Category Archives: Elder Law

Many Ways to Transfer Property at Death

Many Ways to Transfer Property at Death

They say “Where there’s a will, there’s a way”, but there are a number of ways that property can be passed at death without a will. The probate court provides a process to pass on inheritance to the next of kin of the decedent when he dies “intestate” (without a will). Property can also be passed without probate court involvement if it is held “jointly with right of survivorship” (JWROS), with a designated beneficiary or in a trust.  Ohio law even provides that title to vehicles may pass directly to a surviving spouse without probate.

The first step in sorting out a decedent’s estate is to determine what assets he owned and how they are titled. Heirs or beneficiaries can then follow the procedures required to collect the assets.

Intestate Property

The probate court oversees the process of transferring property held in a decedent’s name alone. Without a will, anyone may apply to administer the estate. The closest relatives living in Ohio have first priority to be the administrator and must be notified or sign off for someone else to administer. The administrator is generally required to post a bond (an insurance policy that he will handle his duties properly) in order to protect all the heirs. Because there is no will to grant powers, the administrator will need to get probate court authority to sell or transfer assets. Once the bills have been paid, the administrator will distribute the remaining assets to the decedent’s next of kin in accordance with the Ohio Statute. The probate process can be complicated so it is best to have an attorney assist with the administration.

Joint with Right of Survivorship

Virtually any type of property can be held jointly with another person; real estate, a bank account, even a vehicle. Just because something is held jointly doesn’t mean the survivor gets to keep the asset when an owner dies, but this is often the case. Most times, a certified death certificate and an affidavit outlining the facts is all that is needed to collect survivorship property.

Designated Beneficiaries

A person can name beneficiaries who are to receive an insurance policy, IRA, annuity, bank account, stock account, house, car or other property when the title owner dies. The designation of a beneficiary is given directly to the insurance company, bank, brokerage, county recorder or whoever keeps the record of ownership. To claim the property, the beneficiary must contact that company or agency to make the claim. Claim forms and procedures vary greatly. Making a claim may be as simple as presenting a death certificate or may involve completing multiple page claim forms that require a medallion guarantee signature from a bank or brokerage. Each beneficiary may be required to make decisions about cashing or continuing the account and withholding for taxes.

In the case of an IRA, for example, a spouse may elect to roll the IRA into her own name, name her own beneficiaries, and wait until she needs to make required minimum distributions. If multiple children inherit an IRA, they can divide it into separate inherited IRA’s and each decide whether to cash out immediately or “stretch” it out for years taking only the required minimum distributions. Each holder of an inherited IRA or inherited Roth IRA must begin taking required minimum distributions immediately and should name beneficiaries for their own account.

Trust Assets

Assets titled to a trust are administered by the surviving or successor trustee as directed by the terms of the trust. If all of the creators of the trust have died and there is no one surviving who can revoke the trust, its’ terms become irrevocable and a federal tax identification number must be assigned to the assets. The Trustee must follow proper protocols for notifying beneficiaries, managing the assets and handling the taxes. A qualified attorney and accountant may be needed to advise the Trustee.

Vehicle Transfer to Spouse

Ohio law allows a surviving spouse to transfer an unlimited number of vehicles to herself so long as the total value is less than $65,000, and so long as there is no one else who owns the vehicle jointly with right of survivorship, is designated a TOD beneficiary or is named in the will to receive the vehicle. To transfer, the spouse must take her ID, the vehicle title or registration showing VIN number, and a certified copy of the death certificate to the county BMV title office, sign an affidavit and pay a small transfer fee.

Handling the transfer of a decedent’s property can be a complicated affair under the best of circumstances. The process can take weeks or even months. Dealing with the myriad of details while grieving the loss of a loved one can seem overwhelming. An experienced attorney can help to organize, understand and control the process.


Caretaker Child

Caretaker Child

For many seniors, owning a home is synonymous with the American Dream. The goal is to stay in the family home, and then pass it on to the next generation. The nightmare that plagues many older Americans is being forced to sell their homes to pay the expenses of long term care. For this reason, many seniors want to transfer their homes to their child or children especially if the child resides with them.

In most instances, transferring a home to a child or other family member may cause a penalty period in which Medicaid is not available to pay for care. In certain circumstances, the transfer can be considered exempt and the penalty can be avoided. One such exempt transfer is to a “Caretaker Child”.

