Why do I have to cash in my Dad's life insurance policy if I'm paying for it?

If the policy is worth $100,000 or more, it does not have to be cashed in to the life insurance company to receive monies. It can be sold on the secondary market for several times more. This money can change everything. You can use it to pay for long-term care expenses and it may delay Medicaid by several years. Yes, the children will not receive the death benefit, but if you hand the policy back to the insurance company, no one gets the benefit.. This process is called a life settlement and it is paying for long term care such as assisted living and memory care for our clients who do not have long term care insurance or assets. Even term policies can be turned into cash. In fact, www.longtermcare.gov states this is an excellent way to pay for long-term care. Don't hand the policy back the insurance company. They pay very little. This is no different than Aid and Attendance for veterans. Use your resources wisely.

All humor aside. This web site is set up to show different view points on different topics and its a sure things everyone is not going to agree with all of them. I happen to think that we are born into this world by and large the same naked babies equal no more no less. Thru out our lives we are faced with choices that we must make. Some will be good ones some not so good. There will be challenges we must cope with and again make choices on. As we grow and mature those choices become harder and have consequences if not made wisely. This process repeats and repeats hopefully by the time we have become older adults we have made enough good choices that we have security. But if not there are some safety nets set in place by the government (you and I) to help, while they are not perfect they are better than nothing for some. But to say that the people that have made better choices are now going to be held to a higher level of accountability for the ones that didn't is pretty out there. To say that you have more than me there fore I should get to keep what I have and you should pay for my care is unrealistic. THIS IS JUST MY VIEW POINT nothing more nothing less

JessieBelle your not speaking with Marie Antoinette she died in the late 1700's or early 1800's not sure right off hand your speaking with her double first cousin Pinky Marie.

Dustien and JessisBelle some how this discussion has drifted off course and turned into a debate about the have's and the have not's. The topic was regarding Medicaid applicants being required to use all available assets before qualifying for Medicaid including insurance policies. My view on the subject is that I agree with the rule. I feel that before you can ask the government (you and I) to pay for your care you must have used all your own assests. Perhaps it would be wise to talk with the insurance agent or elder attorney before purchasing policy to see if there is one that would not be required to be cashed in. Dustien I'm sorry your husband still has to work full time at age 72 to pay for cable, internet, multiple pets, pet food, vet bills and the other things you listed. These are your choices not mine.(I would have opted for the better long term care policy but that's just me) But if at sometime you have used all your assets and still require medical care Medicaid is available.

Well, maybe we could afford forever long term care if we gave up cable and internet...I suppose they could be considered luxuries. And eliminating the dogs will help us a bit more by saving on dog food and vet bills... Cutting back on household goods, like buying cheap paper towels and using less toilet paper, shampoo, cream rinses and the like... less doctor visits, less medication, less food...where to cut... looking back probably should have worked jobs that paid more then what we made when we were working our way to retirement or worked two jobs...that would have helped. Maybe paying for long term medical care rather then current medical care? I just don't see how...mmmmm

Pinky, Long term policies that don't run out are a luxury many just can't afford. I know my husband and I can't fit it into our budget and that's with my husband still working full time at the age of 72.

Great post susiez, all true...The look back period is 5 years and a day. If someone changed ownership today the clock will start to tic. 5 years and a day goes by fast. Medicaid should not be started until the 5 years and a day are up. If the policy is changed and the person does not die in 5 years and a day but must go into a Nursing Home the cash balance can be used for that person as a comfort account. Meaning it could be used to keep them in a private room instead of double room. When someone is on Medicaid it is up to the family to pay for the private room which makes elders happier. Then the money will be used directly for your loved ones care. The President is trying to make it a 10 year look back and a day so people can not do this with Whole Life Policy. If worked correctly the Policy money helps your loved one be happy when alive. There most of the time will not be any money left over in the policy after this is done. The loved one still needs to get their hair done, clothes etc. Still needs Medigap bills paid. Part D insurance etc. Tons of stuff. My parents have not done any of this and are both. Both dementia and both think people will steal from them. Impossible to help so they do not realize even after explaining to them that 15,000 a month in NJ will wipe them out and they will not even be able to pay insurance premiums. They are both in bad shape and will soon be in worse shape than they are now. So change policy now to help them later means 5 years and a day. If they can last that long. don't apply for Medicaid until that time is up. Most cases like my parents they will not make it so you would have to give it back anyway so no harm done.

