Insurance policy, Medicaid, and funeral expenses. How do we go about this?

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My mother has an insurance policy that has a huge loan on it. My brother talked to a lawyer in regards to Medicaid and paying off 5 year look back debts, and the fact there is no money. It was suggested that the cash value be removed from the policy but still keep the policy intact. I was hoping to turn this policy over to the funeral home so that we can guarantee money for a funeral. I am not sure if this is now possible or how to go about it.

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Hi SharonZ,

My responses are following your questions in quotes below:

"I just had a question about whether or not a life insurance policy with a loan on it could be turned over to a funeral home to cover her funeral when she dies."
In order for a funeral home to guarantee goods and services for a specific amount there needs to be enough funds intact within the cash values for them to guarantee it. And, the only way they would guarantee the goods and services is if the funeral home is the first named beneficiary. Also, the funeral home would most likely have their own 'Goods and Services' contract in order to guarantee the expense in todays dollars.

"A different brother is the beneficiary of the policy with the loan and promises to use the money for her funeral, but I would rather have a guarantee that the funeral home gets it. Brother POA trusts that the beneficiary brother will keep his word, I do not." The only way to be sure the funeral home would receive the funds, would be if the funeral home is the first named beneficiary.

"There is no other money, except a $2,000 policy that I am beneficiary of and had planned on putting toward her funeral. They plan on taking cash out of my policy and the loan policy and put that money toward the ineligibility month. Can you still sign this over to a funeral home?"

During the process of the Medicaid spend-down, Medicaid takes into consideration the value of the insurance that was earmarked for the funeral goods and services. However, I believe if that policy was established prior to the 60 month Medicaid look-back period, that they would not be able to claim the proceeds from the policy that has you listed as the first named beneficiary. I'm not positive about that - you may need to search on Medicaids site to determine that or seek the help of an elder care attorney. Based on what you stated, your mother is your first concern, so I understand what you were expressing, and that you are being unselfish. But at the same time, don't surrender the policy for Medicaids benefit if you are not required to do so by law.

Frankly speaking - if one of your brothers used money for himself from a cash value loan out of the other policy that should have been used for your mothers funeral, then he should be the one obligated to paying the expenses equal to the money he took, with interest.

Final thought: The brother who is promising to use the money for the funeral, you could ask him to sign off on a statement of that promise to do so, but make sure it's notarized, and it may require more than one witness. That may differ depending on your state laws. And again you may wish to consult with an elder care attorney. Your brother who has been seeking the counsel of one may agree to you sitting in with the visits - not that they will necessarily listen to your input, but at least for you to hear the truth.
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I'm not completely sure how to say this without sounding unkind, but SharonZ surely what matters is taking care of your mother while she is alive? Let the brother who has assumed POA responsibilities and the brother who is your mother's debtor worry about the funeral arrangements.

Of course, naturally, you want your mother's funeral to be decently observed. But that does not make you financially responsible for arranging it; and in any case I don't see why you should be the one trying to guarantee it with the funeral home.

This is only an amateur explanation, but I expect how the loan on the other policy works is this. Your brother takes out a loan. The lender holds the insurance policy as security. If your brother defaults on the loan - if he doesn't pay the money back - the lender becomes the policy's payee. I don't know what terms the loan was made on, how long your brother has in which to pay it back, but unless there's a realistic prospect of his repaying the loan the policy is toast as far as the family is concerned.

Do you know if your mother made a will and therefore has appointed an executor? Because the executor is normally responsible for making funeral arrangements.

Try not to worry about it, especially as there is very little you can do. How is your mother doing?
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This is a different brother who has taken over as POA, and has been managing her finances and taking care of her He went to talk to an Elder Law Attorney to see what needs to be done with her Medicaid ineligibility due to 5 year look back. I cut my strings from this. I just had a question about whether or not a life insurance policy with a loan on it could be turned over to a funeral home to cover her funeral when she dies. A different brother is the beneficiary of the policy with the loan and promises to use the money for her funeral, but I would rather have a guarantee that the funeral home gets it. Brother POA trusts that the beneficiary brother will keep his word, I do not. There is no other money, except a $2,000 policy that I am beneficiary of and had planned on putting toward her funeral. They plan on taking cash out of my policy and the loan policy and put that money toward the ineligibility month. Can you still sign this over to a funeral home? I just want to make sure my mom is taken care of.
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Country Mouse, learned something knew.
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CountryMouse is spot on in sensing that something’s amiss.

Yeah and very very amiss..... SharonZ, if I’m not mistaken,  you’ve posted in the past couple of years regarding your brothers taking $$ from mom. These were not small precise amounts - like say $45.67 which one could probably find a receipt (like a utility bill) to match up to - but more like $ 1,000 plus amounts taken by brother on a regular basis from your mother.

If this is the same brother that has spoken to an attorney regarding “paying Medicaid lookback debts” please do NOT get involved in any of this. Your brother is responsible for this and he needs to deal with the fallout even if it means being held responsible for penalties from Medicaid, or stealing from her, or even perhaps charged with taking advantage of a vulnerable elder. All things mom, even her funeral & burial costs, he needs to deal with and pay for. I’d be beyond wary that you are getting accurate replay of what he has been told by an atty or by Medicaid. You do NOT want to do anything that makes you complicit in what is basically theft.
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Sharon...

Did this conversation between you and your brother come about because you called and asked him to earmark the insurance policy for your mother's funeral? Or have you been involved in managing your mother's finances all along?

The reason I ask is that you say your brother talked to a lawyer about finding a way round the Medicaid look-back, and there being "no money."

In Medicaid's view, the look-back found that your mother DID have money at some point within the last five years, and that money went somewhere. Somewhere, that is, besides her own normal living and healthcare expenses and other legitimate uses. Where did it go?

So your brother's somewhat disingenuous interpretation, if I may say so, if that is how he put it, makes me wonder if someone is pulling the wool over your eyes, possibly.

And who, exactly, secured what loan against your mother's insurance policy? And what happened to that money?

I don't want to turn you into a nasty suspicious paranoid person, I just wonder if you are asking sufficiently searching questions.

I hope this isn't an immediate issue? Is your mother alive and well?
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