Medicaid Policy
Medicaid Policy
No Previous Policy
When an individual owns a life insurance policy that generates a cash value, the cash value may be a countable resource.
The individual has not transferred a countable resource and still controls the policy and has access to the cash value if:
The individual revocably assigns ownership, or
assigns proceeds, revocably or irrevocably, or
designates the funeral provider as the beneficiary.
Apply the rules for evaluating life insurance policies and the rules for excluding burial funds. (521-16)
The individual has transferred a countable asset if the individual irrevocably assigns ownership of the policy to the funeral provider. Examine the pre-need funeral contract and the life insurance policy to determine whether the individual received fair market value of spaces and services equal to the cash value the individual transferred.
The value of the spaces and services listed in the contract must at least equal the cash value the individual transferred to the funeral provider.
Apply the rules for transfer of asset penalties in 575 if:
the cash value of the policy exceeds the value of the burial spaces and services, or
the contract allows changes to be made at or before the individual’s death to the choices the individual made and any unused part of the cash value would be used for someone other than the individual or the individual’s spouse, or
The policy or the contract allows the assignment of ownership to be changed.
Individual's funds are used to purchase life insurance, but someone else is named as the owner.
The individual has transferred a countable asset if the individual's funds are used to purchase a life insurance policy and someone else is named as the owner of the policy. Examine the policy, the pre-need funeral contract, and any assignment documents. A transfer for less than fair market value has occurred and may result in a penalty period if any of the following three things has been done.
Ownership of the life insurance has been revocably assigned to the funeral provider.
Proceeds have been assigned, revocably or irrevocably to the funeral provider.
The policy names the funeral provider as the beneficiary.
However, if the named owner has irrevocably assigned ownership of the life insurance policy to the funeral provider to fund the pre-need contract for the individual, then examine the pre-need funeral contract. No transfer for less than fair market value has occurred if the value of the goods and services purchased on the pre-need contract is at least equal to the cash value of the life insurance policy.
If the named owner has placed the life insurance policy into an irrevocable burial trust, follow the policies in 596 to decide if there is a transfer of assets. No transfer has occurred if the value of the life insurance policy is within the limits allowed for an irrevocable burial trust that will cover the individual's burial expenses.