Should we use Mom's life insurance to pay off Dad's house or save for future care?

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My mom passed away in unexpectedly January from a fall. She had a small life insurance policy that paid for her funeral and we paid for my dads future funeral arrangement plus paid off a few of their many bills. We also received an accidentky death policy from Aflac. My dad is diabetic and on dialysis. My mom was his main caregiver. M.y sister lives near him, works full time and had been doing everything for him with a little help from other family members. He needs care right now 3 times a day to make sure he eats, takes meds and doesn't fall in the shower etc. he uses a walker and is not very compliant regarding his eating and meds. He weighs 300lb. I live out of state. My dad also still owes $38,000 on a small old home. Should we use the Aflac money to pay off his house? His only income is $1400 in soc sec. He still has med bills and credit card debt plus household expenses. Or should we keep the money for possible future nursing home care? We want him to stay in his house but it's really hard on everyone trying to take care if him everyday. We are hoping he will take charge of his kufe more soon. He's still grieving over our mother and in a lot of back pain. He is having surgery next week which we hope will give him more mobility and a renewed life outlook but who knows. Main question now is about house. Oh and we did set up a trust with my sister as the excutor. The house will be in the trust. She also has POA. And is in the checking account. She's been amazing but I worry about her. I try to help as much as I can from afar. We are trying to figure out the whole Medicaid subject too. He is in Medicare. Thanks for any assistance on anything I've talked about.

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akdaughter, this is what I was thinking. Rladams, it sounds like there is a good chance your father may have to apply for Medicaid in the future. If so, the state would place a lien on the house when your father passes, so that medical expenses could be recovered. In your situation I would use the money for other things that your father needs with an eye to the future if he should need Medicaid. The prepaid funeral was a very good expenditure. I don't know how much money was received from the AFLAC policy. If it was not a lot, I would just earmark it for his care.
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It seems like your dad may not be able to stay in the house much longer, if at all, so have you considered selling the house? If you were to pay off the mortgage and then dad needs Medicaid, MERP will come after the house after dad passes anyway. Rather than worry about keeping up the house after dad moves to assisted living or skilled care, it may be better to just sell it.
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He has used up 2 weeks of rehab after being in the hospital with the flu 3 weeks ago so he only has 1 week left to use after surgery. He has to be out if the hospital 60 days I think for it to start over with 20 more days. Depends how well he does after surgery but hoping to not have to pay for additional rehab days out if pocket since its so expensive. The attorney we used is someone related to my sisters boss. Not sure if he is an elder care attorney but dies do trusts and did it for 1/2 the normal fee. I will check and see if she asked him about paying off the house.
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Did you set up the trust through an eldercare attorney? That's who needs to answer this question, I think.

after his back surgery, I'm going to hope he goes to rehab, which will be covered by Medicare for the first 20 days. See this as an opportunity to work with the discharge staff to determine what level of care he needs and if it's safe for him to return home without full time care.
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