The “Caretaker Child” is one who resides in the parent’s home providing care for at least two years prior to the parent moving into a long term care facility such as a nursing home or applying for assistance from a Home and Community Based Services (HCBS) waiver program, such as PASSPORT. Simply residing in the house is not enough. The Caretaker Child must provide needed care which otherwise would have required the parent to go to a nursing home or apply for a HCBS Medicaid program.

The Medicaid rules are quite specific as to what a Caretaker Child must do in order for the exemption to apply.

  • The Caretaker must be a natural or adopted child.
  • The child must actually reside in the parents’ home with them.
  • The parent must require help with activities of daily living or instrumental activities of daily living (See lists) to such an extent that he or she would require nursing home care if the child were not there to help
  • The child must continuously live in the home providing the care for at least two years immediately prior to the parent going into a nursing home or applying for HCBS Medicaid help.
  • The child must continue to live in the home until the transfer is made, even if the parent is placed in the nursing home or receiving HCBS Medicaid.

To prove herself, the Caretaker Child, must provide Medicaid with documentation that she meets the definition. For the transfer of the home to be exempt from penalty, Medicaid will require written proof from the parent’s doctor and the child providing care. Medicaid will scrutinize this documentation to determine if the exemption applies. It is the family’s responsibility to keep careful records as they go.

If you hope to protect the family home via a Caretaker Child exempt transfer, it is important to begin documenting your status as early as possible.

  • Be sure that you have a proper power of attorney in place in case you become too ill to sign the deed when the time comes
  • Talk to your doctor about the kind of care required and your child’s role in providing that care.
  • List the activities and actions that your child performs to keep you safe at home.
  • Your child should keep a journal or calendar of your activities, doctor’s visits, hospital stays and changes in your condition.
  • Keep a checklist of care and services provided on a regular basis.

Contemporaneous records can help you remember all your child has done and to assemble necessary proof when needed. That documentation must show the date that the child moved into the home, the parent’s condition that required the care to stay out of the nursing home, the extent and type of care that was provided, the amount of time the child devoted to the care, and other activities such as school and work, that the child was involved in during that period.

The Caretaker Child exclusion cannot be used for early planning. It is a crisis exemption as the status of Caretaker Child can only be determined at the time the parent enters the nursing home or applies for a HCBS Waiver Program. If the child moves out before the transfer is made, the exemption is lost.

There may be adverse consequences of transferring the home that should be considered.

  • The child may not qualify for certain real estate tax exemptions that the parent had
  • Transferring to the Caretaker Child may defeat the parent’s intention to divide his property equally among all of his children.
  • Transferring the house during the parent’s lifetime may create a capital gains tax problem when the child sells the house.
    • For example, if the parent purchased the house in 1950 for $30,000 and the house is now worth $230,000, the capital gain would be $200,000. A lifetime transfer gives the child the same basis ($30,000) as the parent. If the child received the house at the parents death, the child would get a “step up” in the basis to $230,000 and there would be no capital gains when the house is sold.

The laws surrounding Medicaid and the transfer of the house are complicated and constantly changing. Seek the help of a qualified elder law and estate planning attorney who can analyze your unique situation and create a plan most appropriate for you.

Activities of Daily Living (ADL)

            ADL’s are self-care activities that everyone must perform to lead a normal, independent life.

Eating: Do you have the physical ability to swallow or chew food? Do you have trouble moving food from the plate to the mouth?

Bathing & Hygiene: Can you bathe yourself and brush your own teeth?

Dressing: Are you physically able to dress yourself and make appropriate clothing decisions?

Grooming: Can you comb your hair and trim your toenails and fingernails? Can you properly apply makeup or shave yourself?

Mobility: Can you move around without the assistance of a walker, wheelchair, or cane? Can you successfully get out of bed, get onto and off of the toilet, go up and down the stairs and sit or rise from the couch or other furniture on your own?

Toileting & Continence: Are you able to use the restroom without any assistance or handle your own ostomy bag?

Instrumental Activities of Daily Living (IADL)

IADL’s are activities a person must perform in order to live independently in a community setting during the course of a normal day.

