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What happens with life insurance policies after death is dependent on who is the beneficiary.
If you are listed as the only beneficiary then you contact the insurer to find out how to get the $ as the beneficiary. There will be a form to be completed and likely need an original death certificate. And it will be reported income by the insurance co as a 1099 paid to you.

If its the deceased estate who is the beneficiary, then you have to deal with it in probate and it’s gets distributed as per terms of the will.

If your ? is about Medicaid with a application on your radar, the type & amount of life insurance has specific compliance requirements by LTC Medicaid:
- whole life policies, those have a cash value, and they will have to be cashed out with all $ used as an asset spend down BEFORE Medicaid eligibility can happen
- for GULs it kinda depends on how their written, you probably need to talk with your old HR department or contact the insurance co to see if a cash out can even be done.
- for term life it’s going to depend on your states Medicaid program. Some require the face value of a term policy to be under a certain limit and if it’s over that will require you to get a life settlement. The face value part is super important as that is what’s counted. Often for older term policies, they end up paying way, way more than the face value but it’s the policy stated face value that’s reported to Medicaid. For these, they often pay a dividend that is required to get put back into the policy. It’s income that’s reported to IRS and so reported for Medicaid. If the month that the dividend is paid, takes your Medicaid application over the monthly income limit for Medicaid, you kinda may need to get a CPA to do an amortization letter to accompany Medicaid application. I had to do this for my mom’s Medicaid application.
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