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Can Medicaid Take Life Insurance Policy

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Legal Protecting Your Life Insurance And Your Loved Ones

Does the Nursing Home Get Your Life Insurance?

If you know what you are doing, there are perfectly acceptable, legal ways to protect your interests while qualifying for Medicaid. Which ones make sense for you will depend a great deal on the details of your life, as well as the rules of the state in which you reside.

Here are some potential options:

  • You may be able to take out a loan against the cash value to get it below $1500. If you spend the loan on your nursing home care, this is not considered a dodge.
  • You may be able to prepay burial expenses with the policy. This might be done by assigning the policy to the burial home, or by cashing in the policy and using it to prepay the burial costs.
  • Convert your whole life insurance policy to a Long Term Care policy. This can be a means to keep the policy and have the funds benefit you while you are still alive while staying within the rules for Medicaid.
  • Update your policy. Make sure it lists several beneficiaries and that they are all currently alive. This can help prevent the policy from becoming part of the estate and can help protect the funds from Medicaid recovery.

Remember that re-assigning the benefits in the last 60 months prior to your Medicaid application can be scrutinized as part of the look back. However, if it is done properly, it shouldnt be a problem.

Some people are more likely to qualify as exempt from Medicaid recovery, such as a disabled child. Alternately, you may want to name your spouse by name.

Can Medicaid Or Ltc Take A Cashed In Life Insurance Policy

My mother is in a nursing home. They take her monthly payment from her S.S. She is also getting Medicaid. We just found papers to a Whole Life Ins. policy she has. She wants to cash it in for Face Value. Can Medicaid or the NH take this if we were to put it in a savings account at her bank in her name? She is in sound mind, but doesn’t know what to do with this money. She does want the kids to split it now. I want to do the legal thing. I am her POA of everything. Please help me here! Thank you!!

Ways You Can Obtain Life Insurance And Keep Your Medicaid Benefits

Medicaid and life insurance. These together arent like peas and carrots. More like oil and water!

You may have heard different information about Medicaid eligibility and life insurance. Frankly, a lot of the stuff you read on the internet is inaccurate.

In this article, we dispel the inaccuracies and tell you what you need to know about how Medicaid works with life insurance. More specifically, we describe how Medicaid/SSI recipients obtain life insurance the right way. We also give you 3 suggestions on life insurance for people on Medicaid.

The quick answer to everything: it really depends on your situation. However, we have helped many Medicaid recipients obtain life insurance, and I am sure we can help you out, too.

Its important to stress that we are not lawyers and recommend you consult a lawyer in your state for any specific information regarding the laws in your state. Here is what we will discuss. We start with a discussion about Medicaid and then lead into how Medicaid eligibility affects life insurance ownership.

Lets start off and discuss Medicaid. Skip ahead if you already have a solid understanding of Medicaid.

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Will The State Ever Reduce The Amount Owed

Yes, if you or someone else spends money to maintain your home while you are in a qualified home, these costs can be deducted from the MERP claim. If you or someone else spends money to pay for care that helps you live at home longer before entering a nursing home, those costs for such care provided on or after you become eligible for Medicaid benefits can be deducted as well.

The heirs must have receipts and copies of payments to show what was spent on the person’s home or services when they ask the state to deduct these amounts from the MERP claim. The state may allow deductions from an estate recovery claim for necessary and reasonable expenses, such as:

  • Home maintenance costs, such as real estate taxes, utility bills, insurance, home repairs, and home maintenance expenses, such as lawn care for recipients receiving Medicaid-covered services in a nursing facility.
  • The direct payment of the costs of care provided for a deceased Medicaid recipient that enabled the recipient to remain in his or her home and thereby delayed institutionalization.

Q If A Person Gets Medicaid After Taking The Cash Surrender From Their Whole Life Policy For Funeral Expenses But The Policy Remains In Effect Through Continued Payments By The Beneficiary Who Is Entitled To The Remainder Of The Policy Medicaid Or The Beneficiary Which Is Not The Estate The Medicaid Beneficiary Only Lived For Two Months After Beneficiary

Can Medicaid take life insurance?

A. The rules surrounding Medicaid can be complicated.

Under the terms you describe, it seems the beneficiary and not Medicaid would get the money from the life insurance policy.

Heres why.

Under Federal and New Jersey law, Medicaid is required to recover funds from the estates of certain deceased Medicaid recipients for all payments provided by Medicaid for services received on or after age 55, said Shirley Whitenack, an estate planning attorney with Schenck, Price, Smith & King in Florham Park.

She said states have the option of using a narrow probate definition of estate in their Medicaid recovery program or defining estate more broadly to include probate and non-probate assets.

Probate assets are those that pass under a will. Non-probate assets include joint accounts and assets that are designated to go to a beneficiary other than the estate.

