| In order to qualify for Medicaid coverage of your | | | | children purchase the policy from you and keep it in |
| nursing home stay, your assets cannot exceed $2,000 | | | | effect (by paying the annual premiums). You see, it's |
| if you are single, or $101,540 if you are married. | | | | not who is insured or who is the beneficiary that |
| However, not all of your assets are "countable" for | | | | matters---it's who is the owner of the policy. The |
| these purposes. The biggest exemptions are your | | | | reasoning for this Medicaid rule is that the owner could |
| home, your car, and your personal property. | | | | simply cash in the policy at any time, and thus it is |
| Another exemption is life insurance owned by you. | | | | counted the same as if you already did so. But if your |
| The rule states that only the "cash surrender value" of | | | | child is the owner, you have no ability to cash in or |
| a life insurance policy is countable, but only if the total | | | | cancel the policy, so it would no longer count against |
| face value of all life insurance policies on your life | | | | you. |
| exceeds $1,500. ("Cash surrender value" is the amount | | | | Another option is to assign the policy to a child, as a |
| the life insurance company will send you if you | | | | gift. This will cause a penalty period so in many cases |
| canceled the policy. It's also known as the "cash value." | | | | this is not the best solution. However, as part of an |
| The "face value" is what the company would pay out | | | | overall plan that includes other gifting, it could make |
| to your beneficiaries if you died, assuming the policy | | | | sense. |
| was still in effect.) | | | | Recently, some companies have advertised single pay, |
| So if you have a $1,000 policy with cash value of | | | | non-cancelable, no cash value "life insurance." The idea |
| $800, you can keep it and it will not count towards | | | | behind these policies is that if there is no cash value, |
| your $2,000/$101,540 limit. | | | | the policy cannot count against you. They are set up |
| What if you have a term policy with a face value of | | | | with minimal underwriting (i.e., virtually everyone is |
| $100,000? It's completely exempt since a term policy | | | | guaranteed to qualify to buy one), and the beneficiaries |
| by definition has no cash value. Of course, you (or | | | | are usually the children. |
| another family member) have to pay the premium | | | | The problem is that if you purchase an asset over |
| each year to keep it in force. | | | | which you have no control---you cannot cancel it, |
| What should you do with existing policies? If you have | | | | cannot get your money back, cannot even change the |
| an existing policy and your health is not good, you may | | | | terms or the beneficiaries---the Medicaid agency may |
| decide to keep the policy rather than cancel it. After all, | | | | well deem this to be a gift. If that's the case, you have |
| you may be uninsurable, and if you keep the policy in | | | | not accomplished what you thought you had, i.e., |
| force, your family members could benefit from the | | | | converting cash to a non-countable form, so that you |
| proceeds upon your death. | | | | did not have to make a gift of the cash. Accordingly, I |
| Assuming the total face values exceed $1,500 and | | | | advise my clients to stay away from this type of |
| your countable assets put you over the limit to qualify | | | | product unless and until it has been proven to be |
| for Medicaid, it could be a good idea to have your | | | | effective as advertised. |