Authorizes the creation of irrevocable trust accounts for funeral and burial expenses

Summary of specific provisions

Amends Subparagraph (d) of Subdivision 1, Subparagraph (f) of Subdivision 3 and Subparagraph (g) of Subdivision 3 of Section 453 of the General Business law, as well as Subdivision 6 of Section 141 and Subsection 6 of Section 209 of the Social Services Law. The bill would:

* Ensure that all funds placed in pre-need accounts that are opened by a Medicaid/55 applicant or recipient for the eventual use by their family members would actually be used for this purpose.

* Provide that this requirement is incorporated in the current legal disclosures that must be included in all irrevocable pre-need funeral agreements.

* Similarly provide that this new family member provision is incorpo- rated in the current requirement that relates to the language contained in promotional literature dealing with irrevocable funeral/burial accounts.

* Ensure consistency with current law by clarifying that any funds remaining in an irrevocable account after the payment of all funeral/burial expenses will be transmitted to the social services offi- cial of the county or, as appropriate, other local government subdivi- sion where the person opening the account resided at the time of their death.

* The Amendment to this bill changes the date when this law would apply for all funeral/burial accounts established on or after January 1, 2011 (instead of 2010), the effective date of the bill.

Justification

New York State law has long afforded individuals the option to pay their funeral/burial costs in advance by formally estab- lishing what are known as "pre-need accounts". These accounts are strictly regulated and appropriately provide the consumer with various rights and disclosures in relation to the funds he or she has deposited for this sole purpose. Indeed, consumers are choosing to do so more often for their own peace of mind as well as to spare their loved ones an additional burden at an emotionally wrenching time.

Current law requires that these accounts must be established as "revoca- ble trusts", but requires that they be "irrevocable trusts" in nature if opened by an individual who is an applicant for or recipient of Medicaid or SSI to pay their own funeral/burial expenses.

Recently, however, a growing trend has become apparent where Medicaid/SSI applicants or clients are establishing pre-need funeral accounts for the benefit of their family members as part of the "spend- down" process so they become eligible for Medicaid/SSI. (Because the family member beneficiary was not a Medicaid/SST applicant or recipient, the account, by law must be revocable.)

However, it has been discovered that, in these particular cases, almost all of these pre-need accounts were immediately closed once the person who had opened them (the "purchaser") died. This reflects the fact that this practice is increasingly being encouraged as simply a tool for a person to spend-down their assets for Medicaid eligibility, but without any intent whatsoever to actually use these pre-need funds to pay the funeral and burial expenses of the purchaser's family member(s). In essence, funeral directors' time is increasingly being used to make funeral pre-arrangements and establish pre-need accounts that were ostensibly opened to help family members, but, in reality, are never going to be used for that purpose.

This bill is simply intended to deter this practice by making irrev- ocable all pre-need funeral accounts established and funded by an applicant/recipient of Medicaid or SSI for a family member (as defined in Federal Medicaid program guidelines). In this way, the funds' use would be restricted to its proper purpose. It is hoped that then only those individuals with the true intention of establishing pre-need accounts to pay funeral and burial expenses would actually do so.

Notably, this bill would not in any way impact the rights of a funeral consumer or the legal protections afforded his or her pre-need funds. New York State is second-to-none when it comes to protecting our consum- ers in this area, and should take great pride in this achievement and standing.

Legislative history

New Bill.

Fiscal implications

Should result in some Medicaid cost savings for the State and counties, which will also receive the balance of any funds remaining in an "irrevocable family member account".

Effective date

This act shall take effect on the January next succeed- ing the date when it shall have become law.