Why do I have to cash in my Dad's life insurance policy if I'm paying for it?

To the post from IsntEasy:
Your take on deciding who "deserves" being taken care of by the taxpayers is insightful and food for thought. Your point is well-taken. However, there is a fine line between "deserving" and "earning," which was my point in mentioning that my mom had "worked and paid taxes her whole life." While she never had enough money to set aside for her own retirement, she didn't feed at the public trough - but instead spent 50 years faithfully contributing to the welfare of others with her own tax dollars. I don't typically have a lot of patience with the deadbeats and leeches that are too lazy to work and can't be bothered preparing themselves financially, but I feel that to some degree, my mother HAS "earned" some consideration in return for the years of support she gave to others. Just sayin'...It's a moral argument in my mind (as opposed to LEGAL). Whether she "deserves" such support is another matter entirely...

Goodness, this post has created quite a stir. I tried to reply this morning, but ran out of time. Now I cant recall what I eloquently thought out....memory....age.... Anyway, my thought process went something like this....Avoid Medicaid. Medicaid is for the destitute. Its like welfare. Selling everything of value in order to qualify for Medicaid is ludicrous. No one should ever "plan" to use Medicaid. Medicaid is a bad consequence for bad decisions/bad luck and is only in existence to be the last safety net before homelessness. Prior to the creation of this ponzie entitlement scheme, elders lived with thier children, relatives or friends. What a concept. People, not government, used to take care of each other....because it was the honorable thing to do, not because they might get an inheritance. And if one family was down on their luck, then their friends and neighbors helped them out.

Thanks, Isn'tEasy, beautifully expressed. As for the burial, I believe it can be prepaid in the spend down for Medicaid. But I have to agree with tooyoungforthis, If the taxpayers are compelled to pay, then they should be protected from fraud and compensated where possible.
If you feel that taxes are being misspent, then consider for a moment that unbelievable mess Iraq War, no bid contracts, etc. Don't blame working people, blame the people at the top, the greedy ones, Wall Street and their paid thugs in the Republican party.

People seem to get caught up in whether or not a person "deserves" the benefits they receive from social programs.

Would a better system involve judging whether the child who eats the food bought with food stamps is more or less deserving of tax dollars than someone who "worked and paid taxes his whole life" but, for whatever reason, finds himself with very little money and needing expensive care in his old age?

Does it change the equation if the 'hard working' man gambled and drank away all the money he could have saved for retirement. Or if the child's parent is an unmarried drug addict or a struggling minimum wage worker? Who decides? A social worker, a judge? Some people seem to feel that they (or their parents) do 'deserve' the benefits and others, because of their employment status or perceived laziness, do not.

The programs exist for those who are in the circumstances determined to qualify for them.

No one is able to look into the heart and soul of any individual and judge whether they are deserving of mercy and charity. In our civilized society, we choose to not simply step over the bodies of the poor in the street, whether those bodies be of saints or sinners, they get help when they need it, simply because they need it.

Pinky, My moms policies was NOT my brothers or myselfs inheritance. It was to be use to pay for her funeral, it wasn't a hugh policy. My mom and dad had paid for their plot and head stones, the policies were there to pay for the coffin, embolming etc. So please do not assume everyone is receiving a BIG inheritance. As much taxes as people pay into the state there should be enough to care for all the elderly. If our goverment would stop wasting money and start saving then perhaps all the elderly could get the care and burial they deserve.

Watch that verbal slapping in the face twoyoungforthis God don't like Ugly

I'm in Illinois and work for the state's public assistance agency, so I knew I was given erroneous information by the Medicaid liaison at my mother's NH, who told me I would have to cash in her policy. It had a cash value of over $6000, but the face value was only $1000 (she bought it in 1948), so it met the criteria for exempting the cash value. I had to show the liaison the written policy for her to believe me. It makes me shudder to think how many families got screwed by the NH on that topic.

You are cashing in a policy so that the cash can be used toward paying for your father's care. Do you expect Medicaid, a.k.a. taxpayers, to foot the bill for your father's care so that you can cash in the life insurance policy when he dies & keep all of the money? You don't say how much is in the life insurance policy, but it must be a sufficient enough amount for you to be concerned about losing it.

