Can You Transfer a Whole Life Insurance Policy and Still Get Medicaid?
Question:
Can the ownership of a whole life insurance 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.
Related Articles:
Handling a Whole Life Insurance Policy When Applying for Medicaid
Are Really Small Life Insurance Policies Non-countable for Medicaid Eligibility?
Are IRAs Countable Assets for Purposes of Medicaid Eligibility?
Will Transfer of Home & Rental Property Work Under Medicaid Rules?
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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.
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.