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

HB4979 102ND GENERAL ASSEMBLY

  
  

 


 
102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022
HB4979

 

Introduced 1/27/2022, by Rep. Natalie A. Manley

 

SYNOPSIS AS INTRODUCED:
 
See Index

    Amends the Illinois Insurance Code. Provides that 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 a specified provision of the Illinois Funeral or Burial Funds Act. Provides that a policy owner who executes a designation beneficiary form irrevocably waives and cannot exercise certain rights. Amends the Illinois Funeral or Burial Funds Act. In a provision concerning pre-need contracts funded through the purchase of a life insurance policy or tax-deferred annuity contract, provides that nothing shall prohibit the purchaser from irrevocably assigning ownership of the policy or annuity 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. Requires the insured or any other person who may be the owner of rights under the policy of whole life insurance to sign a guaranteed pre-need contract with the provider that describes the cost of the goods and services to be provided upon the person's death, up to $6,774, except that any portion of a contract that clearly represents the purchase of burial space is exempt regardless of value. Amends the Medical Assistance Article of the Illinois Public Aid Code. In a provision requiring the Department of Healthcare and Family Services to exempt certain prepaid funeral or burial contracts from consideration when making an eligibility determination for medical assistance, provides that at any time after submitting an application for medical assistance and before the Department makes a final determination of eligibility, an applicant may use available resources to purchase one of the exempted prepaid funeral or burial contracts. Exempts up to $6,774 (rather than $5,874) in funds under an irrevocable prepaid funeral or burial contract when determining an individual's resources and eligibility for medical assistance. Contains provisions concerning exemptions; irrevocable designation of beneficiary forms; and other matters.


LRB102 22458 KTG 31598 b

 

 

A BILL FOR

 

HB4979LRB102 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 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 Section 2a and by adding Section 2b as
25follows:
 

 

 

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1    (225 ILCS 45/2a)
2    Sec. 2a. Purchase of insurance or annuity.
3    (a) If a purchaser selects the purchase of a life
4insurance policy or tax-deferred annuity contract to fund the
5pre-need contract, the application and collected premium shall
6be mailed within 30 days of signing the pre-need contract.
7    (b) If life insurance or an annuity is used to fund a
8pre-need contract, the seller or provider shall not be named
9as the owner or beneficiary of the policy or annuity. No person
10whose only insurable interest in the insured is the receipt of
11proceeds from the policy or in naming who shall receive the
12proceeds nor any trust acting on behalf of such person or
13seller or provider shall be named as owner or beneficiary of
14the policy or annuity.
15    (c) Nothing shall prohibit the purchaser from irrevocably
16assigning ownership of the policy or annuity used to fund a
17guaranteed price pre-need contract to a person or trust or
18from irrevocably assigning the benefits of the policy or
19annuity to a funeral home for the purpose of obtaining
20favorable consideration for Medicaid, Supplemental Security
21Income, or another public assistance program, as permitted
22under federal law. The seller or contract provider may be
23named a nominal owner of the life insurance policy only for
24such time as it takes to immediately transfer the policy into a
25trust. Except for this purpose, neither the seller nor the

 

 

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

 

 

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1existing whole life insurance.
2    (a) In accordance with Section 245.3 of the Illinois
3Insurance Code, an insured or any other person who may be the
4owner of rights under an existing policy of whole life
5insurance may make an irrevocable assignment of all or a part
6of his or her rights under the policy to a provider in
7consideration for signing a guaranteed pre-need contract for
8the purpose of obtaining favorable consideration for Medicaid,
9Supplemental Security Income, or another public assistance
10program. The form prepared by the Department of Healthcare and
11Family Services under paragraph (4) of subsection (c) of
12Section 3-1.2 of the Illinois Public Aid Code or by the
13insurance company shall provide for an irrevocable designation
14of beneficiary of one or more life insurance policies. The
15insured or any other person who may be the owner of rights
16under an existing policy of whole life insurance shall sign a
17guaranteed pre-need contract with the provider that describes
18the cost of the funeral goods and services to be provided upon
19the person's death, up to $6,774, except that any portion of a
20contract that clearly represents the purchase of burial space,
21as that term is defined for purposes of the Supplemental
22Security Income program, is exempt regardless of value. This
23amount shall be adjusted annually by the Department of Human
24Services for any increase in the Consumer Price Index. The
25guaranteed pre-need contract must provide a complete
26description and cost of the goods and services. More than one

