I knew Medicare won't pay for nursing home care if a person has more than $2000 in assets, but just found out that having any cash value in a Life Insurance policy will cause Medicaid to refuse to pay for nursing home because it is considered an accessible asset! So, if the life insurance policy has to be cashed out in order to get into the nursing home via Medicare, where does the money for burial come from? My MIL has no assets except the cash value (less than enough to pay for burial, about $9000), is blind, 97, and is too much to handle to be kept at home. Is there a way to make her a ward of the state in order to get her care? (TX)
Please pls pls be on the alert for anyone telling you about Funeral and Burial Trusts and that they can be used for a set-aside or a placing lots of $$$ that would otherwise be a required spend down. Yes they do exist but for TX you’re better off doing a preneed with a local FH imho.
Why? TX has these very very regulated, each policy has to have the insurer registered under a permit with 1. TX Dept of Banking, 2. TX Dept of Insurance and 3. TX Funeral Services Commission (and they have additional licensing requirements); 4. Goods & Services document that is quite specific and lastly 5. Residual Beneficiary Agreement, this is the one that names the State to get any $ left over from the policy should the funeral and burial not use up the entire amount.
Other States do not seem to be quite so over-reaching on these like TX.
I cashed in Moms policy and got about 10k. Took that money to the funeral director and got a Medicaid Funeral Trust. There is a limit to how much money can be put in that trust, I think.
If conservative, you maybe able to get a funeral done for 9k. You don't need the best casket because water proof vaults are used. I had one viewing, the one before the services. Have the luncheon at your home inviting a select few.
- if Whole Life, these have a cash value & has to be cashed in with the cash used towards their spend down. Which for TX is $2,000 max for nonexempt assets from ALL places (bank accounts, investments, etc).
- if Term Life*, that’s a totally different animal as it has ZERO value until the policy owner dies. It’s only after they die that it has any value. And its value reported to LTC Medicaid is whatever its FACE VALUE is. It can be a 50K policy or could be a low 1K policy, it does not matter…. It’s the face value that is reported
- if it’s a GUL*, they tend to have a cash value & be a fixed age based policy but they usually are written that the value is NOT available as it is required to plow back into the policy. If so, it takes the path of Term Life.
So it’s mucho importante to find out precisely what type it is.
* for both Term & GUL, if the policy is more higher value your State allows for life insurance, the State is going to require a change in the beneficiary. So let’s say…. MeMaw1 has a Term Life policy with a face value of 50K so it will a have an after death payout of 50K, and your State has the maximum exempt value set at 10K (10K is common as that’s kinda what you need for funeral & burial); the State will require MeMaw1 to do a change of beneficiary on that policy to now name the State to become the first/primary beneficiary and then everyone else falls to 2nd, 3rd. It’s standard stuff for insurance companies to do.
But let’s say MeMaw2 has a Term with a face value of $7500, she will not have to do a ch age of beneficiary to her Term Life policy as she’s coming in under her States max of 10K.
LSS details super important!