Can Medicaid take this life insurance policy?


Q. A New Jersey resident who was on Medicaid for approximately 20 months prior to her death in January 2021 passed away. We now learn there is a life insurance policy valued at $15,000 or less for which some named beneficiaries have also passed. There are other surviving beneficiaries — nieces and nephews). The only other asset of this individual is a bank account valued at $6,000 for which we are waiting to hear how much the Medicaid lien will be. If the life insurance policy is paid outside of the estate directly to the nephews and nieces, is Medicaid entitled to a lien on these proceeds?
— Uncertain

A. We’re sorry to hear about your loss.

As for many things related to Medicaid, the quick answer to your question is: it depends.

Specifically, it depends on the type of policy and whether Medicaid was made aware of the policy at the time when the application for benefits is submitted, said Jason Marx, chair of the Tax & Estate Planning and Elder Law & Special Needs Planning groups at Curcio Mirzaian Sirot in Roseland.

“If the insurance policy was a term policy, then such policy would not have been considered an `available resource’ for Medicaid purposes and thus, the proceeds paid after death should not be attachable under Medicaid’s estate recovery lien,” he said.

But if the policy was a whole life policy, or some other type of permanent policy that had a cash surrender value, then Medicaid should be able to attach a lien to the remaining cash value of that policy, Marx said.

Other issues might arise if the policy was permanent and the cash value exceeded the maximum amount of resources that a Medicaid applicant can have.

Because of the complexities, we recommend you speak to an estate planning attorney who has experience with Medicaid lien issues.

Email your questions to .

This story was originally published on Oct. 18, 2021. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.