Are you asking this ahead of a Medicaid application or concerns on her Medicaid annual renewal? I’m guessing that you are & my answer is based on that: In theory, Term life does not exist as an asset for your mom at all as mom is still alive. It has no value till she dies. Then after she dies, it should bypass probate as an asset. So it’s not an asset of moms Estate. So not a probate asset so not within Medicaid estate recovery. The named beneficiary of the policy would contact the insurer with policy info and a death certificate and the insurer processes the pay out. (For more fun in this, it’s a taxable event too).
But here’s the rub, when your mom files for / filed for LTC Medicaid, within the Medicaid application, there should have been a question as to her life insurance policies. Of whatever type…. Term, Whole Life, GUL and Medicaid wants a copy of the policy attached to her LTC Medicaid application. What most States will do is if it’s a Term policy will want to look to see its “face value” & if it has any cash value. Most Term produce no cash value but occasionally really old ones will & the cash value ends up being a dividend plowed back into the policy (my mom had this, her face value stayed it’s original 1950’s low $ amount too; dealing with it added paperwork to her LTC Medicaid application & renewals). Medicaid just wants to ensure all income is reported. If face value is over a certain amount, Medicaid may require a change of the beneficiary to be the State as the primary with the old beneficiary as the secondary. Just what the “face value amount” is depends on your States Medicaid program. If it’s a term life policy that’s 50K, State is - I’ll bet a case of Prosecco - going to want to be a beneficiary of the policy. So that 50K term life will need a beneficiary change done before LTC Medicaid eligibility approved.
But 10K hopefully not. Fwiw federal guidelines for cost benefit for estate recovery is 10K. So most States medicaid don’t bother with policies or stuff under 10K value.
Personally a 10K face value policy might could be on the fence for State to try to do a beneficiary change to the policy, if your State is kinda aggressive on MERP aka estate recovery. If your State is aggressive & if mom does not have a preneed funeral & burial done, I’d try to see if there was any way to get that Term done to have the FH as beneficiary’s rather than have the State become the beneficiary. I know you’d probably rather have the 10k but if it’s a choice between the State getting it or having it pay for her funeral and burial, I’d go for funeral and burial costs. Let us know what you find out as we do learn from each other!
I agree with you when you said “Wow”. Medicaid is for people with limited income or no income and is funded by the taxpayers’ dollars. Medicaid will try to recoup the money if they find out that the patient has other source of income. Even if the patient owns a house, he/she can still live in that house if they are on Medicaid but once that person dies then Medicaid will put a lien on that house so they can recoup their money paid out while the person was alive. For someone to receive Medicaid he/she has to be very, very poor. However, this will come as a surprise to many on this forum that some patient who has hundreds of thousands of dollars can still get Medicaid, as long as that money is placed in a trust which the state will go after to recoup when the patient dies.
According to things I found on the internet, no, they usually cannot collect insurance policies from the beneficiaries; but I would call the insurance company directly and ask this question. Found this info by typing in: "Can medicaid take life insurance from a beneficiary. Was answered under SmartAsset site, and a few others.
Found this: Life insurance policies are usually either "term" life insurance or "whole" life insurance. If a Medicaid applicant has term life insurance, it doesn’t count as an asset and won't affect Medicaid eligibility because this form of life insurance does not have an accumulated cash value. On the other hand, whole life insurance accumulates a cash value that the owner can access, so it can be counted as an asset.
Also meant to say here: They don't count term life against her if she applies for Medicaid and in the end there will be a beneficiary on the policy. That means the money from that policy will go directly to beneficiary and will not be a part of her estate (or leftovers). Medicaid does have applicant sign a form (MERP) saying whatever is left in the estate may be recovered before anyone else gets their share. So in this situation, insurance money from term life won't be in the leftover pot of money.
Whole life creates cash value. Like money in the bank. So it IS counted as an available asset when you apply. The cash value would be part of the limited funds you can have for eligibility (in Texas, no more than $2K in the bank or other available assets)
I know this from my BIL he had a life insurance policy that had a cash value on it where we had to cash it out and put it towards his funeral expenses where he couldn't get it because Medicaid thinks if you can cash it out that people do it and then they keep the money. The cash money that Medicaid will allow you to have is under $2000. We had to take all of his finances and spend them down to get him on Medicaid which we did Dec 2022. My BIL is in a memory care nursing home because he has dementia and his short term memory is gone.
