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Will Medicaid view my life insurance as an asset?

I have a single premium life insurance with my children as beneficiaries. If I change the ownership to the beneficiaries will I qualify for NJ Medicaid after 5-year look back period.  What are the consequences of such a change?

See our response on 

The simple and short answer to your question is yes if you change the ownership of the life insurance policy before the five- year look-back period then the whole life insurance policy would be exempt from Medicaid spend down.

When it comes to life insurance Medicaid is not concerned with the insured of a life insurance policy or who the beneficiary is but rather who is the owner of the policy.    The owner has legal rights and can access the funds at any given time, since a Medicaid applicant cannot have more than $2,000 in assets, having access to the additional funds in the life insurance policy could jeopardize eligibility.   If your child is the owner, you would have no access to the funds.  Many people change the ownership of their life insurance policy as a planning strategy.

Let's review the Medicaid rules for Life insurance:

 A Medicaid applicant may own one or more small whole life policies. The total combined face value(s) of $1,500 or less is considered “exempt” and will not affect the Medicaid application, anything exceeding this amount will be countable.   So, for example, a $3,500 dollar policy with cash value of $1,800 would disqualify the applicant from receiving Medicaid benefits since the policy cash value exceeds the $2,000 limit.

Term life insurance cannot be cashed out and thus has no value. Therefore, it is not a “countable” asset under Medicaid rules.