Can You Transfer a Whole Life Insurance Policy and Still Get Medicaid?

 In Long-Term Care Planning

Question:

Can the ownership of a whole life policy be changed to make someone Medicaid eligible prior to the application being submitted?

Response:

No, the cash value of the policy is a countable asset and any transfer would cause a period of ineligibility for benefits based on that cash value. However, if there is a significant difference between the policy’s cash value and the death benefit, it can make sense to eliminate the cash value by borrowing against it and spending down the proceeds. Someone will still have to pay the premiums on the policy, but it may be worth the cost in order to reap the benefits upon the death of the insured.

Showing 2 comments
  • Lorraine Berns
    Reply

    What if the policy is brand new and has no cash value at the time of transfer? A five-year look back period would show zero cash value.

    • Harry Margolis
      Reply

      You are right. The transfer would have to be reported if it occurred within the five years prior to applying for Medicaid benefits, but there would be no penalty because the length of the penalty is based of the value of the transferred asset. If there’s no value, as you suggest, there’s no penalty.

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