To Christine73: changing ownership of an asset is called an "asset transfer" under Medicaid rules. The look back period for asset transfers was changed from 3 years to 5 years some time ago. This means that all asset transfers (ownership changes) are analyzed by the state's Medicaid agency to determine if they meet the criteria for "allowable". If they don't, the asset is considered to be available to the Medicaid applicant. An example of an allowable transfer is when a pre-paid funeral is purchased using a life insurance policy. But even then, the pre-paid funeral contract is still considered an asset, and there are limits as to how much can be exempted from consideration. An example of a non-allowable transfer would be an elder who takes his/her name off a bank account to pass it to an heir (other than a community spouse). Those funds are still considered to be his/hers, and will be counted in the determination of Medicaid eligibility. The asset rules also include a hardship waiver provision, but proving hardship is very difficult.

Hmm... didn't realize Marie Antoinette was among us. :-D

Yes I agree many things can change ones financial class and eat up money. I think the best one can do is try to purchase the fence so they have the choice of which side of it they want to be on. One can purchase long term care policies that don't run out you can purchase multiple long term care policies. One of my family members had three long term policies which paid for her care and she actually made money off them while in Assisted Living. Life is choices think outside the box plan for the worse hope for the best.

We never know what is going to happen in the future. My friend's mother has Alzheimer's. Her mother has always had plenty of money. She and her husband worked and had a home in an upper middle class area. Her husband died. The woman was wise in investing in a very good LTC policy, so when she needed help she moved into AL. My friend's husband will terminally ill and she worked full time, so was not able to care for her mother. Now a few years down the road, the LTC policy has run out and all the money is gone. What looked like comfort was reduced to poverty by a long-term illness. The mother is still fairly healthy, so may be with us a few more years without assets.

We never know when we're going to find ourselves on the other side of the fence. I am glad that Medicaid can help if someone is in a NH. What my friend is going to do we don't know. Her mother is still healthy enough for AL.

JessieBelle I'm not sure what you just wrote or what you were trying to say except the part about "It shows you don't know me at all" I never said I knew you and now I'm saying I don't know what your even trying to say.

igloo that was a type-o should of said Medicaid not Medicare and still stand by my statement that people need to use their assets before Medicaid/government steps in to pay. You may see my Grandfathers actions as foolhardy I choose to see them as honorable. He left the money on the table for someone else as he didn't need it what difference does it make if he would have given it to a waitress, charity, ACLU or left it for Medicaid someone more needy was going to get it. His grandkids didn't need it their future was taken care of as was mine. You see he lived a simple life no frills so did his son my father so do I so does my son. I paid in over $69000 this past year in Federal Income Tax alone I don't draw SS check either don't need it hope I never do. I don't have a problem with government programs helping out seniors that need care but they need to use their assets up first. I will not apply for Medicaid or Medicare until I use up my assets which I think I'm good to go.

Pinky - your statement that……"My answer was simply stating my view point on medicare payments and how the government requires people to use any funds they have available first before medicare will step in and pay." is incorrect.

Medicare does NOT require a spend-down. Medicare does NOT require people to use their $ before Medicare will step in and pay.

I think JessieBelle is using garbage as an analogy. Homeowners pay for garbage service. Some really have that bin filled beyond the brim & gaping open each time, while others could take a month to fill theirs. If you choose not to use the benefit that you pay for & go to the land-fill, go ahead. But you still pay into a shared cost

Most would probably find someone like your grandfather, who paid into SS and has a monthly income benefit payable, who does NOT take their monthly SS to be foolhardy. Even if he doesn't "need" the $, he could donate it to whatever special interest he has - a faith based charity, ACLU, the waitress at his favorite cafe, a UTMA account for his grandkids higher education. Even if he was a low income worker, it's probably 10K a year he is leaving on the table.

Wow, what a lot to think about. My GMA who just passed lived alone in her home at 90, had help come in at the end. She worked all her life, had a decent amount coming in from pensions, investments every month, left quite a bit to her sons. I never really realize how fast that could have been used up at $6K a month if she'd had to go in someplace for several years. That's shocking. I'm not looking forward to any of this as I watch my Mother and Stepdad head towards these things, and am the only offspring left.

If you change the ownership in the policy to yourself, you wont hsve to cash it in.

It shows you don't know me at all, pinky. There are many people on the group, so it is a lot to learn much about each of us. If you read above you'll notice my response was for each of us to try to keep our own costs down so Mom and Dad may have enough to last them. I agree that we should try not to depends on government services. I still think it is wonderful that we have such things as Medicaid to fall back on -- this being because end-of-life care can be out of the financial reach of many people in the US. It is too expensive now. We need some lower cost alternatives.

Services provided to us by the government were relevant in context of what I was writing, since they are socialist services of our government. It was in response to the message above it.

