of this
18Section, the providers who receive and disburse these proceeds
19from life insurance policies shall be funeral homes.
20    (g) Further assignment. The rights and obligations of the
21provider subject to the irrevocable designation of beneficiary
22may be assigned to another provider upon the choice of the
23insured or the approved representative or the power of
24attorney for property of the insured, or upon the insolvency
25or bankruptcy of the provider. The assignee provider shall:
26(i) be bound to the terms of the irrevocable designation of

 

 

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1beneficiary and the associated guaranteed pre-need contract;
2(ii) notify the insurance company or companies of the
3assignment; (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 prior to or after
12submitting an application for medical assistance and before a
13final determination of eligibility has been made by the
14Department, an applicant may use available resources to
15purchase one of the prepaid funeral or burial contracts
16exempted under this Section.
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 $7,248 $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 assignment in compliance
11    with Section 2b of the Illinois Funeral or Burial Funds
12    Act. A person shall sign a contract with a funeral home,
13    which is licensed under the Illinois Funeral or Burial
14    Funds Act, that describes the cost of the funeral goods
15    and services to be provided upon the person's death, up to
16    $7,248, except that any portion of a contract that clearly
17    represents the purchase of burial space, as that term is
18    defined for purposes of the Supplemental Security Income
19    program, is exempt regardless of value. This amount shall
20    be adjusted annually for any increase in the Consumer
21    Price Index. The contract must provide a complete
22    description of the goods and services and any cash
23    advances to be provided and the price thereof. The person
24    shall sign an irrevocable designation of beneficiary form
25    declaring that any amounts payable from the policies not
26    used for goods and services and any cash advances as set

 

 

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1    forth in the contract shall be received by the State, up to
2    an amount equal to the total medical assistance paid on
3    behalf of the person; any funds remaining after payment to
4    the State shall be paid to a secondary beneficiary (if
5    any) listed on the policy, or to the estate of the
6    purchaser if no secondary beneficiary is named on the
7    policy in the event the proceeds exceed the prearranged
8    costs of merchandise and services and any cash advances
9    and the total medical assistance paid on behalf of the
10    insured. More than one policy may be subject to this
11    subsection if the total face value of the policies is
12    necessary to pay the amount described in the contract with
13    the funeral home; policies that are not necessary to pay
14    the amount described in the contract are not exempt. The
15    licensed funeral home to which the life insurance policy
16    benefits have been irrevocably assigned shall retain
17    copies for inspection by the Comptroller and shall report
18    annually to the Comptroller the following: the name of the
19    insured, the name of the insurance company and policy
20    number, an itemized account of the amount of the contract
21    for goods and services and any cash advances provided, and
22    the current value of the policy of benefits designated
23    with a record of all amounts paid back to the State or
24    other beneficiary. The Department of Healthcare and Family
25    Services shall adopt rules and forms to implement this
26    Section.

 

 

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1    (d) Notwithstanding any other provision of this Code to
2the contrary, an irrevocable trust containing the resources of
3a person who is determined to have a disability shall be
4considered exempt from consideration. A pooled trust must be
5established and managed by a non-profit association that pools
6funds but maintains a separate account for each beneficiary.
7The trust may be established by the person, a parent,
8grandparent, legal guardian, or court. It must be established
9for the sole benefit of the person and language contained in
10the trust shall stipulate that any amount remaining in the
11trust (up to the amount expended by the Department on medical
12assistance) that is not retained by the trust for reasonable
13administrative costs related to wrapping up the affairs of the
14subaccount shall be paid to the Department upon the death of
15the person. After a person reaches age 65, any funding by or on
16behalf of the person to the trust shall be treated as a
17transfer of assets for less than fair market value unless the
18person is a ward of a county public guardian or the State
19Guardian pursuant to Section 13-5 of the Probate Act of 1975 or
20Section 30 of the Guardianship and Advocacy Act and lives in
21the community, or the person is a ward of a county public
22guardian or the State Guardian pursuant to Section 13-5 of the
23Probate Act of 1975 or Section 30 of the Guardianship and
24Advocacy Act and a court has found that any expenditures from
25the trust will maintain or enhance the person's quality of
26life. If the trust contains proceeds from a personal injury

 

 

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1settlement, any Department charge must be satisfied in order
2for the transfer to the trust to be treated as a transfer for
3fair market value.
4    (e) The homestead shall be exempt from consideration
5except to the extent that it meets the income and shelter needs
6of the person. "Homestead" means the dwelling house and
7contiguous real estate owned and occupied by the person,
8regardless of its value. Subject to federal approval, a person
9shall not be eligible for long-term care services, however, if
10the person's equity interest in his or her homestead exceeds
11the minimum home equity as allowed and increased annually
12under federal law. Subject to federal approval, on and after
13the effective date of this amendatory Act of the 97th General
14Assembly, homestead property transferred to a trust shall no
15longer be considered homestead property.
16    (f) Occasional or irregular gifts in cash, goods or
17services from persons who are not legally responsible
18relatives which are of nominal value or which do not have
19significant effect in meeting essential requirements shall be
20disregarded.
21    (g) The eligibility of any applicant for or recipient of
22public aid under this Article is not affected by the payment of
23any grant under the "Senior Citizens and Disabled Persons
24Property Tax Relief Act" or any distributions or items of
25income described under subparagraph (X) of paragraph (2) of
26subsection (a) of Section 203 of the Illinois Income Tax Act.

 

 

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1    (h) The Illinois Department may, after appropriate
2investigation, establish and implement a consolidated standard
3to determine need and eligibility for and amount of benefits
4under this Article or a uniform cash supplement to the federal
5Supplemental Security Income program for all or any part of
6the then current recipients under this Article; provided,
7however, that the establishment or implementation of such a
8standard or supplement shall not result in reductions in
9benefits under this Article for the then current recipients of
10such benefits.
11    (i) The provisions under paragraph (4) of subsection (c)
12are subject to federal approval. The Department of Healthcare
13and Family Services shall apply for any necessary federal
14waivers or approvals to implement by January 1, 2023 the
15changes made to this Section by this amendatory Act of the
16102nd General Assembly.
17(Source: P.A. 97-689, eff. 6-14-12; 98-104, eff. 7-22-13.)
 
18    Section 99. Effective date. This Act takes effect upon
19becoming law.