Life insurance and long-term Medicaid. Anyone have experience with this?

ask a elder lawyer. i bought my prepaid funeral in order to bring down my assests to no more then 8,000.00 in savings to qualify for medicade in pa. the house is only in my name, once i die medicade takes the house.

Slothlover2019: Per Google, "Medicaid cannot take your life insurance policy while you are still living. However, based on the face value of the policy, it may be counted towards Medicaid's asset limit."
Disclaimer: Not my authoring.

Slothlover2019: Perhaps you should retain an elder law attorney as your query could be dependent on the type of life insurance policy and other criteria.

My SIL had 2 policies on her brother who passed away and those 2 life insurance policies went to pay for the funeral and what was left over was suppose to go to Medicaid but the funeral home cut her a money order for the remainder and now Medicaid is coming after her for $38,953 for his part he was on when he was in the nursing home.

Dealing with my BIL which I am his representative payee he has a life insurance policy I had to write out a statement saying that his life insurance policy will go for his funeral and the left over will go to Medicaid. My BIL is now in a nursing home I had to spend down all of his money to under $2000 to get him on Medicaid so for 2 months and 5 days I wrote a check to the nursing home in the amount of $15,637. Also I found out too that his pension plus his social security they will take all he will have is $50 of that money to pay his bills. I understand this but my BIL who has dementia thinks his money is his won't understand this move.

Prayers.

Talk to the insurance companies.
Retain an attorney if you feel this is necessary.
Ask Medicaid.
Each state may be different... even if othes have their own experience. Get your answers. first hand.

It comes down to what kind of policy it is and the face value AND the state you live in. An elder attorney can explain countable versus non-countable. Your Medicaid worker, at the local office, can also explain it, however they cannot give you legal advice on how to transfer, use it for burial, or any other legal advice. Probably worth the cost of consult to ask an attorney. Other countables could be reviewed with atty as well.

You know there is long term health insurance but you must be under 70 to start a policy.

We were able to transfer the OWNERSHIP of my husband's policy to me. Now he no longer owns that policy as an asset. I am the owner, as well as the beneficiary. We put all our retirement funds into a trust under my name with our son as trustee. There was a big tax hit, but I did retain the majority of our assets that way, and still qualified for my husband to get Medicare/Medicaid. Having a lawyer to navigate the process was a lifesaver.

The cash value is part of the asset calculation for most State Medicaid programs, so most likely YES those policies become part of what the State claims unless -- as others have noted -- it is a burial policy (the cash value is specifically for funeral expenses). Sorry, the funds cannot be gifted to grandkids when she passes.

Further, Medicaid has a 5-year look back provision, that will review any gifting of assets in the 5 prior years before Medicaid steps in. If the State Medicaid folks find any hiding of assets or gifting in this 5-year window; one may not be qualified out right but qualification can be delayed by a period of time; meaning someone else has to pick up the bill.

But generally, all assets (all funds or expected funds, forthcoming inheritance, SSA payments, annuities, pension, 401K, IRA, stocks/bonds, etc and the house, car, any tangible asset) is part asset calculation. And to qualify, for Medicaid long term nursing home coverage the person has to be below the total State asset limit (about $2K for most states, some slightly more or less). Or one has to spend down all the assets.

Prepaying funeral expenses is a way spend down assets permissible by Medicaid. There may be a way to name the funeral home and/or cemetery as the beneficiary of the life policy value for that purpose.

You may want to get with an elder care attorney licensed in your state who has done a lot of work with getting folks qualified for Medicaid long term care coverage as he/she may have good advice about what can or cannot be done at this point. The nursing home may have recommendations about attorney's (most who are in this space know each other). Or your area agency on aging may have advice. Lastly, the business office people at the nursing home often are very knowledgeable about your State's Medicaid qualification processes and could be helpful; they deal with this all the time.....

Hope you have a durable financial POA AND have set up on-line banking and with access to all accounts (Bank, SSA, any retirement accounts). Once qualified for Medicaid long term care coverage; your LO or with your help (may need more help over time) has to keep the bank balance BELOW the State Medicaid limit each month and one has to pay the nursing home something called the Medicaid "Cost of Care Contribution" each month assuming your LO receives Social Security or other retirement payments. So either you or your LO has to "write checks" or pay monthly. Because this is a MUST do task, it is something you may want to take over on just to assure it is done monthly. Forgetting is not a valid excuse. Having on-line account access is much easier and faster to pay the NH "cost of care contribution" than relying on "snail mail" whereby checks that might get lost.

