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What should I do if my mom refuses to sign papers to have her assets in life insurance spent down in order to qualify for Medicaid?

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A life insurance policy is legally recognized as an asset of the policy owner and it counts against them when qualifying for Medicaid. If a policy has anything more than a minimal amount of cash value (usually in the range of $2,000) it must be liquidated and that money spent towards cost of care before the owner will qualify for Medicaid. All Medicaid applications specifically ask if the applicant owns life insurance and full policy details. Failure to disclose and comply is fraud.
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So my question is, my mom has COPD now and is a recovering alcoholic and smoker. However, she has rebounded now and it worries me that she has no life insurance at all. I have sat with her on numerous occasions to try and discuss this topic and it only upsets her. She says she will never sign a life insurance policy cause she is going to be around along time. Just fustrated and concerned what to do. She is 68 and just getting older..what can i do? Please help..Kim
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D2...
Confusion may lie in the use in terms. There is a difference between a "Pre-paid Funeral Account" and an "Irrevocable Funeral Trust" both of which may be funded with life insurance.

A pre-paid funeral account may be revocable or irrevocable. An irrevocable trust is, as its name suggests irrevocable.

Rules are state dependent. In Florida, an irrevocable funeral trust or an irrevocable pre-paid account is not countable. A revocable account is countable if proceeds or life insurance cash value is over $2,500. The account must be deemed a "burial account".

The statement "...is only irrevocable for a short period of time" makes no sense to me in this context. You might try speaking to the funeral home directly to confirm what was said.
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I am sorry that some states are going to put lien on insurance polices. In my mother case she lived in New York. Her house was only in her name. I had to sell the house and in a copy of years the insurance and laws were going to change in favor of a lien by the nursing home. All the polices had my name on them and I was able to use them for her biils and funeral cost. I sold her house in 2005 and they had inform me the laws were to change.
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Let's assume the Medicaid recipient owns a life insurance policy. If the life insurance policy proceeds are payable to the estate of the deceased owner (unusual), then indeed the state would be entitled to some or all of that payment. However, if the proceeds are payable to someone else (such as the son or daughter of the deceased owner), then such payment is "non-probate" and under the laws of most states would be protected from a claim from the state for reimbursement for the deceased owner's Medicaid expenses.
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Mr. Heiser, I've been reading the posts regading cash value insurance policies closely. Upon the death of the insured family member, why would Medicaid not be entitled to the beneficiary amount? I understand the cash value part entering into whether the person is qualified for Medicaid on the front end. Also, I tried to open a pre-paid funeral account directly with the funeral home for my father but was told it is only irrevocable for a short period of time. How does one set up an irrevocable account?
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Norene, yes you have been given a lot of good advice. get yourself a edler attorney and also call elder care. Make sure you have all your paper work in order. like you were told everry state does have there only little rules and laws they follow. If you have insuance polices that are paid in full and have the power of attorney, no matter what state you are in and you are the only one listed. call the insurance company up explain mom loved one is ill and you need to cash them in. Setting up a pre paid funeral plan is a great thing to have. Becasue if someting happens you have one less thing to worry about. Not every one has the cash up frount to pay for a furneral/ and the price is locked in. It helped me out. I used moms insurance money to pay for her pre paid funeral expenses years beofre her Alzheimers/Dementia got bad. That wass also before I had to sell the house and a lein was placed by the nursing home for a whole year even though they were paid in full . Also the lawyers and real estate got most of her money/ that was in New York. Florida was different. hope every thing works out for you. You may seem you are going in circles but like everyone on this net work will tell you they have been down the same road one way or another. May you have a blessed holiday season. and that goes for all the cargivers out there thank you so much for your help and love, care, good advice and hugs. patrica61
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Norene,
You have- actually we all have been givin great advice and guidanece. The next logical step is to take everything that you learned and to contact a local elder attorney that will be able to specifically guide you in your own personal situation. Each state is different and as caregivers we are too. Take it to the next level- pick up the phone or go onto the internet and find a local elder attorney. I only wish that I had this infromation before- but you have it now.
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Ok, Mr. Heiser, I'm definitely in that latter category. I still don't understand where the cut-off is.
Norene
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Yes regarding benefits there can be only one spouse that would be the one that was married to the vet either male or female until the veet death. And the other person can not remarry. That is true. But if you have all the miltary papers can either mom or dad did not divorce or remarry and were married had the time of the otherrs death. You can get help from the VA. The veternans also if buried in the VA cementary there is NO COST to open the grave and a new tombstone is place. That is what I did with no problem with anything. I used all the insurance polices that wee set up in only my name and I was the power of attorney and set up the pre paid benefit. That was done becasue the law wass going to change about nursining homes and medicade and for my own peace of mind. It wass less stressful when my mom just passed away in my arms a few weeks ago at the assisting living. patrica61
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Yes, one can certainly pre-pay for funeral and burial expenses, buy a new or better car, pay off the mortgage (if any), buy more tangible personal property (household items, musical instruments, etc.), and do other such relatively small purchases/conversions, to reduce one's Medicaid-countable assets. I always recommend looking at the simplest techniques first, before getting into any complex planning. Often it's enough to solve the problem.

