My father has two life insurance policies on him with my mother as beneficiary. Can that be counted as an assets when we apply for Medicaid?

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I have been paying the premiums the last few years. My mother has Alzheimer's and she's going downhill really fast. She needs more help than my sister and brother and I can provide and my father has Congestive heart failure and just survived colon cancer. He can't take care of himself much less her. They do not have the income to pay for assisted living. My mother mortgaged the house when she first started declining and we also had to file bankruptcy 2 years ago but managed to keep the house. I have been supplementing their income for the last few years. Should I just stop paying the premiums and let the policies lapse?

Answers 1 to 6 of 6
You might want to talk to your local area on aging about this. Here's what I "think", but you need to be sure it's accurate. Also, my thoughts are completely based on the subject of medicaid. If your mom's medical situation requires nursing home care and she can qualify for Medicaid, I THINK, Medicaid would allow a portion of her income to be used the pay the premiums on life insurance policies on which is the beneficiary. That means they could be continued, but you would not have to make the premiums. I'm sure Medicaid would want to be reimbursed for any or all of the costs incurred by them as a result of your mom's care. So it would be to their advantage to make sure the premiums are paid. I'm sure there is more to it than that, maybe they would want to be listed as beneficiary. I really don't know how it's done. That's why it would be good to talk to your local Area on Aging or your local State Department of Social Services for some guidance.

I'm assuming when you say "we" it was your parents who filed bankruptcy 2 years ago, but managed to keep the house.

To answer your question more simply. Yes, life insurance policies are considered assets that Medicaid can use for recovery of care expenses after your father passed. If you are wanting to apply for Medicaid for your mom or both of your parents, I wouldn't just let the policies lapse. Get some guidance first.

Top Answer
Do get some guidance. Life insurance policies are assets. If the cash value plus other assets exceed the allowed limit for Medicaid, they will probably have to be cashed in and used for spend down. At least that was our experience 8 years ago. Things may have changed and your situation may be different. Don't act without some professional advice.
I am saying don't let the policies lapse until you get guidance because maybe there would be repercussions to letting the policies lapse just when you are going to the State and asking for assistance. As long as the State is willing to allow the premium costs to be paid out of your mom's personal income (not your dad's) then why not let the insurance continue and give some assistance to the State that is picking up the tab. Seems fair. Again, get some guidance.
I know very little about medicaid and I've been led to believe it varies by state, so I am NOT commenting on that aspect. Are you trying to have your Mom qualify for medicaid or both parents?

Who is the owner of the life insurance policy? For example, If your Dad is the owner and you are not looking for medicaid for him, then the issue is moot . . . until death benefits are paid out, to the beneficiary. One phone call and signature from the owner will change the beneficiary!

What type of insurance is it? If it is a term policy, there is no cash value, hence no asset. (See previous comment about beneficiary changes).

The owner of the insurance can also be changed easily. UNLESS this becomes a medicaid issue for the owner.

There is some info on the web about converting life insurance into long term care insurance that may be of interest to you.
There was an article on this site about converting life insurance into immediate payments to cover the cost of care. The author was the CEO from LifeCareFunding. Don't throw it away until you at least have it valued by them.
Some insurances have cash value or face value that is countable as an asset. We had to cash in a couple for my mom and dad. On the other hand, they fell for a couple of bascially worthless accident and cancer policies and you probably should quit paying those. But others which do not have face vaule may be kept, because the proceeds of a life insurance payout are *generally* not countable as long as they are in special accounts and non-subject to estate recovery; you may be a contingent beneficiary and getting that changed may be wise. It is a matter of checking the rules and the details, and doing the math on each of them. Elder law or estate planning professional consultation may be of gret value even if you have to pay a few hundred dollars for it also.

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