You can use some of the money to pre-pay his funeral expenses. Everything else goes toward his care at the facility. If you want to keep the life insurance money, bring your father home & take care of him yourself/

Whole Life Policies are cash. Owner owns policy. My 90 year old parents don't get that. They don't get anything. My father did not even leave his pension to Mom. Don't know what to do with them. Yes you have to cash it in. Sorry

The key feature of whole-life policies is that they can be redeemed for cash after "x" number of years (usually a lesser amount than face value) without the inconvenience of having to be dead first. This cash belongs and is at the disposal of your Dad regardless of who pays the premiums or who is named as beneficiary in the event of his death. Your father has sole discretion to take that cash and spend it whenever and however he wants as long as he's still breathing - thus it is part of his assets the same as cash in his bank account, stocks, bonds, etc. For people of low enough income to qualify for Medicaid, unfortunately, such a policy is generally their ONLY asset beyond a meager social security income, so it seems especially unfair.

I completely understand how you feel. My parents were never able to provide for me and I managed for myself since I was VERY young. Many years later in life, I ended up caring for my mother's every need in my home for 10 years prior to her nursing home admission (KY). Just as I've done all of my life, this was done without any public or private assistance. However, I had to mollify my husband with the idea that "one day we will recoup at least a fraction of these expenses from her insurance policy," assuming there would be any left after the funeral. Now that won't be the case. I had to designate my Mom's whole-life as a "burial policy," and sign the entire proceeds irrevocably to the funeral home before she could qualify for Medicaid. She only gets to keep $40 of her SS money for her personal needs, so I end up paying the $72 per month in premiums, plus $100 for DEPENDS because she cannot manage the tape-on style of incontinence garments the nursing home provides. There are other odds and ends, so our fixed income takes a $200 monthly hit that we did not anticipate.

I don't mind missing out on any “inheritance” proceeds, nor do I have a problem helping provide for my mother - what I DO mind is dipping into my husband's carefully saved retirement to get it. The conflict is gut-wrenching; so at the age of 62, I'm having to go job-hunting again. With the taxes I still pay, and my mother having been a gainfully employed taxpayer in her own right for 50 years or more before her illness, all of this has been a bitter pill to swallow, discovering that she did not merit any better than she's getting. I've had to take a step back and adjust my thinking about this matter in recent months, and as soon as I can eliminate the need to "Rob Peter to Pay Paul," I will feel a whole lot better. People need to know that planning for your own retirement is not (and has NEVER been) enough. Wish you the best of luck in the trauma of dealing with bureaucracy. It’s never easy.

In general, Florida and Texas are not generous states. Medicaid however is a federal program but likely administered by the state --thus the state to state differences. Personally I do not wish to grow older in either of these states.
Good luck.

Palomita - FICA pays into Medicare & SS. FICA does not pay for Medicaid. All 3 are a different type of entitlement program.

For Medicare, 3 months before you turn 65 you enroll in it. It is a general entitlement. It pays for physician services, hospitalization, rehab, PT & OT, drugs, etc at preset rates paid to participating vendors & often with a co-pay. Medicare coverage is based on groups from Part A - Part D. Part A almost always is covered by FICA; if you are unfortunate enough not to have Part A coverage, it is $ 407 a month for Part A. Part B everybody pays & from $ 105 - 336 a month; most pay $ 147. $ 147 a month is really cheap for guaranteed health insurance. There is no way private health insurance companies are going to provide coverage for folks in their 80's or 90's ever for $ 147 a month, not gonna happen. Part C & Part D all vary in cost depending on what programs exist in your state & what you need. You have control over what programs to sign up for in Part C & Part D - if your costs are high, you should look to see if another C or D program is better & lower in cost. When you're working premiums get paid via FICA. When you retire & have SS for income, premium is deducted from SS.

For SS, that is an entitlement based on what you pay into. So high income in wages & taxes, are going to get more in SS than someone who worked for a low wage or worked off the grid. SS is a income based entitlement.

Most of the US pays into Medicare & SS via FICA, but some folks are outside of the system - like RailRoad retirement. If you work in the US, FICA is done & you really don't have an opt-out but therefore you qualify to get Medicare & SS.

Medicaid is entirely different & totally a needs-based entitlement and has to be applied for & to a specific program. You choose to apply for Medicaid. For NH Medicaid, they have to show the need financially (impoverished) & medically for skilled nursing care. Usually there is no co-pay for medical. Medicaid requires a SOC/share of cost for non-medical - that is why once they go into a NH on Medicaid, they have to do a co-pay of their monthly income to the NH. NH Medicaid also requires a recovery of costs if assets become nonexempt. That is why when they die, MERP can place a claim or a lien on the house, as once they die the exemption goes away.

