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My father has a whole life insurance policy that has a face amount of $25,000. Currently, the policy has cash value of $8,000. If he changes ownership of the policy to me, would that make the asset not countable? Is there a look back or penalty period? Thanks.

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You can get people's experiences and their best guesses here on this forum. But I wouldn't move any money without speaking to a lawyer familiar with the Medicaid laws in your state.
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There is a 5 yr lookback period that starts the date the Medicaid application is filed.
If ownership is changed to you, it’s transferring an asset that With a current value of $8k. If done now, and he applies for Medicaid before 2024, it will come up with a transfer penalty for Medicaid. For more fun, The value could come in to be more than 8k and be placed at what it would be as of date of application.

JoAnns suggestion to have it go for funeral burial is spot on good but it probably cancels the policy completely. Sigh.....

Id guess he would like to have some sort of life insurance policy, if so, I'd suggest you find out what the the FACE VALUE limit is for a TERM life policy is for Medicaid for your state. There will be an exact amount that’s the absolute ceiling for term life face value that’s ok for Medicaid. Then see if dad can get his whole life converted without any qualifications to term life that’s under the Medicaid term life face value limits and whatever cash value left over is used for funeral pre-need policy. If it was an independent insurance agent who did the policy originally, they will be more creative in doing this than one who strictly represents just 1 insurance co (like they only sell MetLife or only sell JohnHancock).

At 25k the policy is sadly too small to interest guys who buy life insurance as a type of investment. I know someone who does these (viatical settlements) and their lowest buy is 1M payout polices. Yeah it’s kinda a creepy kind of investment but can fill a need for some.
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If you plan on using Medicaid for Dads care in next five years, then I wouldn't change it over. This is considered an asset for him. 8k could be used to prepay a funeral.
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