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The life insurance policy is for the amount of 60,000. My deceased sister left her this money through her life insurance policy. I don't want it to affect my mother's Medicaid. So I don't know if it would be wise to forfeit the claim and let it go to the other beneficiaries or claim it and see what options she may have that will not affect her Medicaid and SSI benefits, if there are any? She left her this money so that she could be taken care of, but unfortunately it is causing more harm than help. Please advise as to what options there are available.
FYI: She resides with me full time in the state of Florida I am also one of her POA as well as my other sister.

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If your mother "disclaims" (refuses) the proceeds of the insurance, the Medicaid department of your state will treat it as if she received the money and gifted it to the person or persons next in line according to the policy's beneficiary designation. Such a gift would cause your mother to lose her Medicaid for a certain number of months.
Thus, it would be better for her to accept the money and immediately convert it to something not countable, e.g., a Medicaid annuity, prepaid funeral and burial, household items, new car, etc. I give a lot of these suggestions in my Medicaid Secrets book (by the way, the 2015 edition is just out. www.MedicaidSecrets.com).
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The receipt of the proceeds from the life insurance policy (countable asset) is most certainly a Medicaid disqualifying event.
However in Florida, if countable assets are disposed of in manner that does not impose a Medicaid eligibility penalty in the same month they are received, it is quite possible that no penalty will ensue.
Otherwise, for each month your mother is over the asset limit of $2,000, she will not be eligible for benefits.
In addition to the other suggestions provided, there may be other options to preserve the proceeds for your mother's benefit while she is receiving Medicaid.
Consider a Personal Service Contract between you and she. The value of the contract can be paid in lump sum to you without penalty (may be a taxable event).
Also consider using a Supplemental Needs Pooled Trust. Transferring funds to this existing irrevocable trust sponsored by 501c3 organizations allow her to maintain Medicaid eligibility while having access to the funds transferred for almost anything related to her health, maintenance, and welfare while receiving benefits.
Does she own a home with a mortgage that can be paid down?
I encourage you to explore all the options available to preserve the cash for her use while she is receiving Medicaid benefits.
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I would recommend seein an Elder La Attorney near you. Waiving the insurance proceeds, if you could, would be like waiving an inheritance, and Medicaid would treat that the same way as if she gifted the money. The funds would gone and the penalty would start only after she qualified for Medicaid. There may be other ways to use the money or preserve the money under Florida laws as opposed to waiving her right to the proceeds.
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Consult an elder law attorney.
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I agree don't forfeit the claim. See a lawyer as what you have to do. But I am thinking that whatever you do with the money, medicaid will know about it and it will have to be used up before medicaid will pay a dime. Just my opinion.
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You write: "She left her this money so that she could be taken care of" ... i.e., take care of your mother wherever she is. While it may affect Medicaid monies, i.e., taxpayer dollars, it's doing exactly what your late-sister meant it to do...take care of your mother.

I, too, am paying down my mother's money for her care. It's not my money, it's her money.

Taxpayers should not have to foot the entire bill for our elders, especially if people have money to pay for their medical care. I'd suggest you spend it down on your mother (it's her money).

I hired a Medicaid consultant along with an Elder Care Attorney. I am thankful Medicaid is available to help me and my mother. Think about what would happen if it weren't available.

I've also kept up her Medicare and BC/BS to help her get the best care she can while in the facility.
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Absolutely the $60k was earmarked for mom's care so it would not be right, to abandon it or somehow try to have it go towards anything other than mom's care, I sort of wonder why the question is even being asked. Yes it will mean a few bumps in the road with MedicAid, but they, and any care providers, will just be happy to see their bills are paid, as they should be.
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Dad has 2 VERY small insurance policies. Before he was accepted into the veterans home, he was in another home and I applied for Medicare. He would have to cash in his insurance policies to qualify. Cash value was less than $500 each!
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I had to change the beneficiaries on all sorts of stuff including policies and wills.
My will goes into a trust for the designated beneficiaries that is set up for care of my wife. Upon her death the trust will be covered by our wills and go to the heirs.

See and discuss this with a qualified elder affairs attorney. Never rely of posted advice.

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Yellrihis, I am trying to figure out, if the money was left to her, for her care, why it isn't being used for that? What else does she have to spend it on? Yes, you could pre-pay her funeral expenses and that could be $12,000 or more.
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