Parent with dementia. Of the 5 Assisted Daily Living (ADLs), there's one strong that remains which is ambulatory (walking). Feeding is touch and go and will soon diminish. Parent is aware enough to know they are not thinking clearly, unable to complete tasks, also aware of environment / surroundings. Understand that 4 out of 5 qualifies for skilled nursing and 2 out of 5 qualifies for memory care. We believe best option is memory care as skilled nursing facilities do not focus on patients with demential and allowing them to remain as active and independent as possible. Memory care facilities in our area accept medicaid as portion but then require private pay up to $3000 per month depending on level of care. There is a $50k term life insurance policy on the ill parent. We were considering taking over as beneficiary and paying the $2500 portion monthly memory care in return for receiving $50k as beneficiary at time of death. Is this acceptable by Medicaid? Options?
Medicaid is likely going to want the insurance policy either:
- surrendered to the company or
- sold on the secondary market
with the proceeds for either above used for spend-down or
- state becomes the beneficiary of the policy.
Just what is dependent on how your state administers Medicaid. Really if your parent is at the point of needing a facility, you are very very limited to what can be done. You just have to cash-in and spend-down before Medicaid will pay.
But the first ? on the policy is, who owns it? If parent owns it, then the above probably is what is going to have to happen. But if you own it, then it is not your parent's asset. So clearly read the policy to establish what's what.
If you go and change the ownership, that would be an ever bigger problem. If you did that, then the entire 50K would become a transfer penalty by Medicaid. Transfer penalties are sticky as it's not by $ amount by by days. So a 50K transfer penalty in TX, would mean 323 days that the elder would be ineligible for Medicaid even if they are impoverished & qualify. TX pays about $ 155 a day. 323 days is a long long time for either family to private pay OR to move the parent into their home.
So you have $ 2,500 of your own $$ to spend a month on their care??, what about using your $ 2,500 monthly "contribution" and the cashed in policy for their stay in a facility or to hire at-home caregivers? If it's in a facility, be clear as to what happens if their level of care increases and if they have 100% Medicaid beds for your parent to move into. If you cannot afford to pay your "contribution" and any gap once insurance $ runs out, you really should look for a NH skilled nursing facility that will take your parent from day 1 on a 100% Medicaid bed.
Is the "memory care" a NH or AL? If it's AL, you need to understand that Medicaid funding for AL is not dedicated $; it is diversion funding so can stop. Find out what % of beds are in the Medicaid diversion program and what happens if & when the facility either does not re-enroll in the diversion OR if the state stops funding AL diversion and shifts it to another program (like PACE).
Whereas the policy is not a countable asset under any circumstances, there is no penalty to a Medicaid applicant if ownership of the contract is transferred.
The new owner will have to pay the premium as there will be no funds available from the Medicaid applicant's income to pay the premium once they are receiving Medicaid benefits.
If you do transfer the policy try to do so before applying for benefits as you will then not even have to disclose the existence of the policy (and you will not have to report the transfer of same since, once again, it is not a countable asset).
Also, remember to change the beneficiary (I am sure you will since that was the intent to begin with).
The above is provided for informational and educational purposes only, is generally available to the public, and should not be considered financial or legal advice.