When planning for Medicaid nursing home coverage in Missouri, both life insurance and prepaid funerals can be exempt from the Medicaid asset cap. However, due to the eligibility restrictions on both types of assets, most potential Medicaid applicants will likely only have either a prepaid funeral or whole life insurance as an asset cap exempt asset.
In general, applicants for Medicaid nursing home coverage need to have their assets below a fairly restrictive level in order to be eligible for coverage. There are certain assets that are exempt from this asset cap. Among these are certain types of life insurance policies and prepaid funeral plans.
Term life insurance, insurance that is only valid for a set term of years, is always exempt from the asset cap.
Whole life insurance, which pays out a benefit upon the death of the policy holder whenever it occurs, has more restrictions. Specifically, whole life insurance policies that have a cash surrender value have limited exemption eligibility. A cash surrender value is the amount a policy holder can receive if they cancel their policy. In order to be exempt from the asset cap, the sum total the cash surrender value of all whole life insurance policies has to be under $1,500. For married couples, the total cash surrender value is capped at $1,500 per spouse.
Prepaid funeral plans can also be exempt from the asset cap in certain circumstances. First and foremost, the prepaid funeral plan must be irrevocable, i.e. the purchaser cannot change the plan or get his or her money refunded at a later time. There are additional aspects to funeral planning and Medicaid eligibility, however, this an area where plan details can make a big difference. An experienced elder law attorney is needed to review and help select a plan to maximize the asset cap exemption for a specific client’s needs.
The interplay between life insurance, prepaid funerals, and Medicaid eligibility in Missouri is that Missouri allows individuals to only have either, whole life insurance with up to $1,500 in surrender value, or a prepaid funeral as an exemption from the asset cap. In general, a prepaid funeral will enable quicker Medicaid eligibility, since any prepaid funeral is going to have a greater cost than the $1,500 life insurance exemption. However, if a potential Medicaid applicant is already close to Medicaid eligibility, then a prepaid funeral may not be the most financially sound way to get under the asset cap. An elder law attorney can discuss what the best options are for specific clients.
Medicaid nursing home coverage eligibility vary by state. Please consult with an elder law attorney in your state before starting the Medicaid planning process.
To determine how life insurance or a prepaid funeral could fit into your Medicaid planning, please call Martha C. Brown & Associates at (314) 962-0186.