1. 3485 POINTS
    J Scott BurkePRO
    President, Newbury Inc., Evansville, Indiana
    Medicaid doesn't actually "take" your life insurance. You just can't qualify for Medicaid assistance if you have more countable assets than Medicaid allows. In most states $2,000 is the total allowed to qualify for Medicaid assistance.

    Checking and savings accounts, retirement money, cash value of life insurance, etc. all count against you when qualifying for Medicaid.

    Many people will cash surrender their life insurance to qualify for Medicaid. You can also irrevocably assign it to your funeral home and it will be exempt but must be all used for funeral expenses if you do that.

    An actual funeral preplan life insurance policy that you purchase from a funeral home is always exempt from Medicaid.
    Answered on April 12, 2013
  2. 12689 POINTS
    Ted Ratliff
    Owner, SFS Associates,
    In Ohio if the cash value of a life insurance policy and other assets is greater than $1500 you must spend down. When it come to life insurance you have a few options depending on how long you have had the policy. Prepay your Funeral, assign the policy to the funeral home, or purchase a Funeral Trust with the cash value in the policy. A Funeral Trust policy irrevocably assigns the death benefit of a life insurance policy to a Funeral Trust set up by the insurance company and can only be paid out for expenses directly related to the funeral and final expenses. This makes the policy Medicaid Exempt. In Ohio you can put up to $15000 in a Funeral Trust. In some states you would need a Goods and Services contract to go along with the Trust. Your agent should be able to help you with that.
    If you cash surrender the policy the money cannot be gifted to your beneficiary, you must spend it on yourself or use it in the ways mentioned above. There are rules in place that can preserve some of your assets. A good Medicaid Care Resource Planner or Elder Law attorney can help you with that issue.
    Answered on April 12, 2013
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