Some examples of IADL’s include:

  • Shopping
  • Cooking
  • Washing laundry
  • Housecleaning
  • Managing medications
  • Using a telephone
  • Managing money
  • Driving
  • Handling mail

Pooled Trusts & Medicaid Planning

Pooled Trusts & Medicaid Planning

A powerful tool for Medicaid planning that we are seeing more use from is a Pooled Trust. A Pooled Trust (sometimes referred to as a (d)(4)(C) trust) is a very specific type of trust used to help disabled individuals qualify for the government benefits they need while maintaining some funds set aside for things they may want to preserve the quality of life they are used to. A pooled trust is one of many tools an elder law attorney can use to help a person qualify for Medicaid. There are many different types of trust, and it is important to make sure you have the right trust for your situation. If used in the wrong way, a trust can actually cause more harm than good.

Basics of Medicaid

Medicaid is a needs-based governmental program to help people who cannot afford to pay for their medical care. In order to qualify for Medicaid, one must have less than $2,000 in assets. Once qualified for Medicaid, a person gets to keep $50 per month for personal spending. The rest of their income goes to pay the initial cost of the nursing home. Medicaid then picks up the tab for whatever that income does not cover that month. With the average monthly nursing home cost ranging between $7,000 – $8,000 a month, Medicaid is often the only choice for senior citizens in need of care.

Basics of Pooled Trusts

One thing all trusts have in common is that there are at least three parties to a trust; the Settlor, the Trustee, and the Beneficiary. The Settlor is the person who funds the trust. The Trustee is the person who manages the trust. The Beneficiary is the person who benefits from the trust. Often there is a primary beneficiary and then contingent beneficiaries named for after the primary has passed away.

The purpose of a Pooled Trust is to pay for items or services not provided by Medicaid. These items and services are not meant to replace SSI or Medicaid benefits but rather enhance the life of the beneficiary by supplementing them.

Pooled Trusts must be irrevocable, which means once they are set up and funded, there is no way a person can demand their money back. If they could, the trust would not qualify for Medicaid purposes.

Who can be the Settlor?

Pooled Trusts are unique in that the trust itself is already set up. An individual opts to join into an already established trust. Pooled Trusts get their name from fact that the funds in the trust are “pooled” with funds of other disabled individuals into one main trust and each individual gets their own account when they opt in. The account must be set up solely for one disabled individual’s benefit and must be funded with the individual’s assets. The person who sets up the account can be the disabled individual herself, or her power of attorney, parent, grandparent, legal guardian, or the court.

Who can be the Trustee?

The trust must be managed by a nonprofit organization. Currently in Ohio there are three companies that specialize in pooled trusts to choose from:

  • The Community Fund Management Foundation (CFMF) in Cleveland
  • The Disability Foundation in Dayton
  • The Ohio McGivney Pooled Special Needs Trust in Columbus

Separate from the trustee, who manages the funds, is the Designated Advocate, often a spouse or power of attorney, who represents the beneficiary and submits requests for money on behalf of the beneficiary.

Who can be the Beneficiary?

The primary beneficiary must be the disabled individual. “Disabled” is defined in rules adopted by ODJFS. There is currently no age limit in the state of Ohio on who can be a beneficiary. There can be no other primary beneficiaries named on the account, including the spouse or children.

Once the primary beneficiary has died, the pooled trust must contain an express provision for reimbursement to the state of Ohio for Medicaid services provided. If there are still excess funds remaining in the account once Medicaid has been paid back, those remaining funds may go to the spouse or other named remainder beneficiaries.

Funding the Pooled Trust

The trust is funded exclusively with the individual’s assets. The trust cannot receive funds from people other than the individual. A pooled trust is funded exclusively with cash. You would not put a house or personal property in a pooled trust. Assets that would otherwise be countable for Medicaid can be transferred into the pooled trust penalty free. Excess funds can later be added as they become available such as an inheritance or a lawsuit settlement. The individual can fund the trust with assets or irrevocably assign his or her income to the pooled trust. Generally there is a required minimum initial deposit of at least $5,000 to set up a pooled trust, however there is a method to fund pooled trusts with less.

Getting Money out of the Pooled Trust

Once the trust is set up and the Beneficiary is on Medicaid, the Designated Advocate represents the Beneficiary and submits forms (including receipts) to the pooled trust to request money from the trust account for the Beneficiary’s supplemental services. Once a request is approved, the Trustee releases the money from the trust account for payment to the vendor, service provider, or Designated Advocate. Cash can never be distributed directly to the Beneficiary.

