The Listen to Lawrence Letter: Life Insurance cash value and Medicaid

READER QUESTION:

Is the cash value of a life insurance policy counted as an asset for Community Medicaid and/or Institutional Medicaid?

MY RESPONSE:

Usually, YES! A life insurance policy is an asset that so many people forget about when they are thinking about protecting their wealth. Thank you for bringing this question to all of my readers.

Your cash value is roughly the amount of money you would receive if you cashed in your policy today, and that is what Medicaid focuses on. For their purposes, it is very much like a bank account. It is another source of funds that Medicaid may count as available to pay for your care before they have to write a check. There are some exceptions depending on the type of policy and the amount of insurance, but if the policy has significant cash value, it should absolutely be part of your Medicaid planning discussion.

If the amount is very small, then we may not worry about it. But the bigger that amount is, the more likely we will focus on it and protect it. Sometimes the policy will be retitled into an irrevocable Medicaid trust, with the trust also named as the beneficiary.

Whatever we end up doing, it should be discussed and made part of your overall Medicaid and estate planning strategy.

I hope this helps.

And, if anyone you know would like to

receive this Listen to Lawrence Letter just

tell them to send their email address to info@davidowlaw.com and I’ll add them to the list!

As always, please send your questions in! 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!