Is There a Way to Make a Gift After Death Without Worrying About the Medicaid Five-Year Lookback?

[Dale M Krause]

It's important to note that any gifts made by a person within the five years (60 months) before a Medicaid application are clawed back. This means these gifts will still be considered part of the person's assets, making them ineligible for Medicaid benefits.

For instance, if Grandma wants to give each grandchild $5,000, for a total of $20,000, she can use the Presidio Plus product, which works best in such cases. She has already established a certificate of deposit for each grandchild, with herself as the owner and the respective grandchild as the beneficiary. However, she was told that if she went into a nursing home and needed Medicaid, she would have to spend the CDs. But she is determined not to let that happen.

Fortunately, she has a house, a car, standard household furnishings, and $150,000 in savings accounts. She is not worried about going into a nursing home or needing long-term care or Medicaid for the next five years, as she is in good health. Therefore, she is a good candidate for the Presidio Plus product and has decided to single-pay for four Presidio Plus products.

 

[rmhaire]

And that, only if you vote democrat.

 

[Allen Trent]

As long as the insured names a person as beneficiary the life insurance benefit cannot be taken by Medicaid

Medicaid never takes the money, but you have to spend your own non exempt assets before Medicaid will pay for your care. I don't know about all states, but I have seen hundreds of people have to cash out cash value life insurance to get down to the 2k. Only time personally owned cash value wasn't required in the spend down was if it was owned by someone else for 5 years or a funeral home was listed as irrevocable bene, etc. I even saw a 95 year old woman have to cash in about 8 small policies she had owned since the 1920s, where each of them were weekly pay Prudential or Met Life policies with face value of $250 & cash value of $225.

 

[Dale M Krause]

Yes, you are correct.

If a person owns whole life insurance with a combined face value of $1,500 or more, the cash values are countable resources (not exempt).

Since the Presidio Plus product is irrevocably assigned to the insurance company's trust immediately following the purchase, the person (insured) is no longer the owner. When five years pass following the assignment, the protection against Medicaid and its five-year lookback is secured.

 

[jdeasy]

Medicaid never takes the money, but you have to spend your own non exempt assets before Medicaid will pay for your care. I don't know about all states, but I have seen hundreds of people have to cash out cash value life insurance to get down to the 2k. Only time personally owned cash value wasn't required in the spend down was if it was owned by someone else for 5 years or a funeral home was listed as irrevocable bene, etc. I even saw a 95 year old woman have to cash in about 8 small policies she had owned since the 1920s, where each of them were weekly pay Prudential or Met Life policies with face value of $250 & cash value of $225.

Medicaid will take the money if it goes to the estate instead of a beneficiary.

And cashing out the the policy doesn’t help unless they do it 5 years prior.

This product is supposedly addressing the face amount. But the face amount is never an issue unless they don’t have a named beneficiary.

People can put their policy into a funeral trust and the cash value is no longer a countable asset. But the states have maximums. For example, Indiana allows $10K. Ky allows $15,000.

Many IMO’s teach to just transfer ownership to avoid countable assets for government assistance. But unless they do that 5 years prior to going on any assistance it’s still countable.

And it’s not just Medicaid. It’s any government assistance. From HUD to LIS to WICS to full Medicaid.

And not all states allow $2K of countable assets. They can’t allow less than $1500. And some states only allow $1500.

Some allow much more than $1500.

Whatever it is they have less than that in countable assets in order to qualify for the aid. And they have to continually qualify.

The cash value is only part of it. But in the FE arena we find that the cash value is their primary asset

Countable assets are: cash, money in a checking or savings account, penalty withdrawals from an annuity or CD.

The total has to be under the state max or they don’t qualify until it’s under.

The 5 year lookback exists to prevent people from just withdrawing money and hiding it or giving it away for the sole reason of qualifying

 

[scagnt83]

Yes, you are correct.

If a person owns whole life insurance with a combined face value of $1,500 or more, the cash values are countable resources (not exempt).

Since the Presidio Plus product is irrevocably assigned to the insurance company's trust immediately following the purchase, the person (insured) is no longer the owner. When five years pass following the assignment, the protection against Medicaid and its five-year lookback is secured.

How would this be much different than having the Beneficiary be Owner of the Policy?

After 5 years, its exempt. And income tax-free to the Beneficiary.

 

[Newby]

How would this be much different than having the Beneficiary be Owner of the Policy?

After 5 years, its exempt. And income tax-free to the Beneficiary.

The beneficiary owning the policy is a countable asset if they ever die, are sued, divorce, apply for Medicaid etc. Can be problems but usually works. But only if they are the owner from the very beginning. You can’t assign ownership later or it’s subject to the 5-year look back.

If the policy is intended for funeral/ final expenses you can just assign it to any funeral home for a day one exemption. If it’s to leave money to heirs you have to plan 5-years in advance.

 

[LostDollar]

The beneficiary owning the policy is a countable asset if they ever die, are sued, divorce, apply for Medicaid etc. Can be problems but usually works. But only if they are the owner from the very beginning. You can’t assign ownership later or it’s subject to the 5-year look back.

If the policy is intended for funeral/ final expenses you can just assign it to any funeral home for a day one exemption. If it’s to leave money to heirs you have to plan 5-years in advance.

If a policy is assigned to a funeral home, what happens if the covered person moves, or is moved by their kids?

 

[scagnt83]

The beneficiary owning the policy is a countable asset if they ever die, are sued, divorce, apply for Medicaid etc. Can be problems but usually works. But only if they are the owner from the very beginning. You can’t assign ownership later or it’s subject to the 5-year look back.

If the policy is intended for funeral/ final expenses you can just assign it to any funeral home for a day one exemption. If it’s to leave money to heirs you have to plan 5-years in advance.

Exactly. No different than the product/trust solution mentioned above.

Its subject to 5-year lookback.

Same as the relative/bene owning the policy.

 

[scagnt83]

If a policy is assigned to a funeral home, what happens if the covered person moves, or is moved by their kids?

It should be able to be reassigned to a different one.