PART II: GENERAL RULES, REGULATIONS, AND ETHICAL PRACTICES OF ADVANCED FUNERAL PLANNING
Advanced planning and medicaid One factor that has contributed to the popularity of advanced funeral planning and preneed contracts is its relationship to Medicaid, the federal health program. Medicaid, which was passed in 1965, covers healthcare costs for low-income people—including senior citizens who receive it as a supplement to Medicare. Each state administers Medicaid differently: It creates its own rules yet still obeys federal guidelines. Some states further break Medicaid’s administration down by administering Medicaid on a county level. For purposes of Medicaid eligibility, certain assets are considered exempt. An exempt asset is one that does not count as a resource in the determination of whether or not an applicant is eligible for Medicaid. A person may continue to own exempt assets and receive Medicaid coverage for nursing home care. Certain types of assets commonly used for a funeral, cremation, or burial are exempt under Medicaid. For both Medicaid and SSI, certain types of funeral arrangements—including burial funds, prepaid funeral agreements, life insurance, and burial plots—are exempt Transferability In addition to losing money, the lack of transferability is the biggest problem preneed consumers report. As with every preneed aspect, state laws about transferability vary widely. Some states allow customers who move to another state to transfer funds, some do not; some allow the provider to charge for the service, some don’t. According to one article on the Maryland FCA’s website, a preneed consumer asked her provider what would happen if she died elsewhere. The provider answered, “around $1,500 to an outside funeral home to forward your body here, then Leftover money or a shortfall of money If the customer was on Medicaid, any leftover funds after the funeral go to Medicaid or to the decedent’s estate. Again, this is a state-by-state law. As of 1995, 12 states specified that the estate had to receive the money; many allowed the provider to retain it, some stated that it could be negotiated in the contract. If an individual lives in such a state, make State regulation of advanced funeral planning State advanced funeral planning regulations are not uniform. They may or may not address specific issues of concern to the consumer. Complicating matters, states use different bodies to regulate state policy and may not specify who does what. While states such as New York and Connecticut have strong laws that cover many aspects of the preneed process, the District of Columbia has no law. Other states, such as Alabama, have very weak laws. Furthermore, there’s no reliable guide to current laws; as a provider, it is essential to research and understand your state’s individual statutes. This fact further underscores the need for an attorney or a financial planner to look over a preneed contract. It also highlights the need for a funeral director to thoroughly understand his or her state’s rules and know how to look up the rules of another state if a customer dies there. Courts have proven that state advanced planning statutes are constitutional. In one case, a funeral service provider in West Virginia filed suit, arguing that the state statute regulating preneed contracts violated his constitutional right to free speech. He further claimed that the Funeral Rule preempted the state rule. The court held that the statute was constitutional because regulating advanced planning
from consideration as assets. In this way, an applicant can reduce his or her countable assets while also ensuring that his or her wishes about the planned funeral are respected. Unlike other asset transfers, a Medicaid applicant may set up a preneed trust before needing Medicaid. Customers in the past have typically requested traditional funerals, complete with embalming, casket, and funeral home services. Funeral conglomerates, in some cases, have been known to market these contracts aggressively. Many think advanced funeral planning works well in terms of Medicaid spend down. While some strongly advocate more consumer-friendly preneed requirements, existing research typically shows general satisfaction with most current regulations. Anecdotal evidence from respondents who represented state offices on aging, consumer advocacy groups, social service agencies, state attorneys general, and funeral directors’ associations considered current consumer protection regulations adequate. Only about one in five respondents had received any complaints about preneed policies, most concerning lack of transferability. another $1,500 to receive it. In addition, you’d have to pay the airfare, and weight counts. Of course, none of this is covered in your preneed guaranteed price.” The NFDA’s position is that a customer with an irrevocable contract should have the right to transfer but that the original provider can charge for it. The FCA’s position is that both types of contract ought to be transferable without penalty; if the second home is less expensive, the customer should receive the difference.
sure that the customer understands what he or she is negotiating. Few states address the shortfall issue. One large chain’s policy is to not perform the contract unless it has been paid in full, which has probably not engendered goodwill.
sales was an important state interest and the statute reasonably restricted preneed sales. It also stated that the Funeral Rule didn’t provide comprehensive regulation of the industry and did not conflict with the state statute, so the two were able to coexist. All funeral professionals are required to comply with the Funeral Rule when making both preneed and at-need contracts. If the survivors ask about goods and services, change the preneed arrangements, or must pay additional amounts of money (for example, in a contract that is non- guaranteed), the provider must provide them with the GPL and make all the disclosures required by the Funeral Rule. If the preneed contract was made before 1984 and has not been modified since, the Rule does not apply unless the survivors wish to change provisions of the contract. For example, if a person made a preneed contract in 1983 and dies now without changing any aspects of it, the funeral director does not need to make the now-required disclosures and otherwise follow the Rule. However, if the family wishes to buy a more expensive casket, the funeral director must comply with all provisions of the Funeral Rule.
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Book Code: FTX1625
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