It's when there is, say, $100,000 or more and/or a home to protect, that it starts to get tricky and worth hiring an elder law attorney to save you money.
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I guess I'm a little confused: Why does one need medicaid?
Why not just put away about 20K for funeral expenses and be done with it? When the time comes, your beneficiary will take out the money and pay for the funeral...something wrong with this? Mr. Heiser?
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For Mr Heiser...we made an appt with the elder lawyer here in NJ...Dec 22nd. I feel really good about this...too much red tape and the home will get all the assets anyway, so why not make sure that everything will be done correctly, leaving us less stress. These last four months have been stressful enough with a fall, than heart problems and she seems to be getting worse instead of better. Knowing that she is well cared for is the most important thing to us..and knowing that things are done right to prevent her from being "kicked to the curb" so to speak is our goal. For anyone who spoke regarding veterans benefits, I was told about this from the funeral director (also someone we are familiar with and trust) but she is not entitled to these benefits because her 1st husband remarried after their divorce many many years ago.
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I'm going to share you my story about insurance. I will keep it short. Last year I wanted to put mom on medicaid but because she had an insurance policy over the legal amount, she was ineligable. I had used up almost of her funds to pay for her care- and now had to dip into my savings for her daily care. For many months my nights were sleepless and filled with tears. And then I remembered reading an article that there are people who buy insurance policies. For several nights I thought about how to find a buyer even though I know that they would give much less than the value of the policy- but I needed the money for her care. After many more tears and sleepless nights I called up the insurance company. It turned out that with proper documentation (POA, a letter from hospice, and a letter from the doctor) they released half of the insurance funds. This allowed me to continue moms care for a while. Yes, I was a beneficiary and so were my siblings (two totally not ever involved siblings when it came to moms care but loved to talk about the money that they would get when she passed). When they find out that the insurance payout is going to be much less than what they were hoping for- this will be a new discussion.
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If you do not have a pre paid funeral plan use the insurance policy money to set one up as soon as possible. Not everrything the medicaid social wrokers tell is correct. I found that out the hard way. I di find all moms insurance polices that were paid in full I was the only one listed and was the Durable power of attorney, legal rep, heath epoxy, caregiver and only one on the will. That was done before she got bad with the illness. and wass moved to Florida from New York. I just had to bury my mom, she passed away Oct 5,2009 and was placed with my dad in New York at the veternans cementary. No money was due. Therre was less stress on me, every thing was done by the funeral director of which I knew for years from New York. patrica61
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if you parent is a spouse of a veternan you do not pay for a tombstone. that is given to you. All miltary papers must be in your hands. There is also no charge fore opening the grave site. Some state have rules like New York if a pre plan is set up any money that is not used up goes to the government. Floirda does not have that. Both my husband and myself did our our pre plan so my children have less to worry about. Your house is sold however when I went for the final selling the nursing home placed a $71,000.00 leion the money and held on to my deposit for a year. All money was paid to them when I brought mom to Florida in Oct 2005. She passed away, and the nursing homes is pulling a fast one from 2006 to medicare and blue cross blue shield of a $74,000.00 try to get more money. They werre paid 100% when I left Oct 9, 2007 and borught mom to Florida. I do not beleive in medical social workerrs they did not help me at all. They were suppose to be watching mom, when I wass asked to get things in order and come back to New York, They did nothing, mom fell again and was back in rehad in a nursing home. patrica61
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Regarding a life insurance policy. If the person is ill and the state that you are in is going to change there rules on what happens to life insurance policies something has to be done before the person is on medicade. A policy has to be paid in full, and also you must be the one listed on the policy to get the money. You can set up a pre paid policy so that if someting happens to your loved one, that is one last thing to worry about. I was the durable power of attorney that is different than plain durable power of attorney in most states. everything was done legal. The papers were sent to me and I had to have a doctors note plus send in my legal papers. I received all the money. It was used to pay for mom full funeral cost before she even came to Florida. Mom was buried in New York in a veternans cementry in long island no cost to me to open the grave site but I also needed all my dad's military papers for the funeral director. I had no problem at the time of her death of which just happen. I am still awaiting additional monies from the vetenans. It is important to look over all important legal papers so you do not lose any benefits. You cash in only full paid polcies if the person is not completly on medicaid, ( you are not borrowing on the money the policy is paid in full) patrica61 Insurance polcies should be used for the burial of the loved one. Not to be used for anyting else.
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I understand, Mr. Heiser.
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Under Medicaid rules, only the cash value of a life insurance policy, to the extent the total face value of all policies exceeds $1,500, is countable for Medicaid eligibility purposes. So it may be possible simply to borrow against that cash value (usually it's a very low interest rate), which would get the countable value down low enough so that your mom can qualify for Medicaid. Obviously the borrowed money still has to be spent or otherwise dealt with, but this way your mom's policy remains in place.
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Ummmm. Not so fast. Your mother is the owner of the policy. She bought it. She paid for it. She wanted it. Don't pull the rug out from under her, yet ask yourself why am I doing this? Do you not have the money to care for your mother in her remaining life and therefore become the beneficiary of this policy? If the answer is "No", then how do you expect to "buy" the policy from her? With what money? What cash would you give her? ..the cash value of the policy? That is very little, I would guess. It is certainly not enough to purchase a non-countable asset.
In my opinion, I would not try to take this policy away from your mother. Find some cash to care for her. It won't be long, believe me. You, as beneficiary, will get the money you so desire.
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The best money that you will spend for peace of mind and to get the answers that you will need in your specific situation is to contact a local qualified elder attorney. Every state is different when it comes to the bottom line. If the goal is to get medicaid qualified- there is a 5 year look back. Even if you transfer assets for care, you will come under the microscope and might make the person uneligible for medicaid. Before you move or tranfer any assets you should consult with an attorney in your state that knows the law. Most all states will allow attorney fees to be paid out of the elder's assests.
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Yes, you can definitely use the elder's assets to pay for the attorney's fee. There's only one state with a limit on that (Mississippi), and that's being challenged, of course.

