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Palm Harbor, FL 34685
MIR offers financial planning services designed to help elderly clients preserve their assets in safe investments so they may qualify for government financial assistance programs. MIR charges fees to assist elderly clients in submitting Medicaid applications, and we may receive commissions for annuities structured in the planning process. In 11 years filing Medicaid applications, we have never had an application denied.
We are not attorneys and do not offer legal advice or draft any legal documents. The decision to hire MIR is in no way equivalent to or a substitution for an attorney.
Life Insurance Policy—Is it a countable asset?
The question of whether a life insurance policy is a countable asset arises often. When applying for Medicaid ICP, life insurance is often overlooked and sometimes causes the case to be denied. So, how does one know if a life insurance policy will be a problem when applying for Medicaid? This blog attempts to answer that question.
How to Evaluate a Life Insurance Policy
The key issue is — does the policy have a cash surrender value? If there is no cash surrender value, it will not be counted as an asset. If there is cash surrender value, it might be counted as an asset. DCF evaluates life insurance policies in the following manner:
A life insurance policy having no cash surrender
value is excluded and not considered:
Examples: Term insurance, burial insurance, group death benefit plans from current or former employers, cancer and accidental death policies.
DCF considers only life insurance policies that have
a cash surrender value:
Add the face value of each life insurance policy owned by an individual. If this total is $2,500 or less, then the cash values are exempt assets. If the total is greater than $2,500, then the cash value of each life insurance policy is a countable asset.
Example: Mary is a 91 year old widow who has three life insurance policies each with $1,000 face value. The total cash surrender value of all three policies is $2,750. Will Medicaid count these policies as assets and therefore disqualify her for benefits?
Answer: Yes, because the total combined face values of all three policies is $3,000. This exceeds the $2,500 limit. Therefore, the combined cash surrender value of all policies is countable ($2,750). Since $2,750 exceeds the $2,000 asset limit for a single person, Mary is not eligible for Medicaid benefits with these policies in force.
What are some options for overcoming such an issue?
• One policy could be cashed in and the proceeds used for burial arrangements. The face values of the remaining policies would then be below $2,500 (so cash values no longer count). As long as Mary’s assets are below $2,000 and she meets the other requirements, Mary is eligible for benefits.
• Another option is to gift one policy to a family member. However, one must consider whether this causes a penalty period. Considerable care should be taken prior to gifting life policies.
Please note that transferring or preserving assets requires expertise and experience. Families should consult with a knowledgeable Medicaid Practitioner such as Medicaid Information Resource prior to taking any steps to cash in or transfer ownership of life insurance policies.