208.050.  Aid to dependent children denied, when. — Aid to families with dependent children benefits shall not be granted or continued:

  (1)  Unless the benefits granted are used to meet the needs of the child and the needy eligible relative caring for a dependent child;

  (2)  To any person when benefits are claimed by reason of his or her physical or mental incapacity, and such person refuses to accept vocational rehabilitation services or training or medical or other legal healing treatment necessary to improve or restore his or her capacity to support himself or herself and his or her dependents, and it is certified by competent medical authority designated by the family support division that such physical or mental incapacity can be removed, corrected or substantially improved; provided, however, the family support division may in its discretion waive this requirement, taking into consideration the age of the individual, nature and extent of training and treatment, or whether he or she endangers the health of others in his or her refusal, whether the training or treatment is such that a reasonably prudent person would accept it, and all other facts and circumstances in the individual case;

  (3)  To a household that receives in any month an amount of income which together with all other income for that month, not excluded or disregarded by the division, exceeds the standard of need applicable to the family:

  (a)  Such amount of income shall be considered income to the individual in the month received, and the household of which such person is a member shall be ineligible for the whole number of months that equals the sum of such amount and all other income received in such month, not excluded or disregarded by the division, divided by the standard of need applicable to the family;

  (b)  Any income remaining shall be treated as income received in the first month following the period of ineligibility specified in paragraph (a);

  (c)  For the purposes of this subdivision, where consistent with federal law or regulation, "income" shall not include the proceeds of any life insurance policy, or prearranged funeral or burial contract, provided that such proceeds are actually used to pay for the funeral or burial expenses of the deceased family member.