I know that HAVING a term life insurance policy does not count as an asset for Medicaid eligibility purposes because term policies do not have cash value. But does the PURCHASE of a NEW term life policy violate the spend down rules? In other words, if I buy a new term life policy for my mother as a way to spend down some assets to get below the $2000 limit, will that expenditure be clawed back under the 5 year look back rule?
I would schedule an appointment with a certified elder law attorney, this is a legitimate spend down and can help you not create a penalty period. Because they don't do clawback up front, they just deny coverage, completely or for a certain amount of time, depending on the transgressions.
First, buying a policy now will cost very high premiums.
Second, Mom is not the one who profits from the policy, the beneficiary is. So your using her money that can be used for her care. And, how are you going to pay the premiums once she is on Medicaid, she will have no money?
Have you thought about prepaying her funeral, Medicaid allows this. With my Mom she had 20k . I placed her in LTC paying 2 months privately. This gave me time to spend down and get info needed to Medicaid. The 3rd month Medicaid started.
Not against Medicaid regulations.
BUT
the issue will be that Medicaid will want all the paperwork on these transactions. And if there is a beneficiary involved, like there would be for annuities and life insurance, & if it is over a set amount as determined by however your state administers Medicaid, (maybe 5k or 10k), then Medicaid will require a change on the beneficiary to be done BEFORE she will be eligible for LTC Medicaid.
so yeah mom can sell her home for 200k and buy herself a 200k annuity with you as it’s beneficiary.
But should mom apply for LTC Medicaid, Medicaid will NOT necessarily require she cash it in or do a settlement. She can keep the annuity. BUT state will require a change to it to have the State be the primary beneficiary and whatever the annuity pays for ea mom goes into her overall required copay to the NH as it’s monthly income. After her death, whatever money is left goes to the State - as State is the beneficiary- first and foremost to offset her Medicaid tally. Should there actually be money left after that happens (Rotflmao) then it goes to whomever is the 2ndary beneficiary.
Ditto for a term life insurance policy. State will require her to change the beneficiary from you or whomever to the State as the primary beneficiary in order for her to be LTC Medicaid eligible.
Most NH Medicaid monthly tally’s run 8k a mo, so a yr would be abt 100k. Avg stay is 2.5 years, so she kinda needs to buy a term over 250K to perhaps have $ left over to pay a secondary beneficiary. If you can even find a reputable life insurance Co to do one that size for someone old.
Plus like JoAnn said, if she’s really old, the premium to buy a no cash value term prepaid in full will be horrendous and will have an age limit (maybe 80, it’s set by demographics & actuarial tables) and maybe an exclusion for first year or two for death from cancer or suicide. I cannot image just how in expensive it would be to have a fully paid 300k term policy on someone over mid 70’s.
It’s imo a especially crappy way to move assets. Yeah, It’s allowed but doesn’t make sense imo. Really if she has $, spend it on things that once she’s on Medicaid that Medicaid doesn’t provide for or does as really less than ideal…. like she gets dental work done, or new better tech wheelchair or walker. Also if she has real $$$ being able to use it to private pay for her to stay in a NH that is both Medicaid & private pay will give her more choices to start and then to have them segueway her to becoming a Medicaid resident when she finally gets impoverished.