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My brother, age 62, is currently in a LT care facility and I am PofA. We have liquidated all his assets to qualify for Medicaid except for a whole life insurance policy. It currently has a Cash Surrender Value of $17K and a death benefit of 53K. I am getting conflicting information. The CFO of the facility is telling me I must cash the policy for the 17K and my financial advisor is telling me I can purchase the policy for the 17K and maintain the death benefit and when he passess away it would would go to his heirs. In either event the facility gets the same amount.

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Here is perhaps a better idea:
Your brother is permitted to retain up to $2,000 in assets.
Withdraw or borrow all cash value from the policy except for $2,000 or under.
Draw up a Personal Service Contract (aka Personal Care Agreement) between you and your brother.
Use the cash from the policy to satisfy the Personal Service Contract lump sum in advance (this is a permitted transaction with respect to Medicaid eligibility).
Pay the tax due on the transaction from the transferred cash.
Transfer ownership of the policy now worth under $2,000 to you without Medicaid penalty.
Use the balance of the cash to pay the premiums on the policy going forward.
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If you have $17,000 to purchase the policy, that seems the better choice.
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Jeanne's right.

You need to make sure that you OWN the policy and that the whole life company will sell the policy to you & transfer with no issues. Transferring ownership is pretty routine - often done for couples when 1 dies & the survivor will be going on Medicaid so they need to get rid of assets so transfer ownership of policy to a grandchild or child. I would contact the insurer to get a current cash out value to the penny. I bet there will be fees with doing this, which you probably need to eat and I'd pay for those separately. So if cash value is 17,650 but fees are 345.10 you pay a separate check for the 345.10. Small stuff like this is something Medicaid will have an issue over so you want to deflect that happening. The 17,650 amount goes into his bank account and is used to private pay the facility as per how they bill each month OR other spend-down. NH do not need to get the lump sum or know how the 17,650 was done.

On another note, I would be somewhat concerned about the attitude of the NH. Spend-down issues or transfer penalty concerns are determined by & under the purview of your state Medicaid program and NOT the NH. The NH can look at the financials provided in the application but the determination on penalty or spend-down is done by the state. If your brother currently has no assets except for the 17K from his whole life policy, that is his spend-down amount. Medicaid allows for them to have certain exempt assets. They are allowed to have assets like: a pre-paid no cash value funeral and burial policy; a small life insurance policy; a small amount of cash (under 2K).

The spend down can be for anything for his care or his needs. So you can get him new eyeglasses, dental work, hearing aids, new easy to get off & on clothing, a tricked out walker for him to have & use @ the NH, a NCV funeral policy. The funeral policy alone could be half of his spend-down. He can have the small cash asset of maybe $ 1,500.00 in his checking account. It does not all have to go to the NH. I would suggest you speak to the state Medicaid caseworker on all this before you write a check to the NH for the full 17K. The NH is thinking all about them.

Also I assume he is getting SS. His SS check does NOT have to go to the NH directly either. What I do with my mom is that she has a checking account that had a cash asset of about $ 1,500 when she started on Medicaid. Into this account gets direct deposit her SS and retirement each month ($ 1,800.00). Now mom is in TX and TX has a monthly personal needs allowance of $ 60.00 a month. So each month, I write a check to the NH for $ 1,640.00 for mom's required by Medicaid co-pay to the NH. Now the NH would prefer that they got her SS and retirement directly and then they put the $ 60.00 a month into a personal care trust account @ the NH for her. But there is no requirement that it has to be done this way. My mom's first NH was very insistent on this and not happy when I refused to to this.
Instead I wrote a check for $ 200 for her trust account and that is all that was there for them to draw from to pay for on-site hair salon. All her other personal things I bought and paid for from her account and brought over to her. If you are going to be active in his care and in getting things for him, doing it this way is better imho. Imagine having to go to the NH business office to get $ 58.00 to pay for new clothes from Target for him……Good luck.
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