Distribution requests can be submitted at any time and there is no limit on the number of distribution requests that can be submitted. The entire process may take three to four weeks from the date the request is issued. If there is an emergency, an emergency distribution request can be made at any time, but there is a fee. Reoccurring payments can be set up if the amount of the item or service remains the same, for example, a distribution request can be made for cable TV or other such common expenditure each month.

Money distributed from a trust account must be used for supplemental services for the sole benefit of the Beneficiary. The trust cannot provide for other people in the beneficiary’s life, such as for example, tuition for a child. A request may be denied if the Trustee feels it would interfere with the beneficiary’s governmental benefits, if they do not have proper documents and receipts, or if they feel the request is unreasonable.

A pooled trust can be used only to pay for supplemental services. It cannot be used for food and shelter. Supplemental services are those items or services that will not be paid for by insurance or a government program, but supplement and can enhance the quality of life of an individual with a disability. Examples include:

  • Dental Care
  • Plastic, cosmetic surgery or non-necessary medical procedures
  • Psychological support services
  • Recreation and transportation
  • Differentials in cost between housing and shelter
  • Supplemental nursing care and similar care which public assistance programs may not otherwise provide, including payments to those providing services in the home
  • Telephone and television services
  • Electric wheelchair and other mobility aids
  • Mechanical bed
  • Periodic outings and vacations, including costs incurred by caretaker companions
  • Hair and nail care
  • Stamps and writing supplies
  • More sophisticated medical, dental or diagnostic treatment, including experimental treatment, for which there are not funds otherwise available
  • Private rehabilitative training
  • Payments to bring in family and friends for visitation if the trustee deems that appropriate and reasonable
  • Private case management to assist the primary beneficiary, or to aid the trustee in the trustee’s duties
  • Medication or drugs prescribed by a physician
  • Drug and/or alcohol treatment
  • Prepay funeral and burial expenses
  • Companions for reading, driving and cultural experiences

A Pooled Trust is one of many tools that can help a person qualify for Medicaid while maintaining some funds that enhance the beneficiary’s life. It can be a powerful tool in your long term care plan. Because all types of trusts are complex, consult your attorney if you feel a Pooled Trust would be advantageous to you or someone you love.


Six Things to Consider When Writing Your Will

The first major hurdle in writing a Will is procrastination.  Just thinking about
death and dying makes some of us a little anxious.  Once past that obstacle, there are six things that you should consider to be sure that your Will meets your needs.

1.  Nonprobate Property:  Remember your Will controls only property that is
subject to transfer through the Probate Court.  Any property that you hold jointly with someone else may be “survivorship” property that passes automatically upon your death to the other owner or owners.  You may own property that is “payable on death” to another person.  Insurance proceeds, annuities and IRA’s usually go directly to the named beneficiary rather than passing through probate.  Now is a good time to review all your assets to be sure that however they are transferred at your death, they pass according to your plan and wishes.

2.  Specific Bequests:  A specific bequest is the gift of a particular thing or a
particular amount of money.  For example:  “My wedding ring to my daughter, Katy,” or “$200 to my nephew, Felix.”   When a specific bequest of an item is made, the law requires that item be appraised.  It is then subject to inheritance tax at the appraised value.  Depending on the value of the item, the appraiser’s fee and tax may not be justified.  Many people prefer to give gifts of sentimental value during their lifetime to share in the recipient’s joy and appreciation.

You might wish to make a specific bequest of cash as a token to grandchildren
or a specific charity.  In doing so, keep in mind that specific gifts are always paid first.  Depending on how large or small your estate is at your time of death, your specific bequest may be far more or less proportionately than you intended.  For example, suppose at the time you write your Will you have $500,000 in assets.  You leave $10,000 to each of your ten grandchildren and the remaining $400,000 to be divided between your two children.  Unfortunately, you fall ill and require nursing home care for the last years of your life.  Your estate is reduced to $100,000.  Your specific bequests are made first.  This leaves nothing for your children whom you had intended to inherit the bulk of your estate.

3.  Residual Gifts:  After specific bequests are made, you need to decide who
gets everything else.  Generally, if more than one person is to share the residuary, each person would receive an equal share or some percentage for each person would be named. (“to my children equally, share and share alike” or “forty percent to my Uncle Joe and ten percent to each of my six nieces and nephews”.)  In dividing up your residuary be sure to consider what you want to happen if one of your beneficiaries dies before you.  Would you want that person’s share to go to her children, to the other beneficiaries, or somewhere else entirely?