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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

 

 

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1    annually for any increase in the Consumer Price Index. The
2    amount exempted shall be limited to the price of the
3    funeral goods and services to be provided upon death. The
4    contract must provide a complete description of the
5    funeral goods and services to be provided and the price
6    thereof. Any amount in the contract not so specified shall
7    be treated as a transfer of assets for less than fair
8    market value.
9        (3) A prepaid, guaranteed-price funeral or burial
10    contract, funded by an irrevocable assignment of a
11    person's life insurance policy to a trust or a funeral
12    home, is exempt. The amount exempted shall be limited to
13    the amount of the insurance benefit designated for the
14    cost of the funeral goods and services to be provided upon
15    the person's death. The contract must provide a complete
16    description of the funeral goods and services to be
17    provided and the price thereof. Any amount in the contract
18    not so specified shall be treated as a transfer of assets
19    for less than fair market value. The trust must include a
20    statement that, upon the death of the person, the State
21    will receive all amounts remaining in the trust, including
22    any remaining payable proceeds under the insurance policy
23    up to an amount equal to the total medical assistance paid
24    on behalf of the person. The trust is responsible for
25    ensuring that the provider of funeral services under the
26    contract receives the proceeds of the policy when it

 

 

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1    provides the funeral goods and services specified under
2    the contract. The irrevocable assignment of ownership of
3    the insurance policy must be acknowledged by the insurance
4    company.
5        (4) Existing life insurance policies are exempt if
6    there has been an irrevocable declaration of proceeds at
7    the death of the insured in compliance with this
8    subsection. A person shall sign a contract with a funeral
9    home that describes the cost of the funeral goods and
10    services to be provided upon the person's death, up to
11    $6,774, except that any portion of a contract that clearly
12    represents the purchase of burial space, as that term is
13    defined for purposes of the Supplemental Security Income
14    program, is exempt regardless of value. This amount shall
15    be adjusted annually for any increase in the Consumer
16    Price Index. The contract must provide a complete
17    description of the goods and services to be provided and
18    the price thereof. The person shall sign an irrevocable
19    designation of beneficiary form declaring that any amounts
20    payable from the policies not used for goods and services
21    as set forth in the contract shall be received by the
22    State, up to an amount equal to the total medical
23    assistance paid on behalf of the person; any funds
24    remaining after payment to the State shall be paid to a
25    secondary beneficiary (if any) listed on the policy, or to
26    the estate of the purchaser if no secondary beneficiary is

 

 

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1    named on the policy in the event the proceeds exceed the
2    prearranged costs of merchandise and services and the
3    total medical assistance paid on behalf of the insured.
4    More than one policy may be subject to this subsection if
5    the total face value of the policies is necessary to pay
6    the amount described in the contract with the funeral
7    home; policies that are not necessary to pay the amount
8    described in the contract are not exempt. The Department
9    of Healthcare and Family Services shall adopt rules and
10    forms to implement this Section.
11    (d) Notwithstanding any other provision of this Code to
12the contrary, an irrevocable trust containing the resources of
13a person who is determined to have a disability shall be
14considered exempt from consideration. A pooled trust must be
15established and managed by a non-profit association that pools
16funds but maintains a separate account for each beneficiary.
17The trust may be established by the person, a parent,
18grandparent, legal guardian, or court. It must be established
19for the sole benefit of the person and language contained in
20the trust shall stipulate that any amount remaining in the
21trust (up to the amount expended by the Department on medical
22assistance) that is not retained by the trust for reasonable
23administrative costs related to wrapping up the affairs of the
24subaccount shall be paid to the Department upon the death of
25the person. After a person reaches age 65, any funding by or on
26behalf of the person to the trust shall be treated as a

 

 

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

 

 

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

 

 

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1 INDEX
2 Statutes amended in order of appearance
3    215 ILCS 5/245.3 new
4    225 ILCS 45/2a
5    225 ILCS 45/2b new
6    305 ILCS 5/3-1.2from Ch. 23, par. 3-1.2