In this Warner Medicaid Moments vlog, attorney Catherine Jacobs explains how life insurance policies with cash surrender value are treated during the Medicaid spend-down process and why misunderstanding the rules can lead to costly financial mistakes for families.
Certain life insurance policies accumulate cash value over time. When applying for long-term care Medicaid in Michigan, that cash surrender value may count as an available asset when determining eligibility. However, Catherine explains that the way these policies are owned, allocated and reported can significantly impact whether a policy needs to be surrendered.
Using two real-world examples, Catherine walks through situations where families were incorrectly advised to cash out life insurance policies because the policies exceeded Medicaid asset limits. In both cases, surrendering the policies would have caused families to lose valuable death benefits intended to help cover funeral expenses and provide financial support after a loved one’s passing.
For married couples, Catherine explains that Medicaid initially evaluates assets jointly during the application process. This can create planning opportunities that may allow a policy to be preserved through proper ownership adjustments after eligibility is established. For single applicants, she notes that life insurance policies with cash surrender value may still be retained as part of the applicant’s allowable asset limit, depending on the individual’s overall financial picture.
Catherine also emphasizes the importance of understanding the nuances of Medicaid asset rules and cautions families against relying solely on informal guidance from nonlegal sources. While Medicaid eligibility rules can appear straightforward, small misunderstandings about asset ownership and spend-down requirements can have significant financial consequences.
Watch the video to learn how life insurance policies are treated in Medicaid planning and why experienced legal guidance can help families avoid unnecessary losses. Stay tuned for more Warner Medicaid Moments vlogs.
