Insurance Agent Forum

[chp]

Hey everyone. I was asked this scenario by a husband and wife, and I do not know the answer:

What happens if the husband ends up in a nursing home, wipes out the family savings, ends up dying a year later. The wife has used up all her savings, but still owes money to the nursing home. Can the nursing home get at his life insurance?

Thanks in advance if you can answer this question.

[VolAgent]

To quote one of my favorite professors, "It depends."

Who owns the policy, and who is the beneficiary?

[WinoBlues]

Once he dies it is no longer life insurance. It is cash money. If she is the Bene, it is her cash money (asset).

Originally Posted by chp

Hey everyone. I was asked this scenario by a husband and wife, and I do not know the answer:

What happens if the husband ends up in a nursing home, wipes out the family savings, ends up dying a year later. The wife has used up all her savings, but still owes money to the nursing home. Can the nursing home get at his life insurance?

Thanks in advance if you can answer this question.

[Newby]

Originally Posted by chp

Hey everyone. I was asked this scenario by a husband and wife, and I do not know the answer:

What happens if the husband ends up in a nursing home, wipes out the family savings, ends up dying a year later. The wife has used up all her savings, but still owes money to the nursing home. Can the nursing home get at his life insurance?

Thanks in advance if you can answer this question.

It can vary by state but in general:

You don't owe money to nursing homes. You go on Medicaid once you are broke.

When someone goes in a nursing home, they start by paying their own way until they spend down to $2,000 in most states. Once all their countable assets are less than $2,000 they will qualify for Medicaid. They can NOT own cash value life insurance if the cash value puts their assets over the $2,000 limit. They must either cash surrender the policy OR irrevocably assign it to a funeral home and make the 1st beneficiary for the amount of funeral costs and the 2nd beneficiary MUST be Medicaid (or the estate, which Medicaid gets.)

That's why when you sell final expense insurance, you want to make sure the company you sell has the nursing home rider and even better a critical illness rider. The family can then use the policy to prepay funeral expenses which is better than policy assignment or cash surrendering the policy.

You can make the kids the owner of the policy if you do it 5-years BEFORE applying for Medicaid but that exposes the insured to a whole different set of problems.

The BEST solution is to have good long-term care insurance that is state partnership qualified. That eliminates the whole problem. Few people go to that degree of estate planning though.

Also when there is a community spouse (spouse still living at home) they can keep a certain amount of assets (somewhere in the range of $85,000 depending on how much they started with.) They can also keep one car of ANY value, wedding rings, and their home.

It's always smart for families to use the services of a certified elder law attorney if they have assets when going into a nursing home.

[Never_a_dull_moment]

In order to qualify for Medicaid, he would have had to use up the cash value in his life insurance.

[jdeasy]

Originally Posted by Never_a_dull_moment

In order to qualify for Medicaid, he would have had to use up the cash value in his life insurance.

Not unless the cash value put the assets over $2000.

[WinoBlues]

Assuming it was not term or GUL

Originally Posted by Never_a_dull_moment

In order to qualify for Medicaid, he would have had to use up the cash value in his life insurance.