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Bellini, for this day & age 5k is a pretty small life insurance policy. Bigger insurance companies don’t really do ones under 50k. Some need it to be at 100k minimum or higher to even warrant the paperwork.
Is it a 5k fully funded face value term life insurance policy?

Or is value accrued to some date in the future? Like Is this one of those policies touted to take care of after death expenses. These are often advertised on TV & are low costing monthly or qtrly premium. If so, please please look at the fine print. They often will NOT do a payout at all till a certain period of time & premiums paid is past. The time period could be 3 or 5 years. If it reads this, and if she is unlikely to hit the requirements, it may not be worthwhile. Read carefully as to what happens to premiums paid if it has a required period before activated & she dies before hitting that mark.

I just cannot see a spanking new policy owned by an elderly applicant just bought with premiums owed being able to have any immediate value. Life insurance runs on risk; a new 5k on a 90 yr old makes no sense to underwrite but a 5k on a 30 yr old does as they are likely to live another 30 & actually pay it out. I bet there’s no $ to cash out. Again carefully read the policy.

My experience for my mom’s term life insurance was that it was all about the “face value” of the policy that determined whether it was ok & within Medicaid asset limits. Face value will be indicated somewhere in the policy. Her face value was $1,000, so ok for TX Medicaid, even though it paid more than that after she died. Her policy was quite quite old and fully paid up; it actually was so old it produced a nice lil dividend to her which was required to be plowed back into the policy, & which as a dividend, technically was income/asset and included in her initial application and then reported each year in her Medicaid renewal.

Btw TX does annual LTC Medicaid renewals, so keep all her paperwork together and organized and add to it as bank statements, etc come to her in the future. The renewal had like a 14 day submission deadline....
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anonymous944475 Aug 2019
Wow, what useful information! Thank you very much. I will definitely check into it.

And I am so sorry for you losing your Mom.
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If you took it out on your sister and named yourself beneficiary, it will be considered income and not inheritance and will be taxed at your tax rate. Just an FYI.

You should call Medicaid and ask them, that way if it is a problem then you can cancel it before you are out any money.
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If you have to cash in it, you can use it to prepay a funeral, though it might need to be cremation at that amount.
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anonymous944475 Aug 2019
Thank you. I may have worded that wrong. The $5,000 policy is one that I just took out. We haven't even paid the first premium or payment. Could I have taken the policy out under my name?
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depending on what type of policy it is, they may require her to cash it in and spend it on her care before she will be eligible for Medicaid. Usually if it has a cash value, it’s considered an asset and has to be cashed in. The medicaid social worker assigned to her should be able to tell her if it will have to be cashed in
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anonymous944475 Aug 2019
Thank you for your response. The insurance policy is one that we just took out. We haven't even paid the first premium, yet. Does that matter?
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