Ask Terry Questions Qualifying for Medicaid — does Life Insurance policy count?

Qualifying for Medicaid — does Life Insurance policy count?

By Terry Savage on April 20, 2013 | Financial Planning / Retirement

My dad is 89, widowed,still living on his own and in ok health. He has less than $80,000 in assets, mostly 401K and savings, no home or property. It appears likely that we’ll be looking at nursing home care for him at some point, in the state of IL, involving Medicaid. And we know that they will use all his assets before Medicaid kicks in. He does, however, have a whole life insurance policy for $10,000 with a current face value of over $30,000. My question is if we should buy the insurance policy from him so that I own it instead of him, or take some or all of the cash value out of the policy and buy a Funeral and Burial Trust.

SAVAGE SAYS: I’m about to give you a very long answer, as below I will cut and paste the “exempt” and “non-exempt” assets that a person can have when applying for Medicaid. It is important to know that the state will “look back” at least 5 years in an attempt to reclaim assets transferred in anticipation of qualifying for Medicaid. So I don’t think you can transfer ownership of this policy. Since he has so few assets, to be frank, it is unlikely they will actually do an extensive “look back”? — but the life insurance policy would be “countable.”? I’ll let you make that decision. As long as a burial plan is non-refundable, it would count as an exempt asset. Now here’s that list:

Exempt assets are those which Medicaid will not take into account (at least for the time being).In general, the following are the primary exempt assets:

  • The Home, no matter what?its value. The home must be the principal place of residence. The nursing home resident may be required to show some “intent to return home” even if this never actually takes place.
  • Household and Personal Belongings such as furniture, appliances, jewelry and clothing.
  • Wedding and engagement rings.
  • One Car or Truck.
  • Burial?Spaces and certain related items for?applicant and?spouse.
  • Irrevocable prepaid funeral contract.
  • Value of Life Insurance?if face value is $1,500 or less. If it does exceed $1,500 in total face value amount, then the cash value in these policies is countable.
  • $2,000 Cash

All other assets are generally?non-exempt,?and?are countable. Basically, all money and property, and any item that can be valued and turned into cash, is a countable asset unless it is one of those assets listed above as exempt. This? includes:

  • Cash, savings, and checking accounts, credit union share and draft accounts over $2,000
  • Certificates of deposit
  • U.S. Savings Bonds
  • Individual Retirement Accounts (IRA), Keogh Plans (401K, 403B)
  • Nursing home accounts
  • Prepaid funeral contracts which can be canceled
  • Trusts (depending on the terms of the trust)
  • Real estate (other than the residence)
  • More than one car
  • Boats or recreational vehicles
  • Stocks,bonds, or mutual funds

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