Is It Possible to Use Accumulated Cash Value to Add More Face Amount?

[wehotex]

I'm trying to help a friend of mine to REDUCE her accumulated Cash Value so that she can qualify for Medicaid. Her monthly income is only about $800/mo, but she has too much CV to qualify for Medicaid. Is there a good way to reduce her CV on her whole life policy?

 

[Newby]

I'm trying to help a friend of mine to REDUCE her accumulated Cash Value so that she can qualify for Medicaid. Her monthly income is only about $800/mo, but she has too much CV to qualify for Medicaid. Is there a good way to reduce her CV on her whole life policy?

Pull it out of the policy through a loan. She can use it to buy things for her home or personal things like clothes, furniture, pay on her car, etc. and Medicaid won't have a problem with it. If she has a small policy just to cover her funeral she can use the cash value to prepay her casket and burial vault at the funeral home or buy cemetery spaces with it. Or she can just assign ownership of the policy to her funeral home and Medicaid will allow that.

If she has a large policy keep in mind that once she qualifies for Medicaid she will likely have to make her estate the only beneficiary after her funeral gets paid. Medicaid is the first in line creditor to get anything that passes through her estate. So if that's the case she won't be wise to keep funding a large policy. If she has much money or a large policy I would advise her to meet with an estate planning attorney.

 

[Robert Barney]

From this article:

Can Life Insurance Affect Your Medicaid Eligibility? | ElderLawAnswers

f you have a life insurance policy that may disqualify you from Medicaid, you have a few options:

Surrender the policy and spend down the cash value.

Transfer ownership of the policy to your spouse or to a special needs trust. If you transfer the policy to your spouse, the cash value would then be part of the spouse's community resource allowance.

Transfer ownership of the policy to a funeral home. The policy can be used to pay for your funeral expenses, which is an exempt asset.

Take out a loan on the cash value. This reduces the cash value and the death benefit, but keeps the policy in place.

Before taking any actions with a life insurance policy, you should talk to your attorney to find out what is the best strategy for you.