JessieBelle I sleep quite well at night and get up on the same side of the bed every morning...........I'm not sure why you would be referring to garbage pick up, roads and libraries when the discussion was about senior care. And end of-life-care is a responsibility and not the governments responsibility if there are funds available from the patient. I merely quoted your words if you've taken my response as a backhanded slap it must hit home with you on some level. The point I was making is if people are OK with government running the show they cannot complain when things don't go their way.

pinky, you certainly took my quote out of context. Actually I was thinking of garbage pickup when I wrote it. The governments provide many services for the people, e.g. libraries, public transit, roads, etc., that would be difficult for each person to provide for themselves. To use this comment in such a pinpoint distasteful way shows you must have gotten up on the wrong side of the bed. Unless you aren't reading what I write at all you would notice I am addressing the high cost of end-of-life care and not the shirking of responsibilities.

Personally, I don't take my own garbage to the landfill, I didn't personally build the roads, and I do use the libraries on occasion. I am happy our governments provide these services for us. And I am grateful for Medicare. My parents paid into it when they were working, but I know my mother has gotten more out of it than she ever put in. She abused the "free" care for a while, but fortunately that has stopped.

Anyway... please don't take my words out of context and use them as a backhanded slap to backup some point you're making.

rjovana I read your response about the unbelievable mess created by "paid thugs in the Republican Party" update: our government for the past 6-7 years is being lead by Obama Demo-rats not Republicans

Jessiebelle I read your response...."Imagine how hard it would be if we each had to arrange for all of our own services" This kind of thought is why we have government setting the rules for care so many people don't want to accept accountability for themselves and are happy to let someone else do it. So when you hand over the reins don't complain about the ride.

rfhendricks some how this discussion has drifted into a political discussion. I agree there is tremendous waste of tax payers money and there needs to be change. My answer was simply stating my view point on medicare payments and how the government requires people to use any funds they have available first before medicare will step in and pay. I don't know how big your parents insurance policy was or how much you stand to inherit. My statement was I agree that people need to use all funds available before asking the state to pay. Isnteasy said it very well who is qualified to decide who should get help and who shouldn't. There for our society our government helps many some need it some are playing the system. But there have to be rules and one of the rules is to use your assets first and I happen to agree with it. As adults living life there will always be times that things aren't totally fair we have to understand that suck it up. My Grandfather lived a very simple life no frills would never apply for Medicare, Medicaid or Social Security he always said those are for people in need. He understood he had paid into the program but would never accept any payment back as he said I don't need it leave it for someone that does. I was not raised nor do I think in an entitlement frame of mind. If there are family funds available use them including insurance policies for care, you and your brother will have to figure it out as to how to pay for the burial when it happens. Your parents need care now. And while it might not be fair it is what it is.

suziez, excellent point. Something that really bothers me in the end-of-life scenario is how estates are vacuumed up the system and go to people who already have enough. There needs to be lower-cost alternatives to care. One thing that will have to change is the number of people who sue because their parent got sick, fell, or died. Elders do these things, both at home and in nursing facilities. Insurance costs are probably staggering for nursing homes. Another thing that will have to happen are that people with good hearts and deep pockets are going to have to work to make alternatives that will be self-sustaining, though not overly profitable. I like the idea of the residential facilities I've heard about, where a few people are housed at reasonable costs. (I do worry what one big lawsuit could do to such operations, though.)

It would be nice if we could make what is ideal happen, but few of us have enough resources to do this. The best we can do is try to keep our own costs down and maybe Mom and Dad will have enough to last them.

(From what I've heard, we could cancel one of the Washington parties thrown for dignitaries and keep 1000 people in really nice NHs for a whole year.)

Nothing's going to change the federal rules on assets, except to make them more stringent, as has been the case since 2012 when new rules were effected. One additional point we boomers all need to know is that most "good" NHs (if there is such a thing) do not accept Medicaid upon admission. They all have what's called "Medicaid beds", but they reserve them for persons who were admitted while they had their own money (usually enough for 3-4 years of care) but then outlive their money. My mother only had $100K, but the "good" NH let her in because she was going on 96 and they figured she wouldn't live much longer. They were right, but just before she died, they made us start the Medicaid application process to make sure they got their payment when her money ran out. As an aside, it's well known that in my state, there is just a handful of corporations that own all the NHs; and that they are very lucrative businesses which (shamefully) pay their caregivers/CNAs very low wages.

if the government would clean up and get rid of those that never worked will never work, can collect checks in dual states, I believe in helping the next guy, but enough is enough, all those folks night and day on the streets of Ferguson - evidently they don't work for the most part (guess some took a sick day off) yet they look well fed and clothed and that's just a little town. Clean up the corruption then there would be plenty of money to help the truly poor who need it and let the seniors who worked all their lives to accumulate a modest nest egg keep it. My Dad died when I was 5 Mom raised six of us, and worked every day to do it. We all turned out ok and didn't take advantage of any government assistance as we all followed her lead in our adult lives.

