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225 ILCS 45/2b
(225 ILCS 45/2b)
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
(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.
(Source: P.A. 102-959, eff. 5-27-22.)