Having on-line access to all accounts also makes it much easier for annual "redetermination." Each year, your State Medicaid folks will make a "redetermination" about does you LO still qualify. You'll need to submit more paperwork: potentially bank statements, receipts for expenses (keep all receipts) and any incoming income statements, etc. So having on-line access makes this all easier. Ditto for helping your LO file State and Fed taxes which still needs to be done. PS any private payments to the nursing home, including the monthly Medicaid cost of care contribution are "deductible medical expenses," meaning your LO really should not have to pay taxes but one still has to file. Easier if you can do this on-line.

Medicaid will allow your LO to ONLY keep a bit of money each month from Social Security or any retirement payments (like $75 or maybe $80, depends on the state). That is it. Your LO can spend the funds on things they need for themselves, keep receipts. For my mom we buy everything with a debit card (no more credit cards) so the bank statement records it all for Medicaid to see.

Good luck with this. After qualifying for Medicaid it does get easier.

My experience was that it will depend on the type of life insurance, like if it is Term, Whole Life or a GUL type of life insurance. If you are not sure just what it is, ask an independent insurance agent or a financial advisor who hold an insurance license to look it over…. Older ones may not be real clear as to its type.

If Term, those do not actually have a value until the person dies. Whether it has a face value of 2K, 10K or 100K, it is only when she dies that it pays out. So right now as mom is till very much alive, it has no actual cash value. So not a tangible “asset”. She can continue to keep it. If it is fully paid up, it just sits there till she dies and then you as the beneficiary contact the insurer to file for the $. Then you as the beneficiary use the $ to reimburse yourself for her funeral costs. The insurance companies can take a few weeks to process the beneficiary request, so please pls keep that in mind.
HOWEVER!
for some States Medicaid if the face value is beyond a certain $ amount the State may require for them (the State) to be added on to be the initial beneficiary. The threshold amount seems to be 10K for having to change beneficiary. I hope hers is a lower value Term policy!

If it is Whole Life, those have a cash value and it will need to be cashed in. Usually means the entire policy closes out and mom may be paid full policy value or paid a % of what she has paid in.

GULs tend to have a cash value she could can draw from but stay in force as long as premiums paid. GULs tend to have an age cut off & premiums due till the age out.

Whatever the type, if policy is NOT actually paid up in full and mom still has regular premium due, that will be sticky. It could be quite a big premium to pay depending on the type of policy. As she - due to LTC Medicaid rules - has to basically have almost all her mo income (like her SS $) be paid to the NH; so mom has no $ to pay the premiums. She will be limited to a smallish $50-$60 a mo on average personal needs allowance for her “cash” & it tends to be used in full ea month to pay for onsite beauty shoppe & toiletries. So….It will fall to you or family to pay the premiums or the policy will cancel.

My mom had a very very old, 20+ pages legal size double sided Term policy. So old, it was paid up in full and paid an annual dividend to her that was required to be plowed back into the policy. Nevertheless it had a low FACE VALUE as the face value is set from whatever it was placed at initially. We put it down for her LTC Medicaid application at its face value. Medicaid not at all involved with it once it established that it was Term. The dividend issued a 1099 to mom and so was reported as income for her Medicaid application & annual renewals but could be viewed as amortized for 12 months so that she technically was not over the monthly limit for “income” the month it was paid.

if there is any way to do a preneed, I would do that. Having a preneed will make everything oh so much easier for that eventuality. NH will want to have information on file for this. Some NH fully expect a preneed to be there so that funeral home called & there asap. If not, they might have to make that decision due to health codes. NH really cannot have the deceased at the NH waiting for family to decide on funeral & burial arrangements. Body needs to be moved to a mortuary pretty much immediately after death. Get a preneed done lots less stress and will be at lower costs.

If they have cash value, Medicaid will ask they be cashed in. Does the 10k say its for funeral expenses? If so that may not need to be cashed in. This is a question for Medicaid. I cashed in Moms two small policies face value combined was under 10k. Cash in lots less. I took the money and prepaid her funeral. A Medicaid Trust had to be set up.