Medicaid Planning with Life Insurance

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Long term care Medicaid coverage has rigid income and resource eligibility requirements as I’ve covered in previous posts like How to Qualify for Medicaid Coverage for Long Term Care.

One exempt asset is a life insurance policy with a cash value less than $1,500. However, for many people facing long term care costs and potential Medicaid applications, the question becomes what to do with life insurance policies with cash values above the exempt amount of $1,500. If you simply cash it in and spend the money, you may be losing a great deal of financial benefit for your beneficiaries.  If the cash value is $2,000 but the face value is $20,000, then by cashing, in you’ve lost the benefit of $18,000 for your beneficiaries.

There are several planning options with life insurance policies. One option is assigning the policy to a funeral home to go towards the cost of a prepaid funeral plan. Ohio has strict guidelines on completing an assignment. Failure to follow the guidelines could result in an improper transfer and consequently a period of Medicaid ineligibility. Hence, it is best to do any assignment of a life insurance plan under the guidance of a Cleveland Medicaid planning lawyer.

Another option is to transfer ownership of the life insurance policy to a loved one who will take on any premium payments.  This may involve borrowing from the cash value to reduce the value to within the exempt amount permitted and a small penalty period which can be planned for. As with the assigning the policy to a funeral home, this technique should only be done with the advice of a Cleveland Medicaid planning lawyer.

If you or a loved one is facing long term care in a nursing home, assisted living or home care setting, it is best to seek out a Cleveland Medicaid planning lawyer to schedule a consult as early as possible to maximize planning options.