I'm 60 and I'm hoping that, should I ever need institutionalized care, that there's a better way in this country then 6000.00 +/mo nursing homes. Not a single person I know can afford that amount for more then a year or two without help from the government. I read a report that said nearly half of retirees have no more then 25,000.00 in savings. Even if you add in the fact that they might own their own home free and clear, that's still not going net most of them enough to cover their end of life expenses should they need nursing home care for long. As our senior population lives longer and longer, It's mind boggling what the taxpayers are going to be paying out for senior care in the years to come! Our county simply will not be able to maintain that kind of entitlement.

When that happens folks are going to, more and more, start looking at alternatives to the status quo.. Just as the ever increasing costs of funerals these days has made cremation much more accepted, so will the high cost of senior care change the face of senior care... Can't tell you what the changes will entail but I do hope it's better then what we have today.

Regardless though, I'll bet it's still going to mean you have to cash in Dad's life insurance policy.

I'm not sure about the percentages. We do have socialism in the US. One program is the public education system. Another is Medicare. Actually, any public service is socialism. Thank goodness we have these things. Imagine how hard it would be if we each had to arrange for all of our own services.

someone wrote, " As much taxes as people pay into the state there should be enough to care for all the elderly." This is so easy to say, but if you do the math, it's just not possible, unless you tax everyone about 70% or more. Some Scandinavian countries do this, it's cradle-to-grave care, also called Socialism.

So well said, Igloo. One thing that factors in heavily these days is the cost of nursing home care. Fifty years ago the facilities were not very nice and got a bad reputation. Their only saving grace is that they were affordable. Now end-of-life care is so expensive that few people were able to save that type of money. Considering that many people our parents' age made only $20-30K a year before they retired, each year in even a modest NH would cost more than they made in an entire year at work. And if memory care is needed, as is often the case now, the cost would be twice that. Who can save that type of money and have anything to live? Unfortunately, most people are not Warren Buffett, so didn't turn their molehill of savings into a mountain of wealth.

I do wish that we could find a way to lower the cost of elder care in the US. Keeping parents at home when it is possible is a good way, but often not practical. What I would really like to see is some entrepreneurial spirits open facilities that are nice and not so profit oriented. Sometimes I feel like people view elders as a cash cow. Personally I am glad that Medicaid is there to fall back on. It doesn't take long for end-of-life care to go through what looks like a good bit of money.

wit - Medicare & Medicaid came about in the 1960's & short of the dystopian universe of something happening as in "The Road", there is no going back.

No one is making one apply for Medicaid. Medicaid is totally a program that the elder or their DPOA chooses to enroll them into & they have to qualify for it. So if there is a cash value to insurance policy, it has to be cashed in. Most of the posters that come to this site - imho - find themselves thrust into an emergency situation where their parent just cannot be on their own anymore for their own health, safety & security and their family cannot provide - either physically, emotionally & financially - the level of care that they need; & are at a loss to understand what the programs are. "inheritance" well LOL as parents don't have any real $$, maybe a older home, old car, perhaps a CD or two; maybe 50K - 80K in savings. Enough for a couple of years in IL or AL or NH if their lucky. Most elders don't have an income stream of SS, retirement and savings to shell out 10 - 15K a month very long. I think Pam wrote that average SS is $ 1,200 a month. If they are advanced elderly (like in their 90's) their SS is going to be even less as wages are from the 1940 - 1960s. How to get & pay for care is a crisis situation.

Often family (the daughter) leaves her job (and future earnings & build up of her own SS & retirement) to care for mom &/or dad without planning it out and doing it for free. Ends up being a patchwork of care that leaves the caregiver jeopardizing her future & her own relationships and the parent ends up going into the NH eventually anyway & applying for Medicaid. Yeah daughter can get caregiver exemption on the house but she doesn't have the income to afford it. Over & over there is a post on someone in this situation; it is heartbreaking.

Avoid Medicaid sounds dandy but do you have the funds to pay for care or the ability to provide the level of care for forever? If so, great. But most don't and they know their family home is not a substitute for a skilled nursing facility. The elder becomes the frail elderly who need the ability for there to be 24/7 nursing care & oversight. Unless you are generationally wealthy, it is my experience that if you live long enough you will run out of money & family will run out of steam. (& not likely to ever be on this site) & thank goodness for Medicaid.

Medicaid described as a "Ponzi" isn't valid as there isn't any return on your investment as there isn't any investment paid into Medicaid. Your Medicaid required spend-down or SOC directly pays for your care or your needs (like a FH policy), it is not "invested"; you don't get it back - as in a Ponzi.