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My sister has been diagnosed with early onset dementia. For right now she is living alone on a very fixed income, however I see needing to put her in a nursing home in the future and applying for Medicaid. She is the owner of the above policy.

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Some states place limits on the face value of term life. Larger ones can be sold aka a “settlement” with the proceeds from the sale used for spend down. Life settlement firms are out there but it’s kinda a lousy deal for the consumer. If you find she is going to need to sell and policy is large, she can get a broker to do a viatical life settlement sale to an investor. It sounds creepy but for those who have a verified diagnosis of terminal disease, the viaticals pay better than half.
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No. Term life insurance policies are not considered an asset for Medicaid purposes.
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