Screwed? $1,500 *Death* Benefit for Medicaid Exemption?

[InsuranceAssure]

Probably 50-75% of the people we write are on Medicaid.I'm willing to bet very few agents even think about this and even fewer name another owner for the policy. 80% of the time nobody but the insured is even in the house to have another owner sign right then.

SammyJ --

This is what kept me awake for the last 6 days....Thank you for telling it like it most likely is. It was what I presumed to be true, but wanted to confirm with those more expert than I.

This reality seems that in many circumstances could be pretty grotesque.

That said...I appreciate the reality, better than the delusion.

Thank you SammyJ

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Think about it. If mom NEVER owed her policy, can it count as her asset? No.

If Mom owed it but gave it away within the past 5-years and is now applying for Medicaid will it count against her? Yes.

You are correct that the laws do vary somewhat from state to state but all states have a way for people to set funds aside for reasonable funeral expenses. They do NOT allow people on Medicaid to set money aside to leave to beneficiaries. And they shouldn't.

Case 1: Understood, but per SammyJ's post, is probably not the most common circumstance for F.E. clients to have....though perhaps that is the greater point of this discussion?

Case 2: Yes, maybe...and her $1500 cash value with a $10,000 death benefit risks getting turned into $1500 payment to Medicaid (-surrender fees?) and $0 death benefit and still a $10K funeral bill for the family? Empty pockets.

Case 3: Setting aside reasonable funds? Aren't those reasonable funds forced to be less than the total sum of ALL assets and always less than 2K? If 2K was reasonable for Funeral Expenses, why do Final Expense policies even exist? In the original post, the cash value maximum for a Life Insurance policy to not be surrendered to Medicaid was actually $1,500. If the policy is cashed in and paid to Medicaid, then what reasonable assets are left for the funeral?

The big picture concern is that the future hope of many of these clients who eventually depend on Medicaid, that are paying Premiums to ultimately do the right thing for their family (i.e. pay their own funeral bill), can be, in many cases, just a mirage....a sick sort of outcome really.

I'm hoping to learn from more experienced agents that I am seeing this quite inaccurately, but that is how the facts seem to be shaping up.

I think this may be a bigger mess than some of us are trained/accustomed to consider.

Maybe I'm not correct.

Just trying to wrap my heart/head around it.

 

[jdeasy]

SammyJ --

This is what kept me awake for the last 6 days....Thank you for telling it like it most likely is. It was what I presumed to be true, but wanted to confirm with those more expert than I.

This reality seems that in many circumstances could be pretty grotesque.

That said...I appreciate the reality, better than the delusion.

Thank you SammyJ

I don't who the "we" is that he referred to but my clients are no where near that percentage of Medicaid. Maybe getting extra help? But not full Medicaid.

You are over complicating this whole thing. It's almost never an issue. The people on mediciad usually don't have any other countable assets, that's kinda why they are on Medicaid.

So their only countable asset is gonna be the cash value. Do you know how many years it's gonna take to build up $1500-2000 cash value. And even then all they have to do is take the money out and spend it.

And it's quite easy to change ownership before the policy builds cash.
You are looking for problems that don't exist.

 

[InsuranceAssure]

From LifeCareFunding dot com:

"A: Medicaid rules are very clear that a life insurance policy is an unqualified asset and counts against Medicaid eligibility. The owner of one or more policies has a variety of options to consider:

A policy with more than a minimal amount of cash value (usually $1,500 or more depending on the state) must be liquidated with the proceeds spent down on care.
A policy with no cash value does not need to be liquidated but the death benefit will be subject to Medicaid recovery efforts to return the amount of money spent on care.
Many states will exempt a "final expense" policy if the full death benefit value is assigned to a funeral home. (Not possible with some F.E. orgs)
Assignment of a life insurance policy for less than its fair market value is a violation of asset transfer rules if done within the 60 month look back period.
A policy owner has the legal right to convert a life insurance policy into a long term care benefit plan at its fair market value and extend their spend down period by covering cost of care while preserving a portion of the death benefit until exhausted."​