4.  Taxes:  Estate Taxes are no longer an issue for most people since the Ohio
Estate Tax was ended January 1, 2013.  Those with assets over $5,000,000 may be subject to federal estate tax.  Consider whether you want all the tax paid out of the probate estate or whether persons receiving non-probate assets should pay a
proportional part of the tax.

5.  Minor Beneficiaries:  If any of your beneficiaries could be under the age of 18, you may want to consider naming a trustee to hold the property until the child comes of age.  The person you name may or may not be the child’s parent.  You may choose to be quite explicit in your instructions to the trustee or simply choose someone you find trustworthy and leave the details to his discretion.

If your own children are young, you will want to name a guardian (and alternate
guardian) to care for and raise your children.  Your doing so can avoid much family turmoil in deciding with whom your child will live.  Be sure to choose someone who’s child raising ideas are similar to yours.  Use care in choosing grandparents as guardians.  While your 68 year old mother may seem the best choice to have your 5 year old, she may not be equipped at 78 to handle your 15 year old.

6.  Fiduciaries:  Your fiduciary is the person who will gather together all your
assets, pay your bills, then distribute the remainder of your estate as you direct in the Will.  The person you choose should be trustworthy, organized and patient.  Be sure to name an alternate fiduciary in case the person you name is unwilling or unable to handle your estate.

The law requires fiduciaries to post a “bond” (an insurance policy covering theft
or error) unless you say in your Will that you do not require one.  This is primarily protection for your other beneficiaries.  The size of the bond is determined by the amount of probate assets.  The cost of the bond is paid out of the estate.

Your fiduciary is entitled to payment for the service he performs.  The amount of
compensation is determined by the Court.  Fiduciaries will generally choose a lawyer to assist with the estate.

As your life situation changes, your Will should be revised to suit your needs and
desires.  It is generally a good idea to review your Will every five years to be sure it reflects your wishes.  Think about these six considerations each time you make a Will.  Your individual situation may raise additional issues and considerations that your attorney can address.


I Do, But I Don’t-Modifying Estate Plans in the Face of Catastrophic Illness

By far, the most popular estate plan that I draft is what I refer to as the “I Love You” plan.  Husband executes a will leaving everything to wife. Wife executes a will leaving everything to husband.  Everything is left to children in equal shares when both parents die. For good measure, we title the assets jointly with right of survivorship (house, bank accounts, stocks, bonds) or designate the spouse as beneficiary (IRA’s, life insurance, annuities) so that there isn’t even a probate estate when the first spouse dies. Simple, effective and so popular that the “I Love You” plan is the one chosen by Ohio’s descent and distribution statute for those who never got around to writing a will. Why is this plan so popular? It’s because that is what most people want.

The problem comes when one spouse becomes ill or debilitated to the point he cannot care for himself. The spouse may become so ill as to require nursing home care now or in  the  future,  especially  if  the  caregiver  spouse  passes  away  first.  Then,  the  “I  Love You” plan becomes the worst of all possible plans because leaving everything to the ill spouse,  in  essence,  means  leaving  everything  to  the  nursing  home  to  pay  for  the spouse’s care. Planning ahead is essential to protect assets for the family.

Even more important than a will, which distributes assets at death, each spouse should execute  health  care  and  financial  powers  of  attorney.    These  documents,  prepared when both spouses are competent, appoint someone (usually the husband or wife with children  named  as  backups)  to  direct  medical  care  and  manage  finances  when  an individual loses capacity.

In  planning  for  potential  nursing  home  placement,  it  is  important  to  give  the  financial agent the power to transfer assets within the rules of Medicaid. With such a document, assets  can  be  moved  into  the  name  of  the  healthy  spouse  as  required  for  Medicaid qualification. To  qualify  for Medicaid, a  nursing  home  patient  can keep  only  $1500  in countable  assets.  This  is  usually  kept  in  the  checking  account  where  the  patient’s pension  and  Social  Security  checks  are  deposited.  The  healthy  spouse  may  keep
considerably  more  countable  assets  (with  a  minimum  of  $20,328  and  a  maximum  of 101,640 in 2007). These assets should be placed in the name of the healthy spouse alone “payable on death” to the children.

