Life Insurance / Medicaid Recipient Policy

[HealthGuy]

Life Guys: Heres an interesting scenario...I'm working with a middle aged disabled man on getting him a 40K graded death benefit life policy with Fidelity (that is all I can find he qualifies for at this time based on his health history)...Please no advice on this.

BUT here is where I need help. Before we submitted the paperwork this guys funeral director tells him that the 40K paid into the funeral trust at the funeral home will be seized by the state because the funeral only costs $8,000 and he should apply for a lesser face amount with me to pay into the funeral home trust? I'm like what?

So I told him to consult an estate planning attorney because to my knowledge that would serve him best and maybe he can set up a personal trust so the state doesnt seize his assets as a medicaid recipient...

However, the funeral home director sells their own life insurance policies of about 10k in house, so I'm wondering if the funeral home director is trying to make money on the guy I am trying to help.

Any ideas what may be happening here from the funeral home directors perspective (is he trying to sell this guy a policy, not me)...And what might an estate planning attorney say.

I know there are MANY medicaid recipients who have much more life insurance than this and their beneficiaries are family members, not the state...or the beneficiary is their personal trust, but I could be wrong.

Ridiculous situation. And the guy is worried about the policy building cash value over time that the state could seize.

I told him it would take 30 years of paying into the policy with Fidelity before it even accrues even a few bucks in cash value, its a non factor.

He wants the whole life because he likes the level death benefit and premiums that are guaranteed...I know he doesnt get the full benefit with this policy until after three years BUT that isn't my question.

Is the funeral home director just trying to put a wrench in my sale? And what might an estate planning attorney advise him. Again, he is permanently disabled and will be going on Medicare benefits this summer.
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Anyone wanna reply to my stupid post?

 

[sissymary]

The 8 grand limit the funeral dir is talking about is probably the limit in your state for a funeral trust. You see, if he were to go into a nursing home that medicaid pays for, anything above the 8 grand they will keep if he has a funeral trust. If he does not go into a nursing home he has nothing to worry about, as they won't/can't take anything from what I understand. Just make sure he does not put ESTATE as his benny. Make sure it's a person. Also medicaid has a 5 year look back period, so if he lives past that all should be fine on everything. I would Google funeral trust to learn more. And yes the funeral dir is trying to sell him a policy or a single premium policy set up as a funeral trust with him self as the benny.

 

[Newby]

It's different from state to state but in MOST states in order to qualify for full Medicaid he will need to disclose ALL life insurance policies. They will generally have to be irrevocably assigned to a funeral home. There can only be ONE beneficiary after the funeral home and the one beneficiary HAS to be the estate. Everything that runs through the estate goes to Medicaid.

The 5-year look back has to be before he applies for Medicaid. He would have to have irrevocably assigned the policy to a trust 5- years before qualifying for Medicaid.

One work around is his family members can buy life insurance on him if he never owns the policy. Medicaid can't count his kids assets as his spend down money. You can't change an existing policy over to his kids but they can buy a brand new one.

Yes, funeral homes do sell Preneed funeral insurance. The Medicaid office, his attorney and the funeral home will all likely advise him to do that and not buy other life insurance. In fact they usually recommend that people cash in their existing life insurance when they go on Medicaid.
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The 8 grand limit the funeral dir is talking about is probably the limit in your state for a funeral trust. You see, if he were to go into a nursing home that medicaid pays for, anything above the 8 grand they will keep if he has a funeral trust. If he does not go into a nursing home he has nothing to worry about, as they won't/can't take anything from what I understand. Just make sure he does not put ESTATE as his benny. Make sure it's a person. Also medicaid has a 5 year look back period, so if he lives past that all should be fine on everything. I would Google funeral trust to learn more. And yes the funeral dir is trying to sell him a policy or a single premium policy set up as a funeral trust with him self as the benny.

8 grand is the amount of the funeral not the state limit for funeral trusts. Most states allow $15,000

A nursing home has no bearing on what happens. If he's on full Medicaid (which most people in nursing homes are but also people at home can be) he will have to comply with Medicaid's asset limits.

He is REQUIRED to list the estate as the only beneficiary in most states. This is how Medicaid recovers their money from excess life insurance. He can't name a person. It would result in getting disqualified from Medicaid assistance.

The 5-year lookback will only help if he assigned ownership of the policy to an irrevocable trust 5-years BEFORE qualifying for Medicaid. It doesn't matter how long he lives. If he assigns it today and lives 10-years the money is not protected because you can't give away assets after you go on Medicaid (or even the 5-years leading up to it.)

Googling funeral trust will get you some info but also a LOT of websites selling the NGL type funeral trusts with no clue what they are doing.

The funeral trust will be exempt with NO lookback but any amount overfunded (not spent on the funeral) MUST go to Medicaid.

 

[eddiejoi]

The first thing to know is that term insurance does not count as an asset. That is because term insurance only pays out when you die. It has no cash value while you are alive, so you can keep it and the death benefit goes to the beneficiary. In a husband and wife situation, this can cause a problem. If one spouse is on Medicaid, and the other spouse dies owning a term insurance policy with the “sick” spouse named as beneficiary, the “sick” spouse will suddenly have too many assets and be disqualified for Medicaid if assets then exceed $1,600. So it is important to make sure the person on Medicaid is not a beneficiary of life insurance policies.

 

[MariannaWeiner1]

Can Life Insurance Affect Your Medicaid Eligibility?

 

[BeeSelective]

Can Life Insurance Affect Your Medicaid Eligibility?

Yes. Cash value of life insurance is included as an asset.