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"Some states allow for a final expense policy to be kept or transferred to a funeral home (but the funeral home would keep the entire death benefit). [Not all F.E. policies can be assigned.] Medicaid recovery units have become much more forceful about looking for life insurance policy death benefits (declared and undeclared) that have paid out to families after the death of a Medicaid recipient. Medicaid budgets are now facing extreme pressure and asset recovery efforts can be very aggressive. Recovering the entire cost of care through legal actions against the estate and surviving family to go after the death benefit payment are common."

 

[jdeasy]

From LifeCareFunding dot com:

"A: Medicaid rules are very clear that a life insurance policy is an unqualified asset and counts against Medicaid eligibility. The owner of one or more policies has a variety of options to consider:

A policy with more than a minimal amount of cash value (usually $1,500 or more depending on the state) must be liquidated with the proceeds spent down on care.
A policy with no cash value does not need to be liquidated but the death benefit will be subject to Medicaid recovery efforts to return the amount of money spent on care.
Many states will exempt a "final expense" policy if the full death benefit value is assigned to a funeral home. (Not possible with some F.E. orgs)
Assignment of a life insurance policy for less than its fair market value is a violation of asset transfer rules if done within the 60 month look back period.
A policy owner has the legal right to convert a life insurance policy into a long term care benefit plan at its fair market value and extend their spend down period by covering cost of care while preserving a portion of the death benefit until exhausted."​

----------

"Some states allow for a final expense policy to be kept or transferred to a funeral home (but the funeral home would keep the entire death benefit). [Not all F.E. policies can be assigned.] Medicaid recovery units have become much more forceful about looking for life insurance policy death benefits (declared and undeclared) that have paid out to families after the death of a Medicaid recipient. Medicaid budgets are now facing extreme pressure and asset recovery efforts can be very aggressive. Recovering the entire cost of care through legal actions against the estate and surviving family to go after the death benefit payment are common."

I have seen that hundreds of times. It does not say what you read into it.

But, if that is enough to keep you from selling FE then it's enough. It's not worth the worry that you are assigning to it.

 

[InsuranceAssure]

I don't who the "we" is that he referred to but my clients are no where near that percentage of Medicaid. Maybe getting extra help? But not full Medicaid.

You are over complicating this whole thing. It's almost never an issue. The people on mediciad usually don't have any other countable assets, that's kinda why they are on Medicaid.

So their only countable asset is gonna be the cash value. Do you know how many years it's gonna take to build up $1500-2000 cash value. And even then all they have to do is take the money out and spend it.

And it's quite easy to change ownership before the policy builds cash.
You are looking for problems that don't exist.

Medicaid percentages must vary a lot by area. Thank you for the clarity. In my area, F.E. clients are almost universally on Medicaid.

On a $15-$20K F.E. policy...how long would it take for $1500 in cash value to build? ..and not to get into the weeds, but might taking it out and spending the cash value, possibly be subject to lookback rules? or is that not a factor? If true, the take on the Medicaid rules posted above, said the policy must be liquidated. That seems a bit more complicated than just spending it.

I'm not sure it as much of a non-problem as you suggest, but it is probably not as much as big of a problem as I'm fearing, or is it?

I think it merits consideration by the IMO's and Super Agents that are training the rest of us.

Neither Medicaid, nor these clients should get screwed. It seems like in enough cases, there will be some serious disappointment someday.