I filled out all the paperwork that was needed for Medicaid and it wasn't a walk in the park, I had to jump thru hoops my thinking. That is when I found out that everything this man had has to go to the nursing home to keep him there that Medicaid takes everything except for $50 of all his finances. I had to take his cash out of life insurance and put it towards pre paid funeral expenses. That his pension goes to Medicaid to the nursing home. When we had to spend down his finances the nursing home memory care was $260 a day. I had to even show Medicaid where his money went when we spun it down. My BIL is in a place in town where we all live so we can visit him. I take up snacks and pop to him so that he can have a few things he remembers from his apartment. And we have his recliner, his tv, his ottoman and his clothes all in that room where he is so that its familiar so he knows it where he lives now. So out of that $50 he pays for his room phone and out of that he has $8 left.
If she doesn't have a pre paid funeral set up I would use that for the funeral. And the answer to your question is Yes Medicaid will take it after all her bills are paid.
Just wanted to clarify for other readers. Medicaid does not take any money from recipients. Medicaid is set up so the person pays for their care to the facility out of their own monthly income. Medicaid makes up the difference and pays the facility that amount. You are correct that Medicaid regulations allow the person to retain only a small amount of their income for personal needs, generally $50 or can be more in some states. The rest of their income goes for their care.
Interesting because there is no cash value Medicaid could not make u cash it in when she applied. 10k probably means she took it out for her funeral. Funerals come before Medicaid. I found this:
"Proceeds from any policy are considered recoverable when the proceeds are paid to the beneficiary's estate as the named beneficiary or as a default beneficiary including when another named insurance beneficiary predeceases (dies before or at the same time as) the Medicaid beneficiary."
I interrupt this as if there is a beneficiary, they are entitled to the money. Someone else may interrupt this differently.
If in that Term Policy, the owner of the policy named their Estate to be the Beneficiary then probate would have to be opened in order to have an entity (the Estate & needs a fresh tax ID #) to get the policy payout. The issue would be that because the $ from the term insurance would be paid to the Estate then it totally becomes an asset of the Estate so could be used to pay for any claims filed against the Estate as per probate laws. MERP could file a claim to get all the term life policy $. If the beneficiary was an individual that problem would not exist; the insurance Co would pay the individual directly and issue them a 1099 - Misc.
If the State, via MERP or its outside contractor, filed a claim in probate for the supposed LTC Medicaid tally against the Estate, they could then get whatever % of distribution of assets of the Estate as how your State runs probate. If your state is an all equal probate claims, then all claims filed get the same amount in theory. But not all states do this, like for Texas, it’s a Level of Claim by Class for probate to pay & MERP is a Class 7 claim. So for TX all claims in Class 1-6 filed get paid (or released) first and foremost….. and a claim has to be filed and creditor has to provide court documentation in detail, notarized in proper format to the court or is time barred…. credit cards are Class 8.
In the past it was pretty common for men to have their life insurance policies to be left to “Estate Of” rather than to their wife as it was thought that the lil lady could not handle the $. So it would go into probate as the probate atty would have the expertise to deal with $ as the wf certainly would not. Lol! My dad did that & mom was very much not happy. It wasn’t a huge policy, but that he did it bugged the crap out of her especially as she outlived him & his attorney by decades.
In Florida, anything that goes into probate and if there are outstanding bills such as assisted living or nursing home, they could file something known as "estate recovery". "Estate recovery" has many variations what they can do in accordance to the STATE you live in.
A little off topic, but in FL, I purchased a cremation policy for my mom. Medicaid wanted it signed over to them unless it was non transferable. I made the update to take care of mom as per her wishes when she passed. Ten years later, it still ticks me off that medicaid considered it a cash asset.
In theory, Term life does not exist as an asset for your mom at all as mom is still alive. It has no value till she dies. Then after she dies, it should bypass probate as an asset. So it’s not an asset of moms Estate. So not a probate asset so not within Medicaid estate recovery. The named beneficiary of the policy would contact the insurer with policy info and a death certificate and the insurer processes the pay out. (For more fun in this, it’s a taxable event too).