Sounds like the advice you got is correct. Pre-paying a funeral/burial is a good way to quickly spend down without incurring a penalty-causing gift.
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Wow, i'm reading this and also wondering since we are in the middle of this. A medicaid social worker recently told me that we could sign the policy over to the funeral home which is what we have started to do. The funeral home agreed that they could do that and keep it in a special acct. The face value of the policy is 10,000, the prepaid funeral price is around 12,000, however this does not include the tombstone which we were told to get ahead of time and the funeral home would include it. If its done this way, when she passes the policy would be worth round 15,000, thus possibly leaving a small amount, which probably would need to be turned over to medicaid, but that would be fine with me. Did we get wrong information. And another thing...if we consulted an elder lawyer, can we use her assets to do this? The house is currently sold and settlement should be Jan 8th.
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That's great your mom is willing to cash in the policy, but be careful of relying on any advice or suggestions from a state Medicaid case worker. First of all, they may not give correct advice, and second, it's like asking the IRS for good tax advice! It's not the IRS's job to save you money, nor the state Medicaid department to do the same. So if it's a substantial amount of money she's getting from the policy, give some thought to the best way to protect that money.
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I did check each insurance policy thoroughly, mom allowed me to talk to the customer service reps and I talked with the Medicaid office and there is only one policy she has to cash in under the Medicaid rules and mom is now agreeable to doing that. At first having to do this made her upset again about being in the nursing home and started up some old arguments that we thought were resolved. Not a good idea to have to discuss financial matters with her because it gets her all stirred up again, but she does have to know what is going on and the facts about her financial status now, its just hard having to tell her.
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Thank you. They said joint, and is in both names. I will check into this further. I appreciate your thoughtful response!
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Income is governed by the "name on the check" rule. If the terms of the annuity require payment to both spouses, then half would be countable as your dad's income. If you change that now, the state could deem that as a gift, but they may not; you'd have to check with a local attorney about that tricky point.

I'd be surprised if the joint annuity requires 100% to be paid to your dad. So that's the first step: find out what the annuity contract actually says.
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Thank you. I was able to set aside approximately $11,000.00 for each in irrevokable funeral contracts.

Mr. Heiser, concerning the annuity question: dad is on Medicaid, and mom is not. She is a "community spouse," with house, but living in govt. subsidized housing. For some reason, the annuities all go to the nursing home payments, and none to her. But they are joint annuities. I want to know why mom doesn't get half? They were giving her a "house/heat/whatever allowance, but recently took away 1/2 the annuity money that was going to her for that, and increased dad's patient pay amount. I'm thinking I need to have a redetermination, or do something different with their annuities, etc. What do you suggest?
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Rsrobbins makes some good points! Swapping the policy for a Medicaid-compliant annuity can be a good choice, in the right circumstance.

I do note that in most states there is no official limit on the amount that may be protected in a pre-paid funeral/burial policy. So long as the money is permanently and irrevocably set aside for your funeral and burial, and is so used, then the state will permit it. Purchase of such a pre-paid policy is not a gift, so there's no penalty attached to such purchase.

I'm not sure I understand secretsister's question: how is the joint annuity titled and whom are the payments going to?
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