Is Medicaid due the money meant for his burial?

2 answers | Last updated: Oct 19, 2016
A fellow caregiver asked...

My father has been on Medicaid for the past 4 years. At that time, he had a life policy for $9,000. It was meant for a burial policy. He has no other assets. At the time, my brother and I were the beneficiaries of the policy. We learned that it has a cash value of $3500 dollars. Two years ago, someone told us that we needed to be the owners of the policy, which we did. Medicaid has now asked us what the cash value was since it was over the $2000 dollar limit. Can we use the $3500 dollars to pay up his life policy or will Medicaid get the money?

Expert Answers

In order for your father to have qualified for Medicaid medical coverage, he had to have very few assets. Among the assets he would have been permitted, however, would be a life insurance policy with a cash value of (in most states) no more than $1,500, plus a burial plot, and also a separately maintained fund to pay funeral expenses, or a prepaid funeral service plan, also usually with a limit of $1,500. For whatever reason, it seems that the Medicaid program in the state where your father lives did not consider that the cash value of his life insurance policy was high enough to disqualify him when they were deciding on his eligibility for Medicaid four years ago. (Maybe at the time he became eligible for Medicaid, four years, ago, its cash value was much less than it is now. Or, maybe they weren't even aware of the policy.)

Now that you and your brother own the policy, it should be out of reach of Medicaid because it's no longer your father's asset. (While Medicaid can consider assets transferred from the Medicaid beneficiary to someone else in the five years before applying for Medicaid nursing home coverage, this rule does not apply to regular Medicaid medical care coverage.) On the other hand, if Medicaid did not know of the policy at all when your father applied four years ago, Medicaid may want to review eligibility based on the policy's cash value at the time he applied. If that's the case, you may have to demonstrate that the purpose of the policy, as you have said, was for his funeral and burial expenses. If you use some of the money to buy a burial plot and the remainder is not more than $1,500 (for funeral/burial expenses) and up to another $1,500 as the remaining cash value of the policy, then he should still be eligible for Medicaid and Medicaid will have no claim on the value of the policy.

Community Answers

A fellow caregiver answered...

Check with a local social worker at your Medicaid, Public Assistance or Social Services office. (It's called by different names in different states.) As the previous answer stated, there may be a limit on the cash value of a life insurance policy. In most states, there is not a limit on a prepaid funeral/burial account. It must be in an irrevocable account, meaning that the funds cannot be withdrawn and used for something else. Check with a local funeral director. They always know what the state's laws are regarding that and the state laws supersede the federal restriction of $1500. Since it sounds like his funds are nearly exhausted and probably not sufficient for his funeral, the best thing you can do is, as mentioned in the answer above, provide some proof that the life insurance funds will be used to pay for the funeral. This may be making the funeral home the beneficiary, with you and your brother to get anything that's left, or maybe even making the funeral home the owner, with you and your brother again listed as getting any remaining funds. This cannot be done in every state however, so check with the insurance company or the funeral home. It's nice that you're interested in making sure he gets the respectful funeral services that he deserves.