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Mom (91) is living with us. She has 2 life insurance policies totaling $10,000 in benefits when she dies. Will these policies affect her Medicaid eligibility if she gets to the point where she will need it?

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If they are whole life insurance policies (policies that have a cash value now) yes they will affect her Medicaid eligibility.
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As worried said but not if being paid by an employer. (Not sure if employer based ones even have cash value) The insurance policy will need to be cashed out and the money used for her care and then Medicaid applied for. With my Mom, her policies totaled 10k. I used it for prepaying her funeral. It will become part of her spenddown so there may be ways to use it. Can't be gifted. Check with Medicaid how it can be used.
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dgcctoth Sep 2020
She has been paying for them herself for years. Not employer paid, She's adamant that she continue paying for them. They do total 10K. I don't know if they are whole or term life. I'll have to check.
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The type of policy is what makes the difference, if it’s whole life, it’s what Cali posted as whole life cash value is an asset that exists for her to use & cash out now,

But if it’s term life, that can be sticky and going to depend on what the term life face value is as to whether Medicaid gets involved. Term life has a “face value” on the policy. It’s this face value that is what’s required to be reported to Medicaid, even if the $ to beneficiary after death is actually going to be more than it’s current face value. The after death value, isn’t an asset as it doesn’t exist till after death. Comprende?
You want to make sure that the beneficiary is you or another person and NOT her estate.

Term life tend to be lower value policies, maybe written for 1k, 5k, 10k and have a beneficiary indicated in the policy. States Medicaid programs can place a limit on allowed “face value” for a policy. So you need to find out what the max face allowed. I think if it’s is over the face limit, Medicaid may require the state to be put on as a beneficiary. But on that I’m not sure as I didn’t have that to deal with.

If the policy is really ancient and it’s fully paid up to the point that it’s producing a dividend this is a sticky for the Medicaid application & renewals. If that’s your situation, do a update. I’ll tell you what we did to deal with this.
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dgcctoth Sep 2020
I'm the beneficiary, She purchased them for her funeral expenses and is still paying them each month. She does get a small dividend check from one of them ($8.90/ month plus a $102 each year) so I am assuming that one is term life. Both are $5000. I'm her POA. She's still mostly okay but her cognition is declining daily. I may make the decision to cash them in and prepay for a funeral instead. It may be the better option. Thanks
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Can you talk to her about why she wants them?  To the extent that she can cash one in and purchase a prepaid burial plan, that may not be an issue (depending on state/amount).
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She will not receive face value if cashed in. My Mom had 2 totaling 7k. She received a little more than 2k. The 8k was shares she had in Prudental. That 10k paid for her prepaid funeral.

Do the policies stipulate for a funeral? If so, I don't think you need to cash them in. Check with Medicaid.
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