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The policy was taken out years ago and she did not remember anything about it. The beneficiary was her trust which has been dissolved.

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I'm surprised Medicaid did not find the policy...they found several of my folks' that I had to sort out, some were just the same one renamed, we did cash in the ones that had cash value. If it is less than the 2k or it is intended as a burial policy, it may not even be a problem.
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Igloo has my vote. Definitely seek advice from an Elder care attorney first! Medicaid would probably snap up that CV in a hearbeat. Every state is different and you don't want to jeopardize your Gma's Medicaid eligibility. NJ only allows a person to keep $2000 in assets. If there is any way you can preserve that CV for your mother's benefit, an elder care attorney would be the one to make it happen. Also check out the Money & Legal tab on this website. There is a wealth of educational information in that section on this website. Best of luck to you.
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So it's a whole life policy and it has a cash value, right? I'd contact asap the attorney who did the trust dissolution to see if they do elder law and what options are out there BEFORE contacting Medicaid. The attorney may be able to have the insurance company restructure the policy so that it becomes NCV - no cash value - or have other suggestions what to do with the cash value if that is the only option (like putting the $ in a special needs trust). Whatever the case, you want it so that you are deciding what happens first rather than the state if at all possible and a good elder attorney can do that. Good luck.
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