But here’s the rub, when your mom files for / filed for LTC Medicaid, within the Medicaid application, there should have been a question as to her life insurance policies. Of whatever type…. Term, Whole Life, GUL and Medicaid wants a copy of the policy attached to her LTC Medicaid application. What most States will do is if it’s a Term policy will want to look to see its “face value” & if it has any cash value. Most Term produce no cash value but occasionally really old ones will & the cash value ends up being a dividend plowed back into the policy (my mom had this, her face value stayed it’s original 1950’s low $ amount too; dealing with it added paperwork to her LTC Medicaid application & renewals). Medicaid just wants to ensure all income is reported. If face value is over a certain amount, Medicaid may require a change of the beneficiary to be the State as the primary with the old beneficiary as the secondary. Just what the “face value amount” is depends on your States Medicaid program. If it’s a term life policy that’s 50K, State is - I’ll bet a case of Prosecco - going to want to be a beneficiary of the policy. So that 50K term life will need a beneficiary change done before LTC Medicaid eligibility approved.
But 10K hopefully not. Fwiw federal guidelines for cost benefit for estate recovery is 10K. So most States medicaid don’t bother with policies or stuff under 10K value.
Personally a 10K face value policy might could be on the fence for State to try to do a beneficiary change to the policy, if your State is kinda aggressive on MERP aka estate recovery. If your State is aggressive & if mom does not have a preneed funeral & burial done, I’d try to see if there was any way to get that Term done to have the FH as beneficiary’s rather than have the State become the beneficiary. I know you’d probably rather have the 10k but if it’s a choice between the State getting it or having it pay for her funeral and burial, I’d go for funeral and burial costs. Let us know what you find out as we do learn from each other!
"Can medicaid take life insurance from a beneficiary. Was answered under SmartAsset site, and a few others.
Whole life creates cash value. Like money in the bank. So it IS counted as an available asset when you apply. The cash value would be part of the limited funds you can have for eligibility (in Texas, no more than $2K in the bank or other available assets)
I filled out all the paperwork that was needed for Medicaid and it wasn't a walk in the park, I had to jump thru hoops my thinking. That is when I found out that everything this man had has to go to the nursing home to keep him there that Medicaid takes everything except for $50 of all his finances. I had to take his cash out of life insurance and put it towards pre paid funeral expenses. That his pension goes to Medicaid to the nursing home. When we had to spend down his finances the nursing home memory care was $260 a day. I had to even show Medicaid where his money went when we spun it down. My BIL is in a place in town where we all live so we can visit him. I take up snacks and pop to him so that he can have a few things he remembers from his apartment. And we have his recliner, his tv, his ottoman and his clothes all in that room where he is so that its familiar so he knows it where he lives now. So out of that $50 he pays for his room phone and out of that he has $8 left.
If she doesn't have a pre paid funeral set up I would use that for the funeral. And the answer to your question is Yes Medicaid will take it after all her bills are paid.
Prayers
"Proceeds from any policy are considered recoverable when the proceeds are paid to the beneficiary's estate as the named beneficiary or as a default beneficiary including when another named insurance beneficiary predeceases (dies before or at the same time as) the Medicaid beneficiary."
I interrupt this as if there is a beneficiary, they are entitled to the money. Someone else may interrupt this differently.
If the beneficiary was an individual that problem would not exist; the insurance Co would pay the individual directly and issue them a 1099 - Misc.
If the State, via MERP or its outside contractor, filed a claim in probate for the supposed LTC Medicaid tally against the Estate, they could then get whatever % of distribution of assets of the Estate as how your State runs probate. If your state is an all equal probate claims, then all claims filed get the same amount in theory. But not all states do this, like for Texas, it’s a Level of Claim by Class for probate to pay & MERP is a Class 7 claim. So for TX all claims in Class 1-6 filed get paid (or released) first and foremost….. and a claim has to be filed and creditor has to provide court documentation in detail, notarized in proper format to the court or is time barred…. credit cards are Class 8.
In the past it was pretty common for men to have their life insurance policies to be left to “Estate Of” rather than to their wife as it was thought that the lil lady could not handle the $. So it would go into probate as the probate atty would have the expertise to deal with $ as the wf certainly would not. Lol! My dad did that & mom was very much not happy. It wasn’t a huge policy, but that he did it bugged the crap out of her especially as she outlived him & his attorney by decades.
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