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Public Act 102-0959


 

Public Act 0959 102ND GENERAL ASSEMBLY

  
  
  

 


 
Public Act 102-0959
 
HB4979 EnrolledLRB102 22458 KTG 31598 b

    AN ACT concerning prepaid funeral or burial contracts.
 
    Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
 
    Section 5. The Illinois Insurance Code is amended by
adding Section 245.3 as follows:
 
    (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
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.
 
    Section 10. The Illinois Funeral or Burial Funds Act is
amended by changing Section 2a and by adding Section 2b as
follows:
 
    (225 ILCS 45/2a)
    Sec. 2a. Purchase of insurance or annuity.
    (a) If a purchaser selects the purchase of a life
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.
    (b) If life insurance or an annuity is used to fund a
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
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.
    (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
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.
    (d) If a life insurance policy or annuity contract is used
to fund a pre-need contract, except for guaranteed price
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:
    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
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.
    (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
Insurance, and the insurance producer or annuity seller is
licensed to do business in the State of Illinois.
(Source: P.A. 92-419, eff. 1-1-02.)
 
    (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
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
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
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
    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
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.
 
    Section 15. The Illinois Public Aid Code is amended by
changing Section 3-1.2 as follows:
 
    (305 ILCS 5/3-1.2)  (from Ch. 23, par. 3-1.2)
    Sec. 3-1.2. Need.
    (a) Income available to the person, when added to
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
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
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
is exempt shall be limited to $6,000.
    (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
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:
        (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
    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
    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
    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.
    (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
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.
    (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
income described under subparagraph (X) of paragraph (2) of
subsection (a) of Section 203 of the Illinois Income Tax Act.
    (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.
    (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.)
 
    Section 99. Effective date. This Act takes effect upon
becoming law.

Effective Date: 5/27/2022