New Jersey uses an expanded definition of estate recovery, which includes any property that belonged to the deceased person at the moment prior to his or her death, Whitenack said. This includes property such as the deceased persons home or share of a home, bank accounts, whether solely or jointly held, trusts, annuities, stocks, bonds and any other real or personal property.

She said proceeds from whole life insurance policies are subject to estate recovery if they are not liquidated prior to death as required.

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Where Can You Get Help

If youre receiving public assistance and need assistance navigating the ins and outs of Medicaid and life insurance, an experienced estate planner may be able to help you get the coverage you need to make sure your family is protected. An attorney who specializes in elder law may also be able to Medicaid recipients or potential applicants through the legalities of maintaining life insurance coverage. If you can’t afford to pay a consultant, contact your state Medicaid agency for answers to Medicaid-related questions and help with applying.

Can Medicaid Take My Life Insurance

  • Asked February 1, 2014 in
  • Contact Peggy Mace Contact Peggy Mace by filling out the form below

    Peggy MacePROMost of the U.S.When you apply for Medicaid, a representative of the US Dept of Health and Human Services will meet with you to determine your eligibility. There is a limit on how much income you can have, and also a limit on the amount of assets you have, in order to qualify for Medicaid. Your assets do include any cash value life insurance policies that you own. If you have Term insurance, it will not be counted, because there is no cash value in Term life insurance. If your cash value in Whole or Universal Life exceeds a certain amount, you have some options. You may be able to designate it for your funeral expenses. Or you may be able to use the cash value for long term care expenses and keep at least part of the death benefit. Your social worker will help you with your Medicaid spend down, but you can also contact a reputable life insurance agent or attorney to assist you.Answered on February 3, 2014+1

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    Don’t Let Life Insurance Affect Your Medicaid Eligibility

    On behalf of Ronald Fatoullah & Associates posted in Elder Law on Friday, February 17, 2017.

    A life insurance policy is a contract between an individual and an insurance company where the insured pays a premium in exchange for the insurer’s promise to pay a certain sum of money to the designated beneficiaries on the death of the insured.

    The two most common types of life insurance policies are 1) term life insurance and 2) whole life insurance. Under both policies, an insured pays a premium during a term of years , and if the insured dies during the term, the insurer pays the death benefit to the insured’s designated beneficiaries. But a whole life insurance policy also has a cash surrender value, meaning that the insured can surrender the policy at any time and receive the cash value of the account, which is largely determined by a number of premium payments made by the insured.

    Both types of policies are great estate planning tools. They both pay the death benefit directly to the designated beneficiaries, thereby avoiding probate. Further, such proceeds are not recoverable from the estate by Medicaid, because Medicaid can only recover against assets distributed through the probate process. Despite these benefits, whole life insurance, in particular, can be problematic when it comes to applying for Medicaid.

    How Does Receiving A Death Benefit Affect Your Medicaid Eligibility

    Is Medicaid Coverage Better or Worse than Private Insurance?

    People ask us about the impact of receiving a life insurance death benefit. How does that death benefit impact a person who receives Medicaid?

    Again, I am not a lawyer, and I recommend you speak to a reputable lawyer in your state for specifics.However, usually, if you are on Medicaid and receive a death benefit, that death benefit amount is considered income. Depending on the laws in your state, receiving that income will negatively impact your Medicaid eligibility and cancel your benefits. The death benefit is not taxable to you, but likely is reportable to Medicaid.

    Again, you need to check the laws of your state and speak to a qualified attorney.

    There are ways around this scenario. A trusted loved one could be the beneficiary instead of you. Additionally, a trust could be the beneficiary. The trust could pay income to you as the Medicaid recipient and not impact your assistance. However, check with a lawyer as this topic is beyond the scope of this article.

    Moreover, owning the life insurance policy outright doesnt affect your beneficiaries. In other words, Medicaid cant go after your beneficiaries for any estate recovery upon receiving the death benefit. The death benefit goes directly to your beneficiary and avoids probate.

    However, if your estate is named the beneficiary, then yes, Medicaid could make claim to your death benefit.

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    How Medicaid Benefits Impact Your Life Insurance Eligibility

    When you apply for life insurance, an underwriter evaluates yourevidence of insurability to decide if you qualify for a policy. Evidence of insurability is based on your income and financial history.

    Life insurance companies use evidence of insurability to confirm that your policyâs benefit is proportional to the financial support you provide to your loved ones. You canât buy a policy so large that itâll significantly increase your familyâs wealth.

    But, you must have below a certain amount of income and assets to be eligible for Medicaid benefits. The amount you need to qualify for Medicaid may be too low to allow you to qualify for a life insurance policy.

