22 Mar Will this life insurance policy be seen as an asset by Medicaid?

Q. My mother has early onset Alzheimer’s and is moving into a facility that has a two-year spend down prior to Medicaid. We’re getting all of her financials in order and are aware of the five-year lookback. A friend had told me about modified whole life insurance that is advertised more or less as meant for funeral/burial arrangements and is guaranteed acceptance. Would this type of insurance be looked at as an asset in the eyes of Medicaid and disqualify her in a couple years when we go to apply for it?
— Trying to help

A. We’re sorry to hear about your mother’s condition.

But we’re glad she has help from you.

In order to qualify for Medicaid benefits, applicants cannot have more than $2,000 of countable assets, said Shirley Whitenack, an estate planning attorney with Schenck, Price, Smith & King in Florham Park.

“Medicaid law exempts whole life policies from countable assets if the policy’s face value is less than $1,500,” she said. “If the face value is more than $1,500, Medicaid will count the cash surrender value toward the $2,000 limit.”

Modified whole life policies have a cash surrender value just like basic whole life insurance policies, Whitenack said.

Good luck.

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This story was originally published on March 22, 2022.

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