As long as the healthy spouse continues to live in the house, it is an “exempt” asset for Medicaid purposes regardless of which spouse’s name is on the deed. However, if the ill  spouse  is  on  Medicaid  and  passes  away  with  an  interest  in  the  house,  his  or  her share will be subject to Medicaid Recovery. A lien will be placed on the house which will be collected upon the death of the healthy spouse. Placing the house in the name of the healthy  spouse  before  a  nursing  home  admission  or  application  for  Medicaid  home waiver program may protect the house from Medicaid Recovery.

Once the house is in the name of the healthy spouse, he or she should also execute a new  will  excluding  the  ill  spouse.  If  the  healthy  spouse  should  then  die  first,  the  ill spouse would be required to elect to take only that part of the estate available under the law, preserving at least a portion of the assets for the children.

It seems only natural for most married couples to establish an “I Love You” estate plan, but the financial burdens of a catastrophic illness can quickly change both our lives and our plans. Be prepared.  Review your estate plan with your attorney every two to five years and whenever you have a major life change such as a birth, death, divorce, major illness or disability in the family. It’s the best way to say “I Love You”.


Don’t Keep Secrets and Don’t Be Left in the Dark


Do you know where your assets are?  Many people don’t.  So long as there
is regular income and some money in the bank, we do not bother to take a
complete  inventory  very  often.    There  are  some  people  who  remain
completely  unaware  of  their  situation,  depending  on  someone  else  to
manage  things  for  them.    One-half  of  a  married  couple  often  winds  up
making the majority of financial decisions – handling investments, taxes and
legal  matters.    If  he  or  she  leaves,  dies  or  becomes  incapacitated,  the
partner may be ill-prepared to carry on.

The blow of losing a spouse to divorce, death or incapacity is even more
devastating when a person is suddenly faced with a multitude of financial
responsibilities and no background or knowledge to handle them.  Protect
yourself!    Find  out  now  about  your  financial  situation.    If  you  are  your
family’s financial manager, be sure your spouse knows too.


Your home or investment real estate – Where is the deed?  How is the property titled? What is the value of your home?  Who holds the mortgage?    Are  there  liens  on  your  home?    How  much  are  your monthly payments?  How much are your real estate taxes?

Your  vehicles  –  Where  are  the  titles?    In  whose  name  is  the  car registered?  Is there a lien?  How much are your monthly payments?

Bank  accounts  –  In  which  banks  are  there  accounts?    In  whose names?  What are the interest rates on the accounts?  When do CDs come due? Are they held jointly?  Payable on death?

Stocks and bonds – What type of investments do you own?  Where are  the certificates?   Who  is  the  broker?   In  whose  name  are  they held?  Have your savings bonds matured?

Pension  &  retirement  plans  –  What  benefits  are  available?    What money is set aside?  What are the present and the future values of these  accounts?    Will  the spouse  continue to  receive  pension  after the  pensioner’s  death?  Who  are  the  beneficiaries  of  your  IRAs, 401Ks, etc? Are you taking required minimum distributions?

Safe deposit box – Do you have one?  Where is it?  Where is the key?  What’s inside?

Insurance  policies  –  Who  insures  your  home?  Your  cars?  Your health?   Your  life?   What  type  of  coverage  do  you  have?    In  what amount?  How do you go about filing claims?

Income  tax  records  –  Know  where  they  are?   Who  prepares  them?  Read them before you sign them!

Legal  documents  –  Have  you  signed  an  Antenuptial  Agreement? Have you written a Will or Trust Agreement?  Do you have a durable power of attorney for health care or financial purposes?  Do you have a Living Will?

Credit – What do you owe? To whom? What are the interest rates? What monthly payments are to be made?


Help is often a phone call away.  Know the name and phone number of the following:

  -Your attorney
  -Your accountant
  -Your stock broker
  -Your insurance agent
  -Your banker
  -Your medical claims processor
  -Your employer’s personnel administrator

A  list  of  your  assets,  location  of  important  documents  and professional  advisors  can  also  be  invaluable  to  your  family  should  you become ill or die.


Life Insurance and the Medicaid Application

To qualify for Medicaid in Ohio, an individual can have only $1,500 or less in “countable” assets.  Certain  life  insurance  policies  are  considered  “countable”  assets.  Others  are “exempt”  and  will  not  affect  the  Medicaid  application.  Understanding  the  type  of  life insurance policy you own and its value, both during your lifetime and when you die, will help you best arrange your assets for Medicaid qualification.
Type of Policy

Term Life
The premium for a term life policy pays for insurance only for a certain period of time. Whether you pay monthly or annually, the policy only pays out if you die within the term. If you stop paying, the insurance ends. There is no accumulated cash value. Therefore, term  insurance  is  not  a  “countable”  asset  for  Medicaid  purposes.  There  are  three common ways that people acquire term insurance:

You  may  have  purchased  term  insurance  for  yourself  either  paying  by  check when the bill arrives or on a monthly basis with direct withdrawal from your bank account or your pension check.

