The Listen to Lawrence Letter: Will cashing in an insurance policy affect the Medicaid lookback period?

June 29, 2021
Dear Clients and Friends:
Today’s question is another one of those that we get a lot, but as you will see, not one to worry too much about. Either way, keep those questions coming!
I hope my question isn’t redundant.
I have an Irrevocable Medicaid trust containing annuities and a few insurance policies. One policy has a cash value amount of about 1/2 the amount of the policy. If the trustee cashes in that policy, will the 5-year lookback start all over for the entire amount in the trust? Or will that cash value amount just be part of the other assets outside the trust?
NEITHER will be true. The trust already owns the life insurance policy and its cash surrender value. If the trustee cashes in the policy, the insurance company will send a check to the trustee, who will invest it any way they choose, in the trust. Nothing left the trust.  Nothing new was transferred by you to the trust. Nothing is outside the trust. This is perfectly safe and will not affect the look-back or the protection of the money. Keep in mind, however, that cashing in an insurance policy may be an income taxable event.
I hope this helps! Please forward this information to your friends and relatives to share these informative answers to some very commonly asked questions.
And, if anyone you know would like to receive this
Listen to Lawrence Letter, just have them email me at and I’ll add them to the list!
As always, please send me your questions. If you are thinking about it, others are probably too, so my answers will no doubt help you and many others.
Let’s stay connected.
Stay safe!
Until next time,
peace, health and happiness,
Lawrence Eric Davidow