For Medicaid NH eligibility, either you plan years & years ahead for a need that may not happen OR you have to spend-down to be impoverished OR you're already poor. It is not a perfect system, but really if your elder lives long enough, they will end up needing care and eventually will run out of money, and thank goodness that Medicare, SS and Medicaid is available for them. With the cost of health care in the US and the on-coming tsunami of baby boomers needing care, there probably won't be Medicaid like what there is now in the future for us - it will be too expensive to maintain.

NH run from 5K - 15K a month so the costs for Medicaid are huge compared to other needs-based programs. The other needs based programs - like SNAP or TANF or WIC - are term limited services.There always are abuses to the programs but probably not near what media presents - most on Section 8 are working poor. I think the average cost for a mom on WIC is like $ 500 a mo post. Compare that to $ 4,495 a month for room & board for grandma in a TX NH. The new mom is going off WIC within 6 months or a year; but grandma may be in a NH for years. Costs for elderly on Medicaid are just staggering.

Are they paying for the policy, but their Dad is the owner of it but they are the beneficiary and are worried they won't get their money when he dies?

Can the POA cash out the cash value of life insurance policies?

Find out if Medicaid will allow the policy to be part of an irrevocable burial trust, if you intend to keeping making payments OR find out if the cash value of the policy can go into an irrevocable burial trust to pay for funeral expenses.

I had to cash in my father's life insurance policy or make the state the beneficiary. Since his policy was only going to be 1/2 of what it was worth, I decided to spend it on him as part of the spend down and not "give" it to the state. Pinky1, I understand not expecting the state to provide for my father while he has money. What irks me about Medicaid is that my father worked his whole life to pay "into" the system and when he needs it, I have to jump through hoops to prove that need. Ok, I am doing that. Yet, 2nd and 3rd generation welfare recipients (that you and I pay to stay home) they do not have to pay it back should they ever get a job.

My sister was a low functioning Down's Syndrome adult when she went onto state aid. She worked a job for pennies and when she saved enough, she had to "spend down". With the help of my mother, she purchased bedroom furniture, clothing, personal items, etc. When she was 49 she was diagnosed with Leukemia. We only knew for 5 days before she passed away. (a blessing, actually) However, 2 days before she died, "the very nice and concerned people from the Medicaid office" came in to "discuss" her funeral arrangements. My husband threw them out. We asked for privacy and did not feel that was the time or place. Once she passed, my mother was given a call and said she was not allowed in my sister's bedroom (she was living with another family) without a Medicaid official in the room and then that was only to pick out clothing for her burial. While we were at the funeral, they cataloged every item in her room and determined a "price" for everything. If we wanted anything from my sister's possessions, we had to buy them at the price the office decided.

I have not looked at this as if they were taking my inheritance. It was not my money. I have been able to make sure my father has been looked after for 4 years since my mother's death. I have never expected anything from him. I do not resent that I have had to spend everything in order to get help. I resent what they did to my sister and I resent the hoops and the 5 year look back while undeserving people seem to get welfare with no problem. This has taken me weeks to get the information they are looking for and I still do not know if he will be approved.

In Pa I was able to change the ownership of the largest policy to a family member and cashed in two small policies to pay for care pre Medicaid. I was given a 30 day time period to have any assets used for care or change in ownership before Medicaid would have taken over assets.

Life insurance, unlike many other types of insurance (car, health, home...) often includes an investment component which is an asset in the same way a savings account or mutual fund would be. In most states, when someone is applying for Medicaid to pay for their nursing care, they must first use those assets.

Like 'pinky1', I also bristle when I hear complaints about "the State" taking a parent's assets to pay for care. Medicaid is an entitlement program (like food stamps or Section 8 vouchers). Its purpose is to pay for care for those who cannot pay themselves. If you have assets, you must first use them to pay for your care, then "the State" will pay. The popular notion that the State "takes your money" is inaccurate. The State acts as a middle man so that care can be started immediately. They begin paying the nursing home for you while you sell any assets that are not liquid, then they recover that money from you. Would you rather the alternative...you're discharged from the hospital needing skilled nursing care and you sit at the curb while your house is sold or your insurance policy is cashed in!

