Life insurance and Medicaid

Shb1948, please be aware, the poa can never ever change beneficiary on any type of account. That is only something the policy holder or account holder can do. It is completely illegal for a poa to attempt to do any changes like that or to even suggest to the senior they should make that change.

ALL of you need to see Elder Law Attorneys before you make a big mess.

Thanks for the great comments. Both parents have pre=paid burial policies. Neither parent has more than 10,000 in paid up life insurance policies. Would changing the beneficiary on the policies at this time be an option?

Sum - if Medicaid is in their future you do not want a trust done. And to be quite frank, doing a trust for such a small amount makes no sense at all at least to me. Were you told you needed to cancel their life insurance by the state? Most have it such that small life insurance policies under $ 1,500 or so are fine to keep in force as that is their burial funds if the beneficiary is their estate or their spouse. If just $ 1,200, it is not going to pay for a traditional funeral & burial which run 8K or so. $ 1,200 could cover a cremation and urn and perhaps a visitation. If you have the money, I'd go to FH to see what they can do for the amount and go ahead and prepay for all. Policy need to be NCV - No Cash Value to be ok for Medicaid.

Shb - have you gone on-line to see if it's possible to do that way? For small value policies with bigger insurers, a lot of things can be done on-line as it's not worth having customer services to do it. If it's under 10K, there's a good chance, you can do whatever on-line with your parent as you are their POA. 10K is the tipping point for paperwork on financial stuff due to Homeland Security documentation needed.

Shb1948, are the policies whole life or term? Medicaid does limit the size of a life insurance policy, so that it can have only a certain cash (surrender) value. I imagine that both the policies are below that value or the state would have asked that the policies be sold.

Do the policies have contingent beneficiaries. I ask because when one parent passes, the other will still be written to the other parent, so would probably go to the estate. If both parents are on Medicaid, I wonder if anything in the estate would be subject to recovery. Maybe the person on our board who knows a lot about Medicaid will be along soon. I wonder if contingent beneficiaries could be added to the policy.

I read here the other day about people diverting life insurance policies to a funeral home to pay for burial expenses. Are both of your parents' policies $10K? Maybe someone will have an idea how this could be done if your parents need this.

As it stands now, I would say that yes, the $10K received by one parent will have to be spent down. If when that parent passes, if the death benefit goes to the estate, then it may be subject to Medicaid recovery. I am not an expert, though, so don't take my word for these things.

I have a similar problem. My parents are both on Medicaid and are beneficiaries of each other's life insurance policies. How can we avoid either one losing their Medicaid eligibility when the other dies? Can the beneficiary be changed by Power of Attorney?