 

[goillini52]

From LifeCareFunding dot com:

"A: Medicaid rules are very clear that a life insurance policy is an unqualified asset and counts against Medicaid eligibility. The owner of one or more policies has a variety of options to consider:

A policy with more than a minimal amount of cash value (usually $1,500 or more depending on the state) must be liquidated with the proceeds spent down on care.
A policy with no cash value does not need to be liquidated but the death benefit will be subject to Medicaid recovery efforts to return the amount of money spent on care.
Many states will exempt a "final expense" policy if the full death benefit value is assigned to a funeral home. (Not possible with some F.E. orgs)
Assignment of a life insurance policy for less than its fair market value is a violation of asset transfer rules if done within the 60 month look back period.
A policy owner has the legal right to convert a life insurance policy into a long term care benefit plan at its fair market value and extend their spend down period by covering cost of care while preserving a portion of the death benefit until exhausted."​

----------

"Some states allow for a final expense policy to be kept or transferred to a funeral home (but the funeral home would keep the entire death benefit). [Not all F.E. policies can be assigned.] Medicaid recovery units have become much more forceful about looking for life insurance policy death benefits (declared and undeclared) that have paid out to families after the death of a Medicaid recipient. Medicaid budgets are now facing extreme pressure and asset recovery efforts can be very aggressive. Recovering the entire cost of care through legal actions against the estate and surviving family to go after the death benefit payment are common."

It almost looks like you're looking for a reason to NOT sell FE. If you don't believe in, or feel right about the concept of FE...maybe it isn't for you.

There are other types of life insurance, or other types of insurance you might feel better about offering.

 

[InsuranceAssure]

Okay...good.

Okay...good! It doesn't say what I read into it. This is why I am here with the topic.

So can you please tell me what I read into it, that it does not say, so that we can both put this to rest?


I woke up with the mission today to get the bottom of this, so all of your efforts are very much appreciated.

I've seen your posts hundreds of times and know you to be well regarded on these forums...

I'm just concerned that it may actually say what we don't want to hear and that perhaps overall, the F.E. community needs to be more mindful of this outcome.

If I'm seeing it wrong..knock me between the eyes...I won't hate you for it. I came to know the truth...(and yes...I can handle the truth.)

 

[jdeasy]

Medicaid percentages must vary a lot by area. Thank you for the clarity. In my area, F.E. clients are almost universally on Medicaid.

On a $15-$20K F.E. policy...how long would it take for $1500 in cash value to build? ..and not to get into the weeds, but might taking it out and spending the cash value, possibly be subject to lookback rules? or is that not a factor? If true, the take on the Medicaid rules posted above, said the policy must be liquidated. That seems a bit more complicated than just spending it.

I'm not sure it as much of a non-problem as you suggest, but it is probably not as much as big of a problem as I'm fearing, or is it?

I think it merits consideration by the IMO's and Super Agents that are training the rest of us.

Neither Medicaid, nor these clients should get screwed. It seems like in enough cases, there will be some serious disappointment someday.

Man, you are way overthinking this. My state has the highest percentage of population on mediciad than all but 1 other state and this is not a problem.

What it means in saying it has to be liquidated is simply that they do not qualify for Medicaid that month. So if it's an issue than all they have to do is borrow it down below the threshold and they are good to go. They must spend the money before the first of the next month but that's never a problem. Or they can assign it to a funeral home or trust. Or they can assign ownership to someone else. Yes, that subject to lookback but if it's not over the countable asset threshold it doesn't matter. The face amount is never an issue if it's going to a beneficiary. It's only an issue if it goes to the estate.

I've been fulltime in FE for over 7 years. I've written well over 2000 FE apps. I have never once experienced the problems that you are imagining.

I do have to help my mediciad clients with their annual reporting on the current cash values.

You are looking for problems that aren't out there.

 

[InsuranceAssure]

Now that reply I can understand!

Thanks for diving in with a more thorough explanation.

That enhances my understanding greatly.

THANK YOU!

 

[jdeasy]

Now that reply I can understand!

Thanks for diving in with a more thorough explanation.

That enhances my understanding greatly.

THANK YOU!

Now, there is a real problem that you haven't addressed. The idiots down at social services will create problems for you. "You can't be having whole life insurance if you're on Medicaid". That happened all the time. I'm usually able to get the problem fixed but there's been a couple times where the people were just too scared to allow the problem to be fixed.