Medicaid eligibility and VA life insurance? - AgingCare.com

Medicaid eligibility and VA life insurance?

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My dad has life insurance through the VA. 10K term life and a little more than 20K whole life. I know that for Medicaid, only the cash value of the whole life counts as an asset (since term doesn't build cash value).
Several years ago he took out a car loan against the life insurance. He explained to me that when he died, the car loan plus any accrued interest would be deducted from the life insurance payout. The current loan value is 8,300, and the current cash value of the whole life is 9,300.
Would the value of the loan be evenly split between the term and whole life policies? Or since the whole life is 2/3 of the entire amount, would 2/3 of the loan (about 5,500) be deducted from the current cash value? Or would Medicaid not take into account the loan, and use the entire current cash value in their determination?
Thank you for any assistance provided!

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Maybe I need to explain better. In PA, where we live, term life insurance does not count as an asset when determining Medicaid eligibility. Only whole life does. And the yearly statement I'm referring to states he has both term and whole life through the VA. "5 year level term basic $10,000", "paid-up additions - whole life - $20,147", "total coverage $30,147", "total net cash value $9,297." I'm trying to figure out where the car loan would be deducted (from the whole life only, the term life only, or a combination of both), since he can only have $8,000 in total assets to qualify.
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Yes it doesnt look like much but a car is an asset.
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Just a thought: 10K or 20K is NOT a whole lot of money, especially when you deduct the car loan money. That will go fast.
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PS that didnt look right. my Mom is still living.
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justofus, term life insurance can not be used unless your Dad died? I just went through this with medicaid and the term life insurance has no cash value until my Mom died. At that time, medicaid cannot touch it. Your Dad should have taken out car insurance that has a rider on it that its paid off should he die, but too late for that. About the rest, I do not know, Good luck
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First of all, the insurance with the VA is not "term". This policy is used anyway the veteran wants, and you have an interest rate and you need to repay this in order to collect when he dies. The other life insurance which was used to finance the car has to be repaid. What the Medicaid guidelines are regarding this question needs to be directed with your state Medicaid office.
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I think the better bet what I've been to do prearrangements through the funeral home and to put the life insurance in the funeral home's name. That way, the funeral home owns the policy while you're just make the payments. I'm on Medicaid myself, and this is exactly what I did without ever affecting my Medicaid. You're going to need that life insurance later down the road. This is why you really don't want to do anything with the life insurance policy that's been set up because that money that builds within the policy is intended to be there in the event of the person's death. That money can be used to pay off your funeral expenses work to give to your survivors. Life insurance is called life insurance for a reason. Cashing out the life insurance policy is definitely a bad idea because then you have an outstanding debt with the life insurance policy. I borrowed against my policy, and it actually lapsed until I repaid the loan and restored coverage. It took a while to re-pay every dime, but I did it and will never do it again. Had anything happened to me during that time, I would not have likely had coverage, and there would've had to be some other way to cover my funeral expenses such as selling off expensive items. Always have a way to pay off funeral expenses by setting up a plan, even if that plan includes reserving expensive items for that specific purpose because one day you'll need the money for that purpose. It's always wise to keep expensive items handy just in case you do need extra money and your coverage just doesn't cover all of the cost. You really don't want to burden your family with unexpected funeral costs because funeral costs often break the bank, causing added and unneeded stress on the family. You want to have a secure plan to make sure the funeral home is paid while you're living, and having a very good life insurance policy is a good start. It's always good to take care of these things your self while you're living so that your final wishes will be carried out when you're gone. This is why it's not a good idea to attach your life insurance to any other accounts such as loans. Doing so what's that money at risk in case something happens to you. Let's say you fall on hard times and you can't make the loan payment. Let's say those hard times may last a while. Now, the loan company is going after that life insurance policy. Let's say something happens to you and that money's now gone, and you have no extra money and no way to pay the funeral home. Now what? The financial burden is now on the family who may not even have the money to spare to bury you. To those with no family, they're definitely screwed in a situation like this. You really don't want to depend on others to cough up money for you, this is your responsibility to make sure you have a set plan. This is why it's never a good idea to risk your life insurance policy.
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Medicaid would tell you to cash it in, paying off the loan and leaving $1000 for his care. The term life stays in place, as long as there is no cash value.
It's very important to know who is beneficiary of the term life policy. If it is payable to his estate, MERP will recover their costs from that payout.
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