Both of my parents are on Medicaid and have small life insurance policies. The beneficiary on both policies is the surviving spouse followed by myself. Will the surviving spouse lose their Medicaid eligibility due the insurance proceeds?

JoAnn29: Wow, I know those AL rates are outrageous! We paid $7,000 for a month to one when the NH my mom was in  was deeming my late mom "too well to stay there." Unfortunately they were dead wrong as she deceased days later at the hospital. We ran around like nut jobs, but we were able to get the $7,000 back.

Are they whole life polices or Term? It makes a difference. If they are whole life they are presently a problem, If term not so much so.

10k for two months? I just paid private pay for two months of long-term care it cost $18,600. Moms AL was 4500 a month and would have been 6000 if I hadn't gotten a break on her room.

10k for two months? I just paid private pay for two months of long-term care it cost $18,600. Moms AL was 4500 a month and would have been 6000 if I hadn't gotten a break on her room.

jbclync, I think you need to re-read my original question. My only concern is whether my surviving parent's Medicaid status will be impacted by the life insurance proceeds. Nowhere did I say anything about staking a personal claim to the money. I do 100% agree with your sentiment that Medicaid is a vitally important program and nobody should do anything to intentionally defraud the taxpayer funded program that benefits our most at-risk citizens.

Life insurance with a face value under $1,500 is not countable for Medicaid. If it is over that amount, then only the cash value is countable. I assume the $10,000 policy must be from their employment years ago.

Normally, I would advise a child in this situation to utilize the $10,000 by spending it down within the month of receipt so it will not cause disqualification. Pre-paying funeral and burial expenses is usually advisable, but in your case they have decided to donate their bodies and thus this is not an option. Ask the nursing home if it possible to purchase anything for the parent's room that might benefit them; that way it is not a penalty-causing gift. The idea is to spend the benefits down in the month of receipt: in the month of receipt it is deemed income, but in the following month it is treated as an asset and must be reported to Medicaid. At that point, your surviving parent will be over-resourced, i.e., have too much money to qualify for Medicaid till the money is spent down again.

Vocalsbyjoanna, your post is a mess. Your cash inheritance is not taxable and not all states would have some inheritance tax as you seem to indicate. Your resources are countable for Medicaid, but do not count for food stamps if you are Categorically Eligible due to the level of your income. There are special rules for how lump sum payments are treated as income and resource purposes. If you are commenting on disability income it matters whether you are talking about SSI or Social Security. SSI is need based and your other income and assets are reportable and affect your eligibility. Social Security is not need based and your other income and resources are irrelevant. Don't encourage people to illegally try to hide assets, which I think you might be trying to do, except that your post is too confusing to tell.

Okay, so I'll just share what happened in my late mother's case and I'm hoping it helps and if it doesn't, I'll apologize. Mother died. After her death she received a dividend check from one of her 3 small insurance policies. I sent the check back to the insurance company with an attached letter written by me that she had deceased.

If you inherit Money - you are penalized for that initial ONE time amount after you pay taxes --- I suggest you only keep 5000 in your bank account - put the rest in a safe "Place" if you get a safe deposit box -- just keep in mind - legally you cannot disclose that you put cash in there --- either give it to someone you trust - put it in there and dont say anything, or build a hiding safe in your wall -- You will only get penalized from medicaid if you have MONTHY INCOME you may loose your medicaid and/or you will have to pay something ( call them and ask them they are pretty informative about the rules - its your right to know and learn) Early if you have any cash in your accounts and they equal like 100,000 you will get a small percentage of probably (whatever the bank rates are going for) One time a year ( usually you will need to disclose this Dec 31st) I know 5000 you will get taxed 1.86 lol - for tax purposes - And --- the state you live in will charge you a ONE time % for Taxes. For that Month you inherit whatever sum you are given lets use 100,000. plus your Medicare. or your Disability. You May have to pay for your own Insurance that Month - but were in (Connecticut) we live in Elderly - Adult disabled housing -- we will have to pay the Max for our Apartment which is 1000 + We will not get Food Stamps that MONTH - ONLY Plus we will have to pay the taxes on the amount of the inheritance and or sum of money Insurance claim or what have you at Tax time. We will NOT loose our disability because it is not work income and it is not a monthly income, if we had a monthly income we would of course have to just pay Higher rent and of course loose our Food Stamps - but NOT our Disability -- ONLY if our income is MONTHLY! only if you work and get some sort of Monthly income will you have an issue.

Medicaid should have asked if there are any insurance policies. Mom had two small ones worth about $13000. I had to cash them in and prepay her funeral. My understanding is that if the cash in value exceeds the funeral expenses (flowers and funeral luncheon costs are allowed) then Medicaid gets what is left over. I would assume this goes for funeral policies. If you don't use the money for a funeral, Medicaid should get it. All wills and beneficiaries are null and void when Medicaid is covering the care of person. The only insurance policies I understand they cannot touch is policies held by former employer. Call Medicaid. I agree about Micalost. If you did this within the 5 year look back, it could be considered fraud and effect being OK'd for Medicaid.
It pays to be honest with Medicaid because it can come back on you.

When I was on medicaid many years ago, I had to disclose any policies as well as all my assets. I am guessing that Medicaid already knows about the policies and beneficiaries.
Best advice is to call your local medicaid office and ask.

