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In theory, Term life does not exist as an asset for your mom at all as mom is still alive. It has no value till she dies. Then after she dies, it should bypass probate as an asset. So it’s not an asset of moms Estate. So not a probate asset so not within Medicaid estate recovery. The named beneficiary of the policy would contact the insurer with policy info and a death certificate and the insurer processes the pay out. (For more fun in this, it’s a taxable event too).
But here’s the rub, when your mom files for / filed for LTC Medicaid, within the Medicaid application, there should have been a question as to her life insurance policies. Of whatever type…. Term, Whole Life, GUL and Medicaid wants a copy of the policy attached to her LTC Medicaid application. What most States will do is if it’s a Term policy will want to look to see its “face value” & if it has any cash value. Most Term produce no cash value but occasionally really old ones will & the cash value ends up being a dividend plowed back into the policy (my mom had this, her face value stayed it’s original 1950’s low $ amount too; dealing with it added paperwork to her LTC Medicaid application & renewals). Medicaid just wants to ensure all income is reported. If face value is over a certain amount, Medicaid may require a change of the beneficiary to be the State as the primary with the old beneficiary as the secondary. Just what the “face value amount” is depends on your States Medicaid program. If it’s a term life policy that’s 50K, State is - I’ll bet a case of Prosecco - going to want to be a beneficiary of the policy. So that 50K term life will need a beneficiary change done before LTC Medicaid eligibility approved.
But 10K hopefully not. Fwiw federal guidelines for cost benefit for estate recovery is 10K. So most States medicaid don’t bother with policies or stuff under 10K value.
Personally a 10K face value policy might could be on the fence for State to try to do a beneficiary change to the policy, if your State is kinda aggressive on MERP aka estate recovery. If your State is aggressive & if mom does not have a preneed funeral & burial done, I’d try to see if there was any way to get that Term done to have the FH as beneficiary’s rather than have the State become the beneficiary. I know you’d probably rather have the 10k but if it’s a choice between the State getting it or having it pay for her funeral and burial, I’d go for funeral and burial costs. Let us know what you find out as we do learn from each other!
"Can medicaid take life insurance from a beneficiary. Was answered under SmartAsset site, and a few others.
Whole life creates cash value. Like money in the bank. So it IS counted as an available asset when you apply. The cash value would be part of the limited funds you can have for eligibility (in Texas, no more than $2K in the bank or other available assets)
I filled out all the paperwork that was needed for Medicaid and it wasn't a walk in the park, I had to jump thru hoops my thinking. That is when I found out that everything this man had has to go to the nursing home to keep him there that Medicaid takes everything except for $50 of all his finances. I had to take his cash out of life insurance and put it towards pre paid funeral expenses. That his pension goes to Medicaid to the nursing home. When we had to spend down his finances the nursing home memory care was $260 a day. I had to even show Medicaid where his money went when we spun it down. My BIL is in a place in town where we all live so we can visit him. I take up snacks and pop to him so that he can have a few things he remembers from his apartment. And we have his recliner, his tv, his ottoman and his clothes all in that room where he is so that its familiar so he knows it where he lives now. So out of that $50 he pays for his room phone and out of that he has $8 left.
If she doesn't have a pre paid funeral set up I would use that for the funeral. And the answer to your question is Yes Medicaid will take it after all her bills are paid.
Prayers
"Proceeds from any policy are considered recoverable when the proceeds are paid to the beneficiary's estate as the named beneficiary or as a default beneficiary including when another named insurance beneficiary predeceases (dies before or at the same time as) the Medicaid beneficiary."
I interrupt this as if there is a beneficiary, they are entitled to the money. Someone else may interrupt this differently.
If the beneficiary was an individual that problem would not exist; the insurance Co would pay the individual directly and issue them a 1099 - Misc.
If the State, via MERP or its outside contractor, filed a claim in probate for the supposed LTC Medicaid tally against the Estate, they could then get whatever % of distribution of assets of the Estate as how your State runs probate. If your state is an all equal probate claims, then all claims filed get the same amount in theory. But not all states do this, like for Texas, it’s a Level of Claim by Class for probate to pay & MERP is a Class 7 claim. So for TX all claims in Class 1-6 filed get paid (or released) first and foremost….. and a claim has to be filed and creditor has to provide court documentation in detail, notarized in proper format to the court or is time barred…. credit cards are Class 8.
In the past it was pretty common for men to have their life insurance policies to be left to “Estate Of” rather than to their wife as it was thought that the lil lady could not handle the $. So it would go into probate as the probate atty would have the expertise to deal with $ as the wf certainly would not. Lol! My dad did that & mom was very much not happy. It wasn’t a huge policy, but that he did it bugged the crap out of her especially as she outlived him & his attorney by decades.
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