In this Elder Law Minute, Wes Coulson, Illinois and Missouri Elder Law attorney, discusses an important and sometimes overlooked subject and that is life insurance in the context of establishing Medicaid eligibility to help pay for nursing home costs.
Life Insurance and Medicaid Eligibility: How It’s Handled Can Have Huge Consequences
Hi, this is Wes Coulson from Coulson Elder Law serving clients throughout the St. Louis metropolitan area, both in Missouri and Illinois, and this is your Elder Law Minute. Today I want to talk about an important and sometimes overlooked subject and that is life insurance in the context of establishing Medicaid eligibility to help pay for nursing home costs.
A lot of people are under the misconception that life insurance doesn’t count as one of your assets. Kind of understandable because you don’t think of it as money that you have, you think of it as money that is going to be for somebody else after you die. But, that is not how Medicaid looks at it. Medicaid considers life insurance based on the amount of money that you could get if you cashed the policy in now to be part of your assets that are subject to that small asset limit, $2,000 in Illinois (as of the latter part of 2018 when I’m recording this) $3,000 in Missouri. So, it doesn’t take very much by way of value of life insurance policy to cause you to be denied for Medicaid.
Worse yet with life insurance, life insurance has different values. There is the face amount of the policy, that’s I bought a $10,000 policy. There is the death benefit, how much that policy will pay off when you die. If you’ve had in it effect for a long time that’s often more, sometimes quite a bit more, than that face amount of the policy. And then last, but not least for these purposes, the cash surrender value, the amount you would get if you cashed it in.
We’ve seen people who have had policies, that because they didn’t do planning they had to cash it in for $15,000, under circumstances in which if it was still in force when they died, it would have paid a $50,000 death benefit. That’s quite a loss to take.
So, the object or moral of this story is that if you have life insurance, or a loved one who is going to apply for Medicaid has life insurance, you need to talk to an elder law attorney because there are some complex considerations, but at the same time the benefit of doing planning with life insurance in this context can honest-to-goodness, in many cases of itself, more than pay for the cost of the planning. Thanks, we look forward to seeing you if you favor us that opportunity.
For more information about Life Insurance and Medicaid eligibility, visit these articles:
- What You Can and Can’t Keep with Medicaid: Life Insurance
- Life Insurance and Medicaid or VA Benefits Eligibility
- See a Lawyer First: Potential Problems can be Addressed Before a Medicaid Application is Filed
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Coulson Elder Law is dedicated to providing families in the St. Louis area with their Elder Law needs. Our practice areas include Asset Preservation Planning, Veterans Benefits, Medicaid Eligibility, Alzheimer’s Planning, Special Needs Planning, Estate Planning and more. We understand the financial challenges you may face as you and your loved ones grow older. At Coulson Elder Law, our clients’ well-being is our number one priority. For immediate help, call (618) 632-7000 or (314) 567-9292, or Contact Us and we will get in touch as soon as possible.