Medicaid rules on what are allowed exempt assets for life insurance & fir funeral & burial will be state dependent as each state manages Medicaid uniquely.
For insurance policies finding out whether the policy is whole, term or universal is kinda the first step in this. If it has a value that can be cashed out (whole life always does, universals might & term usually don't), then it's part of the spend down before medicaid will pay. This is what Babalou is referring to. But if the policy is not owned by the elder, then it never ever needs to disclosed on medicaid application as Mica did.
FH can do a Medicaid compliant funeral & burial policy. These are NCV - no cash value - & under a set amount that Medicaid allows (seems to be 10k as the max). Personally I think that doing a prepaid funeral & burial should be the first thing if you have to get a spend down done.
When I did my moms medicaid, one of the required documents to be submitted was her life insurance policy. It was an old school one, 30+ legal pages, double sided done decades before. Policy fully paid up & to the point where annual dividend issued. The caseworker called me on it as to what kind it was and it's value as none of this was obvious. Also the caseworker does not have the time or training to evaluate policy. (More current policies are 1 page with type, cash value etc, printed and sent out each year with premium bill.) I got a broker who held insurance license in moms state to do a letter stating term NCV which was faxed to caseworker ASAP to get past that hurdle for Medicaid application approval.The dividend (which is reported to IRS) btw got reported as income on moms annual Medicaid renewal each year and amortized for the year so that the month of payment would not take mom over the monthly income allowed by medicaid. My point in all this is that insurance is very much scrutinized by Medicaid and there are tax consequences from any income that an insurance policy pays.
If your moms cash out is pretty large, what may be a good idea is to wait to have her apply for Medicaid to begin with. She does private pay and uses the cash to pay the N.h, then buys a prepaid funeral/burial and also buys eyeglasses, hearing aids, a specialty walker or wheelchair and get whatever dental done. All these are either not ever covered by NH medicaid or pitiful cheapest item covered. Dental for my mom was a good use of her $$$ as "dental care" once in a NH are those red- sponge swab sticks that are tits on a bull useless. If the elder can't brush & floss on their own, it won't get done.
Also it will take time to get the cash out done with the insurance company & there may be fees associated to do. You'll need solid legal (DPOA & MPOA) to send to insurer. If you are also the beneficiary, it will make this somewhat easier.
If the beneficiaries are other family members, once all this is done, you may want to let it be known that that inheritance is now gone. Good luck & try to keep a sense of humor in the maze that is Medicaid.
I've always found that most reputable financial advisors and website advise AGAIN whole life, as opposed to term life insurance, for just this reason. There are far better instruments/ ways to save money.
I believe we will probably do this. It's frustrating that she paid into this policy for years and now we have to cash it in and use the cash to prepay funeral expenses.
Who is it for and who are the beneficiaries? I changed myself to be owner of my father's policy- and just removed my mother from being a beneficiary because it would disqualify her medicaid title 19 when he passes.
Excellent question! I believe that you must cash in a whole life policy, but there sre, I believe, Medicaid compliant burial policies. Does anyone know about yhat?
Also, I believe you could legitimately used the proceeds to prepay funeral expenses. Whenever anyone here talks about things to spend down to Medicaid limits, prepaid funerals are always on the list.
I'm hoping someone more knowledgeable comes along to answer this!
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For insurance policies finding out whether the policy is whole, term or universal is kinda the first step in this. If it has a value that can be cashed out (whole life always does, universals might & term usually don't), then it's part of the spend down before medicaid will pay. This is what Babalou is referring to. But if the policy is not owned by the elder, then it never ever needs to disclosed on medicaid application as Mica did.
FH can do a Medicaid compliant funeral & burial policy. These are NCV - no cash value - & under a set amount that Medicaid allows (seems to be 10k as the max). Personally I think that doing a prepaid funeral & burial should be the first thing if you have to get a spend down done.
When I did my moms medicaid, one of the required documents to be submitted was her life insurance policy. It was an old school one, 30+ legal pages, double sided done decades before. Policy fully paid up & to the point where annual dividend issued. The caseworker called me on it as to what kind it was and it's value as none of this was obvious. Also the caseworker does not have the time or training to evaluate policy. (More current policies are 1 page with type, cash value etc, printed and sent out each year with premium bill.) I got a broker who held insurance license in moms state to do a letter stating term NCV which was faxed to caseworker ASAP to get past that hurdle for Medicaid application approval.The dividend (which is reported to IRS) btw got reported as income on moms annual Medicaid renewal each year and amortized for the year so that the month of payment would not take mom over the monthly income allowed by medicaid. My point in all this is that insurance is very much scrutinized by Medicaid and there are tax consequences from any income that an insurance policy pays.
If your moms cash out is pretty large, what may be a good idea is to wait to have her apply for Medicaid to begin with. She does private pay and uses the cash to pay the N.h, then buys a prepaid funeral/burial and also buys eyeglasses, hearing aids, a specialty walker or wheelchair and get whatever dental done. All these are either not ever covered by NH medicaid or pitiful cheapest item covered. Dental for my mom was a good use of her $$$ as "dental care" once in a NH are those red- sponge swab sticks that are tits on a bull useless. If the elder can't brush & floss on their own, it won't get done.
Also it will take time to get the cash out done with the insurance company & there may be fees associated to do. You'll need solid legal (DPOA & MPOA) to send to insurer. If you are also the beneficiary, it will make this somewhat easier.
If the beneficiaries are other family members, once all this is done, you may want to let it be known that that inheritance is now gone. Good luck & try to keep a sense of humor in the maze that is Medicaid.
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I changed myself to be owner of my father's policy- and just removed my mother from being a beneficiary because it would disqualify her medicaid title 19 when he passes.
Also, I believe you could legitimately used the proceeds to prepay funeral expenses. Whenever anyone here talks about things to spend down to Medicaid limits, prepaid funerals are always on the list.
I'm hoping someone more knowledgeable comes along to answer this!