My parents died in a NY nursing home. They were both on Medicaid when they died. However, they left owing the nursing home for services prior to Medicaid. Most of their assets, home, money etc are gone. The only thing let are insurance policies with my brother and I names as beneficiaries. My brother is telling me that because these policies were used as an asset when calculating Medicaid eligibility, we need to turn the money over to the nursing home for unpaid bills and that Medicaid is expecting us to do just that. From what I have read life insurance is not recoverable nor an asset. So what is the answer?
1. Ownership very important and if it transferred how long ago and did whomever "owned" the policy make all (and every) payments on the policy during their ownership.
2. Exactly how does the beneficiary read.... does each policy read specifically that you and your bro are the direct beneficiary OR was it that mom/dad were each others beneficiary (so that since they have both died it is their estate that is the beneficiary) with you & your bro being the 2nd or 3rd beneficiary.
3. What was the "cash" value and the "face" value of each of the policies and for each of your parents at the time of the Medicaid application. How was this reported on the Medciaid application.
4. Then once you figure that out, what does your state allow as the maximum value for all policies to be exempt from Medicaid. There seems to be a formula on whole life that involves face value amount and cash value amount and what can be excluded. Then take all this & see an estate or probate attorney. Good luck.
If they had a term life policy, then they may have it listed in your folks Medicaid application but it would not an asset unless the beneficiary of the policy were the other spouse. (so like John & Jane are married and each have a 50K term policy which names each other as their beneficiary...so Jane dies and now John is 50K richer and it must be used towards repaying Medicaid....). But if you & your brother are the names beneficiary then that is not an issue. Now if it had been a whole life policy, then those have a cash value and those ARE an asset. Medicaid routinely asks for the policy to determine if there is a whole life policy out there that will need to be cashed in or if for married couples if they are each other's beneficiary and will be getting an asset upon the others death. Understand?
If you are the beneficiary and the policy reads as such, then when you go to file the claim with the insurance company (and provide the death certificate and whatever else they need)....you will get a check in your name. It's your money. You don't own Medicaid or the drug store, etc as it is not your debt.
If you choose to use it to pay off whatever outstanding debts that were your parents you can, but there is no obligation to do so.
If you all signed off for the funeral, burial, flowers, etc then that is your expense, and you have the life insurance $ to be able to do that. If you want to have a big memorial service at sea for them 6 months from now and use the $ to do that you can. Or if you want to use the money for your kids wedding, or getting a new driveway put in, you can. It's your $ & wonderful that mom & dad did that.
About unpaid bills. If any service provider accepts Medicaid, then they agree to accept whatever Medicaid pays as their payment in full. Which is much less than their private rate, or Medicare rate or secondary insurance rate. Some providers will send a "bill" for the difference (had this happen with an outside therapist for my mom), but they cannot make you pay the difference...if they accept Medicaid it's just too bad if it pay's 70% less. So read any bills very carefully. ALSO you need to make sure - really, really make sure - that you or your brother did NOT sign off to be personally responsible for any of your parents health care items. If when they went into the NH and you or your bro, signed the forms personally rather than as "Mike Smith as DPOA or John & Jane Smith", then the NH may bill you or him for whatever the costs were prior to Medicaid. It could add up to alot of money depending on just how long it was before Medicaid paid. If you want to go hardball, this is when you tell the collector that you "anticipate" going full probate & look in the paper for the filing. Most will write it off rather than deal w/probate. Good luck.