No Assets, No Will - Public Aid

[gr8gram]

What is the name of your state? IL

My mother passed away in August. At the time of her death she had been living in a nursing home & had been on Medicaid since January. Her only income was her Social Security check & she owned no property or other assets except for an older vehicle valued at less than $1000. She did not have a will. She did however, have a life insuance policy in the amount of $21,000 naming me and my two brothers as beneficiearies of this policy. This policy had no cash value. It could not be cashed in prior to her death because she did not purchase the policy. It was provided to her at no charge as a benefit of her previous employment.

A week or so ago I received a letter from the IL Dept of Public Aid stating that because she was on Public Aid, her estate may owe the State of IL upwards of $38,000 for benefits that she received prior to her death. They are asking me to fill out a for providing information on her life insurance policy, cost of her funeral etc.

As far as we were aware there was no "estate". The insurance proceeds were distributed evenly among the three of us and we used part of it to pay for her funeral expenses. Am I really required to provide this information? Are they entitled to whatever monies were not spent on her funeral expenses?

 

[Dandy Don]

You are NOT required to inform them about the life insurance--that was payable to beneficiaries OUTSIDE OF HER ESTATE and has no relevance. If you were to mistakenly provide that information, they would be coming after you for payment.

Just report the minimal assets that you know about and they will soon determine that this is a virtually worthless estate that they can not collect from.

 

[gr8gram]

Just to clarify....the State of IL is aware of the $21,000 life insurance policy as I listed it on the application for public aid that we had to fill out for her to become eligible for public aid in January. I also had to get a letter from her former employer stating that it had no cash value & provide that along with the application for public aid, otherwise if it had a cash value I was told we would be required to cash it in & pre-pay funeral services or turn it over to the state. But it sounds like you are saying I do n ot have to provide any further information as to how that life insurance was spent...ie. funeral expenses or whatever.

Is it necessary for us to start or open probate if there was nothing else for assets? There is no disagreement among the three of us since the life insurance was so little there really is nothing but personal effects & nothing worth squabbling about. I really am only concerned about any creditors or the State of IL trying to come after us for payment of her debts.

 

[Dandy Don]

You may have made a mistake by reporting the insurance policy although you probably reported it innocently. Since that money is payable to her beneficiaries, it was technically NOT an asset of her estate. Now that the state knows about it, they probably will come after SOMEBODY for payment of the debts, whereas if you would not have ever reported it they would have had no one to go after to collect the debt since her estate would have technically been insolvent/of no value. You still have the defense of saying that as beneficiaries YOU HAVE NO LIABILITY for any debts from her estate--the debts are the responsibility of the executor, and since there are no assets the state has nowhere to go to collect. It will just have to write off the debt like they normally do anyway.

 

[BlondiePB]

You may have made a mistake by reporting the insurance policy although you probably reported it innocently. Since that money is payable to her beneficiaries, it was technically NOT an asset of her estate. Now that the state knows about it, they probably will come after SOMEBODY for payment of the debts, whereas if you would not have ever reported it they would have had no one to go after to collect the debt since her estate would have technically been insolvent/of no value. You still have the defense of saying that as beneficiaries YOU HAVE NO LIABILITY for any debts from her estate--the debts are the responsibility of the executor, and since there are no assets the state has nowhere to go to collect. It will just have to write off the debt like they normally do anyway.

Most state applications for Medicaid do ask if there is an insurance policy/policies for the person.