Hi, my mom went a little overboard on life insurance policies, and was paying out more than a third of her Social Security check for life insurance (and almost half on credit card balances but that's another story). I took over one of the policies, and after some wrangling my brother took over another. A couple I cashed out and used it for her expenses. The rest I started paying on and have ownership of. The payments became unmanageable and I cashed out the largest policy. But...I have since learned that to qualify for Medicaid she is going to have to use up the cash value of all of these. None of this was done to dodge Medicaid requirements, just to make her finances more manageable and stable. Is there any way to justify the transfer of these policies on that basis, or any other basis?

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The cash value of the insurance policies are an asset. There is no way around it. If moms assets are over 2K, she will be ineligible for Medicaid as its an " at need" entitlement both financially & medically for the entitlement & for financial it basically means they are impoverished at whatever income level moms state has set. Most states are about $2,100 income & 2K assets. Each state runs its program uniquely.

BUT mom can determine just how she does the spend down of the funds. Usually they just private pay but mom can be more creative. She could do a Medicaid compliant special needs trust with the $. Mom could get dental work done, new eyeglasses & hearing aids; a preneed no cash value funeral policy.

Now I have a ? for you......just when did you & bro take over moms policies.? Like you changed ownership, right? This could get sticky for moms eventual medicaid application, there will be a transfer penalty inquiry on this if it was less than 5 years from the date of her application. If you have kept documentation on every cent going for moms care or needs, you can explain this but it will be a butT-rash to deal with.

Also what is going on with the CCs? Is mom walking on the debt? Are the CC writing it off? If yes & yes, there is going to be a sometime in the future 1099 -C & taxes due to IRS & medicaid eligibility issue.

I'd really suggest you & mom see an elder law atty BEFORE mom does the application. I'm going to guess that you are doing all this already have 2 red flag issues with the insurance policies & CC debts, really speak with legal before this morphs into bigger problems.
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