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How Does Life Insurance Impact Florida Medicaid Eligibility?

How Does Life Insurance Impact Florida Medicaid Eligibility?
November 4, 2022

There are several strict regulations to be eligible for Florida Medicaid. If you're in the application process, you may wonder how your life insurance will affect your eligibility. It is essential to know this information to ensure that you are eligible for Medicaid coverage.

Continue reading this guide to learn how life insurance impacts your Medicaid eligibility in Florida:

Today I want to talk about how life insurance impacts whether or not you're eligible for either the Florida Medicaid ICP program or the Florida Medicaid waiver program. These are the long-term care Medicaid programs in Florida. And life insurance may or may not be considered an asset that would impact your eligibility.

The way to determine this essentially is to figure out whether or not there is a cash value. If there is cash value, almost always, Medicaid will look at that as if it were money in the bank. Medicaid has a strict $2,000 asset limit. So if you had a life insurance policy with a $100,000 death benefit but a $3,000 cash value limit, well, you're not eligible for Medicaid, not because of the death benefit. Medicaid doesn't care that the policies will one day be worth $100,000. They care about how much money you, the Medicaid applicant, can get ahold of now. And if there's cash value, you can borrow against it. And if you can borrow against it, Medicaid will count that against you.

So as another example, if you have a term life insurance policy, that's where there's a death benefit, but there is no cash value at all. So you could have a million-dollar term life insurance policy, but because there's no cash value, it does nothing to negatively impact your ability to qualify for Medicaid. On the other hand, you can have a $5,000 death benefit policy with $5,000 worth of cash value, and that by itself, even if you didn't have two pennies in the bank, would mean you're not eligible for the Medicaid waiver or the Medicaid ICP program.

So what do we do about it? So it depends. If the cash value is the equivalent of the death benefit, then our or close to the equivalent of the death benefit or guidance is usually going to be cash out of the policy. Because we have other ways of dealing with that money, right? Even if you had nothing in the bank and cashed out, you now have all this money? Well, that's why most people are coming to Elder Needs Law in the first place because they don't qualify for Medicaid. They want to, so we have legal and ethical strategies to help you get that money out of your name without having to wait five years and go broke first.

Now, if you have a cash value that impedes your ability to qualify for Medicaid and has a very high death benefit, it would be a shame to cash out. So if you had $5,000, with the cash value on the $100,000 death benefit, I'm not going to advise you to cash out because if again, it'd be a shame to lose out on that 100k. So instead, we're going to guide you on how to borrow against that cash value. And once you've borrowed against it, you can draw it down. It might be worth $5,000 today, and after you borrow against it, you may be able to withdraw $4,500 from it.

Usually, the life insurance companies will make you keep a little bit of money in the policy to keep it enforced. So let's say they make you keep $500. But we've taken out the rest of the cash value; now you have an asset worth $500. And that counts against your $2,000 limits. If you have $500 in the cash value of a life insurance policy, you could only have $1,500 in the bank because that would add up to $2,000. But we can take the money out and protect it another way.

I've got all sorts of videos that talk about that. We can certainly talk about it during a consultation. So life insurance is essential to make sure that we have. We'll ask you for either the declarations page, the face sheet, or just a policy summary. And we can then give you the proper guidance on what to do to ensure that you or your loved one would still be eligible regardless of whether or not you have this life insurance. And certainly, if you have other assets and their income issues, we have ways of dealing with every situation we can get our clients onto Medicaid.

If you are interested anywhere in the state of Florida, that's the state that we serve. And we work with people whether we're based in South Florida, and we work with people all over the state. If you or a loved one is interested in a consultation, please call us. If you found this video informative, please give it a thumbs up and share it. That's how we help to get good, practical information out to the world. And thank you very much for watching. I hope you found this helpful.

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Jason Neufeld is the Founder and Managing Partner of Elder Needs Law, a Florida estate planning and elder law firm he created in 2017. With more than 15 years of experience practicing law, he represents clients in a wide range of legal matters, including Medicaid planning, estate planning, elder law, probate, Medicare, and life insurance.

Jason received his Juris Doctor from the University of Miami — School of Law and is a member of the Florida Bar and the Broward County Bar Association. He has received numerous accolades for his work, including being named a Rising Star and Super Lawyer by Super Lawyers and among the Florida Legal Elite by Florida Trend in 2024.

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