The  company  you  worked  for  may  provide  you  with  a  term  policy  or  “death benefit” as a part of your retirement package.

Banks,  auto  clubs,  social  organizations  or  other  groups  may  provide  term
insurance as a benefit of membership. These policies are most often “accidental
death” policies that pay nothing unless you die of an “accident” as defined by the

Whole Life
Whole life policies combine both a death benefit and a savings benefit. A part of each premium you pay goes to accumulate a “cash value”. When the cash value reaches a certain level the policy is said to be “paid up”. At that point, the accumulated cash value and the interest it earns are sufficient to pay the premiums so you don’t have to. You may also choose to “cash in” the policy or take a loan against it. Doing so will eliminate or reduce the amount that your beneficiaries would receive at your death. To the extent that the Medicaid applicant can cash in the policy, it is considered a “countable asset”.

Thus, a whole life policy  will have a “face value”- the original amount of the policy, a “cash value”- the amount accumulated in the “savings” portion of the policy and a “death value”- the face value plus accumulated cash. The death value is the amount the policy will pay out when you die. The cash value is what the insurance company would pay if you cancelled the policy today.

What Does Medicaid Consider “Countable”?
Term  life  insurance  cannot  be  cashed  out  and  thus  has  no  value  that  is

A Medicaid applicant may own one small whole life policy. A policy with a face value of less than $1,500 is considered “exempt” and will not affect the Medicaid application regardless of the cash value.

With the exception of the one “exempt” policy, the cash value of any whole life policy is countable. Thus, a policy with a face value of $5,000 and a cash value of $3,500 would disqualify an applicant from receiving Medicaid since the cash value is more than $1,500.

What to Do?
In  order  to  qualify  for  Medicaid,  the  applicant  must  reduce  his  countable  assets  to $1,500  or  below.  There  are  a  number  of  ways  to  deal  with  the  “countable”  value  of whole life insurance.

1.  Cash in the Policy:  You can request that the insurance company send you the
cash  value  of  the  policy. When  the  check  arrives,  spend  down  excess  assets.
This will eliminate the death benefit and cancel the policy.

2.  Take  a  loan  against  the  policy:    This  will  reduce  both  the  cash  value  and  the death value, but will keep the policy in effect. You will need to continue paying premiums to keep the policy in effect. This may increase the cash value in the future which may disqualify you from Medicaid.

3.  Transfer ownership of the policy to someone else:

Spouse – Married applicants can transfer ownership to a community
spouse.  The  cash  value  would  then  be  part  of  the  community
spouse’s resource allowance.

Funeral Home – The applicant can transfer ownership to a
funeral home to pay for an irrevocable burial plan which is
an exempt asset.

Child or Other – The applicant can transfer the policy to a
child or other individual.

The child could purchase the policy for the cash value. The Applicant could then spend down to $1,500 of countable assets and qualify for Medicaid.

The  transfer  can  also  be  made  as  a  gift.  A  gift  to  a  disabled  child  would  be exempt  from  transfer  penalties,  but  most  gifts  are  penalized  with  a  period  of Medicaid ineligibility.

Change the Beneficiary
Whether the life insurance policy is countable or exempt, whether it now belongs to the Medicaid  applicant  or  someone  else,  consider  changing  the  beneficiaries  of  the policies.  Policies  with  no  living  beneficiary  named  may  be  payable  to  the  Medicaid. Applicant’s  estate  and  subject  to  Medicaid  Recovery.  A  new  owner  of  the  policy  will most probably want to name himself or herself as beneficiary. The applicant’s spouse should also change the beneficiary on his or her  own life insurance policies to name someone  other  than  the  Medicaid  applicant,  since  any  death  benefits  the  applicant
would receive would be countable.

The  handling  of  life  insurance  policies  is  just  one  facet  of  Medicaid  qualification. Consult  with  me  or  an  elder  law  attorney  in  your  area  to  design  and  implement  a personalized comprehensive plan for Medicaid qualification.