Both of my parents are on Medicaid and have small life insurance policies. The beneficiary on both policies is the surviving spouse followed by myself. Will the surviving spouse lose their Medicaid eligibility due the insurance proceeds?

Life insurance with a face value under $1,500 is not countable for Medicaid. If it is over that amount, then only the cash value is countable. I assume the $10,000 policy must be from their employment years ago.

Normally, I would advise a child in this situation to utilize the $10,000 by spending it down within the month of receipt so it will not cause disqualification. Pre-paying funeral and burial expenses is usually advisable, but in your case they have decided to donate their bodies and thus this is not an option. Ask the nursing home if it possible to purchase anything for the parent's room that might benefit them; that way it is not a penalty-causing gift. The idea is to spend the benefits down in the month of receipt: in the month of receipt it is deemed income, but in the following month it is treated as an asset and must be reported to Medicaid. At that point, your surviving parent will be over-resourced, i.e., have too much money to qualify for Medicaid till the money is spent down again.

I was thinking about donating my body to the medical university here. I was discussing this with my nephew who, at that time, was going through medical school. He informed me that the school would give the body back to the family for burial after they were finished. Thus family would need to pay for burial/cremation. You may want to double check with the school if they dispose the body or return it to you.

Vocalsbyjoanna, your post is a mess. Your cash inheritance is not taxable and not all states would have some inheritance tax as you seem to indicate. Your resources are countable for Medicaid, but do not count for food stamps if you are Categorically Eligible due to the level of your income. There are special rules for how lump sum payments are treated as income and resource purposes. If you are commenting on disability income it matters whether you are talking about SSI or Social Security. SSI is need based and your other income and assets are reportable and affect your eligibility. Social Security is not need based and your other income and resources are irrelevant. Don't encourage people to illegally try to hide assets, which I think you might be trying to do, except that your post is too confusing to tell.

micalost, I do appreciate your reply. The route you chose does not seem appropriate for me.

I apologize for not being clearer , I had to do this because if my father died (which he did) The money would be income and mom would be disqualified for medicaid until it was used up and we would have to go through filling out the title 19 forms all over again.

I do not know if you will lose medicaid eligibility or not, but why would you want to take government money when you could be paying for the surviving parent's care? That is exactly what is wrong with the medicaid system. Those who liquidate their assets and use that money to pay for care cannot get medicaid to help them when they run out of money because people who "hide" money instead of using it to pay for care. I may sound harsh, but do not expect any extra money from your parents when they pass........use it to take care of them.

We went thru an estate planning attorney to get my mother on Medicaid. Mom had several life insurance policies and even though she had maintained her own Nursing Home expenses for years,she ran out of money due to a LTC company that would not pay off. We had to either cash in her policies at a small value or cancel them. Life insurance is considered potential income. I am surprised Medicaid allowed them to keep the policy unless you changed the ownership of the policy to yourself and paid the premiums yourself. Most likely you will be kicked out of Medicaid and have to reapply. Since $10K is only about 2 months of Nursing Home costs you might be able to take the funds (if collected) and put them in his/her QIT account and IMMEDIATELY write out the whole thing to the nursing home.

Usually, during the Nursing Home application process for Medicaid, all assets are listed including life insurance. Life insurance has to be converted to a irrevocable trust to the funeral home. The funeral director can help you with this; an elder law atty is not needed. When your loved one passes, the funeral home is the beneficiary. All the best.

I went online and changed the ownership of the plan to myself. They sent a letter to my parent which I got. Then I changed the beneficiary.

When I was on medicaid many years ago, I had to disclose any policies as well as all my assets. I am guessing that Medicaid already knows about the policies and beneficiaries.
Best advice is to call your local medicaid office and ask.