Cashing Out a Whole Life Policy

[bennie21]

My wife's mother recently was put into a state run convalescent home in New York. She has a whole life policy worth $2,000, and we have been told that this must be cashed out, in order for her to be in the home. She cannot have any assets in her name, since she is under Medicaid. What can we expect to get from this policy, as it has been in effect aprox. 60 + years ? The funds will be used for her future burial and expenses, but, I assume, we will still be paying the taxes on this. Seems so complicated, but not worth seeing an attorney for, for a $2000 policy. We are 2500 miles away, which doesn't help matters.

 

[Jerard]

My wife's mother recently was put into a state run convalescent home in New York. She has a whole life policy worth $2,000, and we have been told that this must be cashed out, in order for her to be in the home. She cannot have any assets in her name, since she is under Medicaid. What can we expect to get from this policy, as it has been in effect aprox. 60 + years ? The funds will be used for her future burial and expenses, but, I assume, we will still be paying the taxes on this. Seems so complicated, but not worth seeing an attorney for, for a $2000 policy. We are 2500 miles away, which doesn't help matters.

To get the assets of the policy out of her name just have her transfer ownership to someone else. You would still need her signature to cash it in, anyway.

There is no way of knowing how much it's worth. Contact the company for that. You could estimate it by checking the non-forfeiture values within the policy.

As far as taxes go. If you transfer ownership and just file a claim at her death there isn't any. If you or her cashes it out you only pay taxes on the amount the policy is worth less what was paid into it.

Good luck.

 

[STIBROKER]

think there is a 5 year look back.....this will not help......

To get the assets of the policy out of her name just have her transfer ownership to someone else..

http://www.nydailynews.com/new-york...g-five-year-look-back-rules-article-1.1464721

 

[DHK]

My wife's mother recently was put into a state run convalescent home in New York. She has a whole life policy worth $2,000, and we have been told that this must be cashed out, in order for her to be in the home. She cannot have any assets in her name, since she is under Medicaid. What can we expect to get from this policy, as it has been in effect aprox. 60 + years ? The funds will be used for her future burial and expenses, but, I assume, we will still be paying the taxes on this. Seems so complicated, but not worth seeing an attorney for, for a $2000 policy. We are 2500 miles away, which doesn't help matters.

If the policy has been in force that long, she will have a gain in the cash surrender values. When she cashes it out, it will show up as ordinary income (instead of capital gains). However, due her living situation, (being qualified for Medicaid), I wouldn't worry one bit about this.

This isn't tax advice, so if you have tax-specific questions related specifically to her situation, you'll need to contact a tax advisor for her state.

 

[Cornelius]

Ask one of the board agents about a funeral trust.

 

[Newby]

My wife's mother recently was put into a state run convalescent home in New York. She has a whole life policy worth $2,000, and we have been told that this must be cashed out, in order for her to be in the home. She cannot have any assets in her name, since she is under Medicaid. What can we expect to get from this policy, as it has been in effect aprox. 60 + years ? The funds will be used for her future burial and expenses, but, I assume, we will still be paying the taxes on this. Seems so complicated, but not worth seeing an attorney for, for a $2000 policy. We are 2500 miles away, which doesn't help matters.

If she's had it 60 years she will get very close to the full $2,000.

She can pay the money to a funeral home and be day one exempt. In most states she could assign ownership of the policy to a funeral home and it would no longer count as an asset. Who knows if New York allows that. That state is run by a collection of nuts and anti-consumer politicians.