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jdconrad Asked October 2016

Is life insurance award given to children from one parent's policy eligible in Medicaid 5 year look back?

My mother is on Medicaid in a nursing home in NY. My father was estranged (not legally separated) and in NC under the care of my sister. He passed away Dec. 2015. He had 3 life insurance policies. All 4 children and mom were named as beneficiaries and funds were dispersed. Medicaid is now re-certifying mom's medicaid. Are the insurance awards paid out to the children considered in the 5 year look back formula? Will the children be required to hand over the insurance money to Medicaid? I have been unable to get an answer from Medicaid, which has become the norm in this whole ordeal!

EXPERT K. Gabriel Heiser Oct 2016
1. The amount of proceeds paid to your mother is obviously her money and has to reported to Medicaid.
2. As for the portion of the proceeds that passed to the children, the only way that such insurance proceeds could be countable (as a transfer from your mother, subject to the five-year lookback rule) is if in your state life insurance proceeds form part of the "statutory share" of a deceased spouse that the surviving spouse is entitled to. In most states, life insurance paid to anyone other than the estate of the insured would not be part of this calculation and thus would not be deemed a transfer from your mother (because she was entitled to a portion of those proceeds under the statute and did not actually receive them).

pamstegma Oct 2016
Mom has to report her portion of the insurance. Keep all the statements from the insurance company. The kids portion is theirs, not factored in.

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igloo572 Oct 2016
My experience is that $ that an insurance pays to each beneficiary is "income" for the month received and if not spent within that month becomes an "asset". It is reportable $ for Medicaid. If only mom is on Medicaid, then the $ paid to her alone is the only $ problematic & reportable for Medicaid.

Perhaps the best way to deal with this is to try to find things allowable as expenses to spend all the insurance $ on for mom AND do this within the month received so that she starts the month within Medicaid's income / asset limits and ends the month within Medicaids income /assets limits. If the insurance $ isn't to big (or "bigly" rotflmao) having them fully buy a pre-need funeral & burial policy (8-10k), or if its a larger amount of $ perhaps dental work if mom is able to deal with dental care, as both are larger amounts of $ spent. Whatever the case the windfall of $ mom is paid (moms $ only not kids) will need to be spent on her care & her needs only. If she can't spend it within the month, then it will take her assets over the maximum 2k allowed under Medicaid. If this is what moms situation is, you need to clearly find out just how Medicaid needs for mom to do her copay or SOC ( share of cost). Could be she reverts to private pay and suspended from Medicaid till she becomes impoverished again or could be she will need to pay back all excess $ over the 2k asset limit to the state for what the states Medicaid program paid on her care. You / DPOA need to clearly find out just what needs to get done.

I'd do a short 1 page letter to Medicaid and fax it over to medicaid and also call the local caseworker for mom and snail mail it too. If your states medicaid is especially overwhelmed or inept, instead of snail mail perhaps mail letter certified with the return registered receipt. Medicaid should have sent mom /DPOA a letter stating her medicaid eligibility and her SOC and the fax # will be on this letter. I'd fax from a FedEx office type of place where you get a fax confirmation report. Fax & certified mail maybe run $ 10 to do both.

For my moms annual medicaid renewal, there was a questionnaire asking on the status on her finances, property ownership, insurance, etc. as well a required the current months bank statement AND the previous 3 before that one. Renewal sent to me as her on file for medicaid contact person & DPOA and with my signature verifying it. I had no idea that renewals even happened & had basically put all of my moms paperwork into storage. Fun!!!

BarbBrooklyn Oct 2016
So, are you talking about money from the policies that went to the children? Or money from the policies that went to mom, which she gifted to the children?

teacup44 Oct 2016
I have to agree with you regarding Medicaid....you get a different answer with different people you speak with!

ferris1 Oct 2016
the children of the deceased are not applying to Medicaid. Insurance policies are exempt from taxation, however, I do not work for your state's Medicaid office and I would press them again to get an answer. They should tell you exactly what they need for paperwork. Your mother is the only one involved.

FrontierGal Oct 2016
You could look into creating a Special Needs Trust and put the insurance proceeds into it, if the amount is significant and will cause her to lose Medicaid benefits for a significant amount of time. The money in the trust then becomes "for" her benefit but doesn't legally belong to her, so therefore doesn't cause Medicaid benefits to stop. This may be a better option than rushing to spend the money in one month. In the long run, the state gets any money left in the trust at mother's passing. Check with more than one lawyer for cost of setting up trust and advice on whether it's a good idea in your situation. Otherwise, I believe she will lose benefits for the amount of the insurance proceeds divided by the monthly cost of her care. ($100,000 divided by $10,000 per month = 10 months of no Medicaid. I have heard of this happened when, say, someone is injured n a car accident and gets on Medicaid and then an insurance settlement comes through and because of it they are kicked off Medicaid. I believe these trusts are used in these situations. With no trust, the person is off Medicaid and must pay for care themselves until the money is gone, then get back on Medicaid. You can still use the money in the trust for any of your mother's needs without having to scramble to find expenses to use up the money in 30 days.

Avalon4 Oct 2016
In New York Medicaid recipients are allowed to keep $14,000 in bank account not $2,000 everyone keeps referring to which must be the amount most states allow. Anything over $14,000 is excess and would have to be spent down to qualify for Medicaid or if recertifying anything over $14,000 would result in the NAMI to the nursing home until spent down to $14,000.

pamstegma Oct 2016
Avalon, I don't know where you heard that. I am in NY
We just went through this, it really is 2000 or less in assets.

Avalon4 Oct 2016
Pamstegma - perhaps your loved one is not over 65? I had two parents in nursing home both were recertified twice. My father who has now passed away had to self pay until he reached $14,000. My mother is still in a NY nursing home and has considerably more than $2000 and has been recertified three times. I don't know your situation re: age or disability of the Medicaid recipient but I do know that in my parents case that is the amount they were/ are allowed to keep.

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