In preparation for a Medicaid application I would like to know what to do about two (existing) whole life insurance policies.
The cash values of the policies will be counted in the total of the assets the applicant has when he applies. My question is about the death benefit.
The Medicaid applicant is the owner of the policies. The insured is his wife. The beneficiaries are his sons.
If the wife dies and the payout goes to the sons, is Medicaid going to consider that death benefit a gift?
Policy the way you described it is owned by dad. I bet this was done thru dads employer ages ago, & if so, he was listed as owner; premiums may have been taken out of his paycheck or retirement or as a perk of his employment. Too late to change it as that needed to be 5 years ago to be outside of Medicaid lookback is my understanding.
No kids as beneficiary as he’s gonna need to cash policies out.
Then $ will be an asset he has to spend down before he can ever be eligible for LTC Medicaid.
btw Term policies do not have this. Whatever is face value is what counts, even if it actually will pay more. Term might - if it’s a quite alot of $ - be required to have state placed as first beneficiary. Cause of this You need to make absolutely sure if Term or Whole Life.
This isn’t what you were expecting....
I’d suggest that dad or mom contacts the insurance ASAP to find out what the process is for doing cash out & the likely amount of $.
if it’s quite a bit of $, then they might want to get with an elder law attorney to figure out how to perhaps shift assets to mom so she can be in a better funded community spouse situation. As community spouse, CS, they are allowed for most states abt 120K in their own assets. CS income not a factor for the needing a NH LTC Medicaid spouse. CS stuff imho not ever a DIY. Just too too many interlocking parts. Like if they have 2 cars, not allowed for LTC Medicaid. CELA or NAELA elder law attorney project. Dad will have $ from insurance cash put to pay for it.
So if his wife, who is not well, passes before he files a Medicaid application will the death benefit count as "gifting" on his application. The answer will determine if it's better to cash them early or hold off until the application needs to be filed.