That said, many states allow certain expenses to be paid from assets before the money must go towards nursing care. Often, you can pre-pay for the funeral. It's unfortunate that many don't know this and wind up footing the bill themselves when it could have been paid. Even for someone with minimal assets, it is so worth sitting down with an lawyer, just to get some good advice. I spend only $200 for an hour with a qualified elder law attorney and she steered me clear of what would have been a very expensive mistake. Get all your paperwork and questions together and make an appointment.

Hi Bdette, that does sound strange. The idea of prepaying for arrangements with it is a great one if it is considered an asset of his estate though. Saw a situation where the child who was handling things for his mother died in an accident. Other adult child, out of stater, stayed out of loop, knew nothing of his Mom's affairs, thought she had life insurance, since she used to before it had to be done away with due to a cash value and "spent down" also. Was sad for surviving son when he learned there wasn't any insurance for a decent burial, and he himself was cash strapped with health issues. He had to cremate her and burry urn in unmarked grave. He'd hoped to come up with $ for a headstone later. That was 10 years ago, she remains unmarked, as he remains ill with limited income abilities. A tough pill to swallow and know it makes him sad, (he's gone and looked at stones a few times over the years).

Rather than take the cash value for his life insurance, he can sell it on the secondary market for up to 7 times what the insurance company may offer. If the amount is substantial, it may give him more choices on his long term care. A life Insurance policy is an asset, just like your home. You can sell it for cash.

get an elder attorney to help you and when you pay him, it should come out of YOUR parents money, not yours..........they are very helpful and I am thankful that I saw someone mention that on this site. we are using one to help us with our parents assets, etc..........and it has been very helpful and glad that I didn't have to figure alot of the stuff out on my own.

I don't understand ----They take FICA from our paychecks they say this is to pay for services like medicare then they raise our taxes every year to pay for medicare --But yet they take everything from the recipient ---to pay for it---- and from what I see of the amount my mom gets it just doesn't add up .Parents buy family homes or pay on policies to help their families or to leave something for their kids but then it gets taken

Generally the policy's cash value is considered an asset, however if you were to make the funeral home the beneficiary for a prepaid burial the Medicaid agency would not count it as an asset. If you need help you can contact legal aid or contact the local Area Agency on Aging or Bureau of Senior Services; they have a lot of info and can assist you.

In Colorado we had to cash in the policy however, in the spend down we were allowed to put some into a funeral policy. What ever is not spent on funeral costs does revert to the state. I believe legislation needs to happen on this portion of Medicaid spend down policy so families do not have to bear the extremely high costs of funerals/burials.

{Q}if he owns the policy, even if you or another kid pays the policy, then it's his asset. If it has a cash value, the cash value has to spent down on his care before Medicaid will pay. {EQ}
If he is a beneficiary on anything and that person dies he can be disqualified for Medicaid after the fact.

I found grist of this disclaimer on TechByter Worldwide. {adapted for my postings}
Regarding my posts: I participate and post for informational purposes only. I assume no responsibility for accuracy. Any actions you take based on my posting information are entirely at your own risk. Products and services are mentioned for informational purposes only and their various trademarks and service marks are the property of their respective owners. I am an independent un-paid aggregator; I collect information from various Internet sources share it thru Dave Mainwaring’s Knowledge Network

Does mom have to hire an attorney to change her poa?

I'm always bewildered when I read article's that say "my parents worked hard all their lives and the state took everything to pay for their care." Who exactly do you think the "state" is? Well its you and me its the tax payer we make up the "state" and its wealth or lack of. So for us the "state" to ask that everyone pay for their own care if they have the funds before asking others to chip in and pay seems fair actually more than fair. We are willing to pay for the care of others if they can't afford it. And what else could be more important to spend someone's money on than providing care for them in their time of need? I guess some people think that spending their inheritance on care is just plan wrong. I urge you to take a step back and look at how you sound.

Generally, the cash can be used for a funeral - at least a certain amount. As nearly everyone here has said, states vary since Medicaid is state run.
Good idea to check all of this out.
Carol

Check if you can cash it in and prepay for a funeral-I heard you could if you need to sped down-that can be done in NY-check with a funeral director where he will be living

If your Dad is the owner of the policy, and the face value is greater than $1500, then the cash value or surrender value is considered an available resource. It does not matter if you are paying the premiums either the policy be cashed out or borrow against the cash value in order to reduce his countable resources to less than $2000. Any amounts given away would be subject to a penalty unless it is converted to an exempt asset.