Advanced Underwriting Consultants

Question of the Day – March 26

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question:  My client, who is currently receiving Medicaid assistance from the state, wants to know whether the costs of care can be recovered from a term life policy death benefit payable to her child?

Answer:  Maybe.

Each state has its own rules with regard to the types of assets from which a decedent’s cost of Medicaid-funded care can be recovered.  In every state, the state administrator can generally recover from probate assets.

The federal government has created rules for the Medicaid program that allow expense recovery from assets owned by the decedent that are non-probate assets.  Some states have implemented rules allowing recovery from the enhanced estate (as of this writing, California is one example), while others have not (e.g. – Tennessee, as of today).

For states that have enabled enhanced estate recovery, life insurance proceeds payable to a named beneficiary may be available to reimburse the state for Medicaid expenses paid for the policy owner’s care.

By the way, a life insurance policy itself—particularly permanent insurance—is generally considered to be a countable asset for Medicaid qualification purposes.  The state Medicaid administration officer may consider a term policy of little or no value.  However, with the rise of the life settlement market, clients should not assume that their term life policies will be ignored when their countable assets are reported.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.