Usually, during the Nursing Home application process for Medicaid, all assets are listed including life insurance. Life insurance has to be converted to a irrevocable trust to the funeral home. The funeral director can help you with this; an elder law atty is not needed. When your loved one passes, the funeral home is the beneficiary. All the best.

If you use one of the newly available able accounts then you shouldn't have anything to worry about. Able accounts are specifically designed for people on federal benefits who have disabilities. 

Someone here also mentioned changing the beneficiary but be very careful about this or it will cross the line into  either theft or coercion, both of which can get you in very serious legal trouble. If the wards already had these life insurance policy is in place when they were competent, I would leave it alone and not go changing the beneficiaries unless you want some very serious legal trouble on your hands. I'm currently dealing with a very similar matter under the care of a lawyer. My dad had a life insurance policy when he worked for Ford. He worked there pretty much his whole life and built up a pretty big life insurance policy and it's been suspected that something suspicious happened while he had Alzheimer's. Be very careful messing around with someone else's life insurance policy that they long since established because you can possibly get yourself in very hot water over this if the person is no longer competent to make competent decisions to change a beneficiary. If they already had the policy when they were competent, leave it alone! 

These days you really must have everything in writing by the rightful owner of the insurance policy or sometime somewhere along the line someone is going to start looking at you when something goes amiss and the right people start noticing something's just not right, and if something doesn't seem right, the person having that feeling is probably right. This is a very firm warning from someone whose dad was most likely coerced despite having Alzheimer's. Don't do it, just don't or you could end up with a very hefty fine and maybe even some prison time.  If you've ever watched enough shows on prison, you'll see that just from those shows what inmates go through and they are blocked there for a number of reasons including changing beneficiaries when you had no permission to do so, and changing claiming funds you're not entitled to. Be very careful and have it in writing before you go changing the beneficiary because once someone has dementia or Alzheimer's, you could very easily cross the line and land in some very serious legal trouble. I currently have a pending estate case, and my lawyer is helping me through this situation because someone may have taken advantage of my dad when he had all Alzheimer's. 

I'm currently keeping a discussion open for ohioans on my thread, it's for newbies who have never dealt with estate issues before. I post updates as I get them to help Ohioans know what to expect as they are dealing with their own estate issues. My thread started out as a question and with developments, it became a discussion and then an update thread to help Ohioans. My thread has become a development able to help Ohioans through their own estate issues, especially where insurance policies and property is involved. If the OP happens to live in Ohio, definitely check out my thread

I was thinking about donating my body to the medical university here. I was discussing this with my nephew who, at that time, was going through medical school. He informed me that the school would give the body back to the family for burial after they were finished. Thus family would need to pay for burial/cremation. You may want to double check with the school if they dispose the body or return it to you.

We went thru an estate planning attorney to get my mother on Medicaid. Mom had several life insurance policies and even though she had maintained her own Nursing Home expenses for years,she ran out of money due to a LTC company that would not pay off. We had to either cash in her policies at a small value or cancel them. Life insurance is considered potential income. I am surprised Medicaid allowed them to keep the policy unless you changed the ownership of the policy to yourself and paid the premiums yourself. Most likely you will be kicked out of Medicaid and have to reapply. Since $10K is only about 2 months of Nursing Home costs you might be able to take the funds (if collected) and put them in his/her QIT account and IMMEDIATELY write out the whole thing to the nursing home.

I do not know if you will lose medicaid eligibility or not, but why would you want to take government money when you could be paying for the surviving parent's care? That is exactly what is wrong with the medicaid system. Those who liquidate their assets and use that money to pay for care cannot get medicaid to help them when they run out of money because people who "hide" money instead of using it to pay for care. I may sound harsh, but do not expect any extra money from your parents when they pass........use it to take care of them.

Yes, and you would have to go through the approval process again for her unless you take the proper action. From what I read on here that means going on a spending spree to benefit your mom, using a debit card so purchases can be Immediatly withdrawn (check night delay) and making sure her beginning balance and ending balance for every month falls beneath the state allowable for Medicaid recipients. You can prepay services for mom, make sure they have a zero cash value. You could spend it on dental work, new glasses, hearing aid, new chair, sound system, better shoes or clothing. She could keep some in her account so long as it isn't over her allowed dollar amount. Use the search on this site to find more answers. I thought you had to turn over ( cash in) such policies at the time of application so an elder attorney well versed in your states Medicaid laws might be the place to start.

I apologize for not being clearer , I had to do this because if my father died (which he did) The money would be income and mom would be disqualified for medicaid until it was used up and we would have to go through filling out the title 19 forms all over again.

Anybody else? I would really like to know if the life insurance proceeds will have an impact on my surviving parents' Medicaid status?

vegaslady, there are no outstanding debts and the body will be donated to a medical university so I don't anticipate significant expenses. Thank you!

Isn't it likely that the proceeds will be spent right away on the deceased person's final expenses leaving nothing to disqualify the survivor?

micalost, I do appreciate your reply. The route you chose does not seem appropriate for me.

I went online and changed the ownership of the plan to myself. They sent a letter to my parent which I got. Then I changed the beneficiary.