My posts last week about life insurance and Roth IRAs prompted some follow-up questions that I will present and answer today and on Thursday. I think this conversation that we are all having is terrific. Keep the questions coming.
What about term life insurance that has no cash value? Would it be ignored for Medicaid purposes?
In a prior email, I stated that life insurance with a cash value is another asset that Medicaid could go after. The cash value would be considered like a bank account, available to pay for care. On the other hand, a term policy has no cash value so it is ignored by Medicaid.
However, what about the death benefit? During the life of the insured, the death benefit is irrelevant. Upon death, however, we must look to see who is to receive the death benefit. If it is the surviving spouse, we may have a problem because the surviving spouse now has an asset that is unprotected from (i) her need for Medicaid someday and (ii) Medicaid’s right to recover from the surviving spouse’s estate upon her death. Therefore, it may make more sense to name someone other than the spouse as the beneficiary, such as an irrevocable trust. Of course, if the surviving spouse needs the money, then he or she should receive it. The right thing to do may not always include how to save the most money for the kids! Blasphemy!!!!
I hope this helps! Please forward this information to your friends and relatives to share these informative answers to some very commonly asked questions.
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