How often have I heard clients tell me they were told to cash out a life insurance policy as part of a “Medicaid spend-down,” because it was “an asset.” The fact is, whether a given policy needs to be liquidated depends on who owns the policy, what its cash surrender value is, and who is applying for Medicaid benefits. There’s no “one rule for all cases.” It’s a real pity when someone who owns a policy with a minimal cash surrender value but a sizeable death benefit is told to go liquidate it, ending up with nothing. Senior care planning requires attention to these nuances.
NJ Medicaid/MLTSS pays for long-term care services (nursing home etc.) and an applicant needs to be financially eligible. Among other things, the applicant’s non-excluded resources have to below $2,000, and there is an upper limit on the resources that their spouse in the community can have at the time the application is filed. The process of reducing or restructuring resources to get them below these limits is often referred to as the “spend-down.” Each applicant or spouse needs to make decisions about which assets (resources) to keep and which to liquidate. Each situation is unique. Here’s one example: let’s say a certain community spouse could retain $126,000 in non-excluded resources. She might want to retain one or more IRA accounts (or the 401K at her job), her higher-earning CD or commercial bonds, a term life insurance policy with a zero cash surrender value, or a vacant lot adjacent to their house that has a low value. As noted, each case is unique. It’s a question of the total countable value of each of the assets being retained. The total value has to below the limit for that case.
Careful planning can preserve assets in ways you may not realize. Call us for advice on Medicaid eligibility planning …… 732-382-6070