Can medicaid take your life insurance money

Medicaid pays for long-term nursing home care for eligible applicants.

Medicaid is a federal and state government program that provides, among many benefits, payment for skilled nursing, rehabilitation and long-term nursing home care. Medicaid eligibility is limited by a term known as countable assets. Life insurance might not count toward the limit. Whether Medicaid takes your life insurance depends upon the type of policy, its cash value, if any, and how you plan prior to applying.

When an individual applies for Medicaid as a source of funding for nursing home care, all of his assets and those of his spouse must be disclosed. Assets fall into two categories, either countable or non-countable. An example of an asset that does not count is a payment toward funeral expenses, also known as a prepaid funeral. The limit for countable assets is $2,000 for an individual and $115,920 for a married couple if only one spouse is seeking long-term care.

A term life insurance policy is like automobile insurance. You pay a premium for a set period of time and you are covered, such as a 10-year term life policy. If you die during the 10 years, the life insurance company pays the face amount of the policy to your designated beneficiary. The policy has no cash value, with the exception of some policies that pay dividends, so it does not count toward the Medicaid limit. Only policies that pay dividends count. You can keep all term life policies, and as long as the beneficiary is an individual and not your estate, the money will pass free of Medicaid restrictions.

Whole life insurance policies accrue cash value and thus count toward the limit. The only exception is a policy or policies whose total face value does not exceed $1,500. Any other whole life policy whose face and cash value exceeds $1,500 counts and disqualifies an individual. The individual must therefore divest himself of the policy.

Balancing the benefits of life insurance and Medicaid requires careful planning. For example, you can keep term life insurance, but someone must pay the premiums. For whole life policies, one solution is to sell the policy to your children who will continue to pay the premiums. The cash value no longer counts because you do not own the policy. Another option is take out a loan against the cash value to reduce it below $1,500, and then use the loan for a prepaid funeral. If the cash value exceeds the funeral costs, the balance must be expended to get under the limits required to be eligible to receive Medicaid coverage.

Related Posts

Can non residents buy life insurance in canada

Term life insurance is affordable, easy-to-understand coverage that gives you flexible, tempor...

Can texas lawyers sell life insurance

Selling your home takes more effort than simply planting a sign in your front yard, but it doe...

Can u borrow against a term life insurance policy

There are many different types of life insurance, but the biggest factor to consider when purc...

Can you buy contacts at walmart without insurance

Products that have this symbol are health-related items that are most likely to be eligible fo...

Can you buy multiple term life insurance policies

Buy one term insurance plan with a big life cover and be done with it. If this is what your fi...

Can you claim pre tax health insurance premiums

You are here Taxes Property Tax Homestead Property Tax Credit...

Can you deduct health insurance on federal tax forms

Deducting medical expenses can be difficult, because of the required AGI floor of 10% (or 7.5%...

Can you deduct home owners insurance taxes

Mortgage insurance premiums are entered on Schedule A. The Internal Revenue Service (IR...

Can you dispute a car insurance claim

Just because you have had a claim rejected it does not necessarily mean that you have no furth...

Can you drive without insurance in new york

Laws requiring auto insurance are enacted at the state level. While a few states have differin...

Can you get earthquake insurance in california

Look at the premium. It’s the first thing most customers will do, and with good reason. ...

Can you get full coverage insurance salvage title

A salvage title is something that is issued by a state when a vehicle is severely damaged and ...