Can we cash in Mom's life insurance to prepay funeral expenses?

Speak with the funeral home.. You can make them the beneficiary.. It's legal and medicaid will not consider it an asset..

If the ins. Policy has a cash value, she/you can surrender (cash in) the policy and take the cash value. The ins. Companies will not pay out the face value ($11,000) until she is deceased. Some ins. Companies will allow you to borrow against the policy. When she has passed, they will take funds from the face value to repay the loan, and give you what is left.

My step-mother passed away last week. My dad assigned her life insurance policy to the funeral home to pay for her funeral.

If she is already on Medicaid, the policy was obviously exempted. Look at who the policy owner is, it might be someone else. Look at the cash value, some term life policies have no cash value. Finally look at who the beneficiary is. If her estate is not the beneficiary, who is?

That could be different from state to state. Go on line for Medicaid in your state or call a Medicaid office to inquire. In our state, spending on their final needs, (funeral) is an allowed spend-down. You could sign policy over to funeral home.