Life insurance and Medicaid Eligibility

In order to qualify for Medicaid coverage of your nursing home stay, your assets cannot exceed ,000 if you are single, or 1,540 if you are married. However, not all of your assets are "countable" for these purposes. The biggest exemptions are your home, your car, and your personal property.

Another exemption is life insurance owned by you. The rule states that only the "cash surrender value" of a life insurance course is countable, but only if the total face value of all life insurance policies on your life exceeds ,500. ("Cash surrender value" is the amount the life insurance company will send you if you canceled the policy. It's also known as the "cash value." The "face value" is what the company would pay out to your beneficiaries if you died, assuming the course was still in effect.)

Life Insurance

So if you have a ,000 course with cash value of 0, you can keep it and it will not count towards your ,000/1,540 limit.

Life insurance and Medicaid Eligibility

What if you have a term course with a face value of 0,000? It's fully exempt since a term course by definition has no cash value. Of course, you (or an additional one house member) have to pay the superior each year to keep it in force.

What should you do with existing policies? If you have an existing course and your condition is not good, you may decree to keep the course rather than cancel it. After all, you may be uninsurable, and if you keep the course in force, your house members could advantage from the proceeds upon your death.

Assuming the total face values exceed ,500 and your countable assets put you over the limit to qualify for Medicaid, it could be a good idea to have your children buy the course from you and keep it in consequent (by paying the every year premiums). You see, it's not who is insured or who is the beneficiary that matters---it's who is the owner of the policy. The reasoning for this Medicaid rule is that the owner could naturally cash in the course at any time, and thus it is counted the same as if you already did so. But if your child is the owner, you have no ability to cash in or cancel the policy, so it would no longer count against you.

Another selection is to assign the course to a child, as a gift. This will cause a penalty duration so in many cases this is not the best solution. However, as part of an full, plan that includes other gifting, it could make sense.

Recently, some fellowships have advertised single pay, non-cancelable, no cash value "life insurance." The idea behind these policies is that if there is no cash value, the course cannot count against you. They are set up with minimal underwriting (i.e., virtually every person is guaranteed to qualify to buy one), and the beneficiaries are regularly the children.

The qoute is that if you buy an asset over which you have no control---you cannot cancel it, cannot get your money back, cannot even change the terms or the beneficiaries---the Medicaid agency may well deem this to be a gift. If that's the case, you have not finished what you thought you had, i.e., converting cash to a non-countable form, so that you did not have to make a gift of the cash. Accordingly, I advise my clients to stay away from this type of goods unless and until it has been proven to be effective as advertised.

Life insurance and Medicaid Eligibility

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