Life Insurance and Medicaid Eligibility

DAVIDOWLAW Blog Post

Dear Clients and Friends:
Life insurance is something else to consider when applying for Medicaid. Read on…
CLIENT QUESTION:
If I paid off a 5-figure debt, at 5% interest, to my Life Insurance company, does that disqualify me from Medicaid?  Is that considered a look-back penalty, prior to qualifying for Medicaid?
MY RESPONSE:
My readers certainly know that there is a five-year look-back when applying for nursing home Medicaid.  The look-back is an audit period where if a gift is found, the person will not be eligible for Medicaid for a period of time. The issue then in the client question above is whether or not a gift was made. The answer appears that no gift was made. All the person did was pay off a personal loan.  However, this person would still be ineligible for Medicaid because the cash value of the life insurance policy counts as an asset. Paying off the loan will increase the cash value. On the other hand, if the policy is owned by someone else or an irrevocable trust, and then the person pays off the policy loan, then a gift would most likely have been made, subject to the five-year look-back. Got it?
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Until next time,
peace, health, and happiness
Lawrence Eric Davidow