I live in Michigan, am 82 years old and my husband passed away a year ago. I have a question on a life insurance policy and what would happen if I had to apply for medicaid for nursing home care. I am the policy holder of a $30,000.00 policy that was taken out in 1998 which my son Chris pays for $25,000.00 and I pay for $5,000.00. Chris has always lived with us and so we have given him a quick claim deed to the home. The five thousand is for my funeral expenses and Chris has four other siblings who he will use the $25,000.00 to pay them each an equal share for the family home. This is the way it was set up with the insurance company and my oldest son Larry is the administator and beneficery of the policy. He was to see that above plan was taken care of. At this date this policy has a cash value of a little over 17,000 dollars. Is there any way to protect this and keep it for what it was intended for. Any advice you can give me would be greatly appreciated, Thank you

Terry Says:  Oh, this is a tough one.  Here is a link to the Michigan booklet that is a guide to Medicaid income and assets restrictions.  According to this document, you may only have $1500 in life insurance cash value to qualify for state-funded nursing care, as well as slightly over $11,000 in prepaid funeral expenses.  This is ridiculous, upside down, and illogical.  You say that you are the “holder” of this life insurance policy, but that your son makes the majority of the payments?  Double check as to who is listed as the “owner” of the policy — not the “insured.”  If Chris is listed as the “owner” then it is not part of your estate.  And if this had been done at the time the insurance was purchased, you have no problems.  However, if you are listed as the “owner’ then the cash value is part of your assets.

I don’t way to “play lawyer.”   So I’m going to suggest that you contact a qualified elder law attorney in your state.  And here’s how to do that.  Click on this link to NAELA, the National Association of Elder Law attorneys.  There you can search for a qualified lawyer in your locality.  I’m quite sure there must be certain exceptions or perhaps a way to use the current cash value to prepay your funeral expenses.  And the attorney should review the situation with the quitclaim deed to  your house.  You need expert, individualized advice here.  And please write back and let me know how this turns out.

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