    An existing life insurance policy wonât be affected if you apply for Medicaid. As long as you pay your premiums, your provider canât cancel or change your coverage because of changes to your health or income.

    Every insurer has its own minimum earned income and asset requirements. An independent life insurance broker like Policygenius can help you evaluate your options.

    About Senior Legal Line

    Senior Legal Line is a legal question and answer line for Seniors.

    The column is written by the Senior Citizensâ Law Project. It is not meant to give complete answers to individual questions. If you are 60 years of age or older and live within the Minnesota Arrowhead Region, you may contact the Legal Aid Service of Northeastern Minnesota with questions for legal help by writing to: Senior Citizensâ Law Project, Legal Aid Service of Northeastern Minnesota, 302 Ordean Bldg., Duluth, MN 55802. Please include a phone number and return address. To view previous articles, go to: Reprints by permission only.

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    Can Medicaid Take Life Insurance Proceeds When The Decedent Dies

    Now that you have a basic understanding of how your choice of life insurance policy counts against Medicaid eligibility, you might be curious to learn whether or not the program is allowed to legally recover the care costs theyve covered.

    While there are different ways Medicaid can attempt to recover costs of care, its not always possible for the program to tap into proceeds because theres often an exemption that protects life insurance benefits.

    Medicaid doesnt always try to seek recovery from every benefit recipients estate or heirs. While it doesnt always happen, with dropping budgets and rising expenses, the program has to be replenished somehow. When the state is required to seek recovery is defined in the Omnibus Budget Reconciliation Act of 1993. Here are some scenarios where the state will try and collect from the deceaseds estate:

    • Services are provided to recipient in a nursing home
    • Services are provided in an intermediate care facility for the mentally handicapped
    • Home and community-based services in a hospital are provided to recipient whos 55 or older
    • Prescriptions costs of recipient whos 55 or older

    Life Insurance And Medicaid Spend

    Will Medicaid be Able to Claim my Life Insurance Policy ...

    What should be done with existing life insurance policies when an elder is planning to apply for Medicaid? If your parent has an existing policy and is in poor health, you may decide to keep the policy rather than cancel it. The elder may be uninsurable at this point, and if you keep the policy in force, then the family may be able to benefit from the proceeds upon their death or use these funds to help cover funeral costs.

    If the total face values of an elders life insurance policies exceed $1,500 and their countable assets put them over the limit to qualify for Medicaid, then they will need to carefully devise and follow a Medicaid spend-down strategy. In some cases, it could be a good idea for a family member to purchase the life insurance policy from the senior and keep it in effect by paying the annual premiums.

    You see, it doesnt matter who the insured is or who the beneficiary is. Medicaid only cares about who owns the policy/policies in question. The reasoning for this Medicaid rule is that the owner could simply cash in the policy at any time and receive the surrender value. Because these funds are readily accessible, Medicaid believes they could and should be used to help fund an elders long-term care. But if a child purchases the policy at fair market value, then the elder no longer has the ability to cash in or cancel it, thereby eliminating its impact on their Medicaid eligibility.

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    Does My Life Insurance Policy Count Towards Medicaids Asset Limit

    It depends on what type of life insurance policy you have. Because a term life insurance policy does not have a cash value, it does not count towards the Medicaid asset limit. But if you have one or more whole life insurance policies , and the total face value of all those policies is more than $1,500, then it does count towards Medicaids $2,000 asset limit.

    How Does The State Define Undue Hardship

    The state may consider it a hardship when:

    • The estate property was a family business, farm, or ranch for at least 12 months before the person on Medicaid dies, and is the main source of income for the heirs.
    • The heirs would need financial help from the government if the state filed a MERP claim to get money back.
    • The heirs could stop getting financial help from the government if the state did not file a MERP claim.
    • The person who died received services because he or she was a crime victim.
    • There are other circumstances that may create a hardship.

    One type of hardship applies just to the home. If the value of the homestead is under $100,000, and if one or more of the heirs have family income under a certain amount, the state may not ask for money back. In 2019, this income limit for one person is $37,470. For a family of two, it is $50,730. These figures are adjusted each year.

    The state will not grant a hardship request unless the person’s heirs ask for it and provide the requested proof of the hardship.

    If the estate has debts, such as funeral costs, legal costs, or a home mortgage, those costs are paid before a MERP claim is paid.

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    Can Life Insurance Coverage Impact Your Medicaid Eligibility

    There is a limit on assets you can own to qualify for Medicaid. A term life insurance policy wonât affect your ability to get Medicaid because term life insurance is not an asset. But apermanent life insurance policy can impact your eligibility.

    Some permanent insurance policies, likewhole life insurance, have an investment-like component called a cash value that can be accessed while youâre alive. Because you can use the cash value, itâs considered an asset when applying for Medicaid.

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