Mother's funeral insurance switched to life insurance but is on Medicaid

[Kaiohm]

My mother has been paying for funeral insurance through Lincoln Heritage for about the last two years. She's on disability, has both Medicaid and Medicare and made sure they knew. Recently they changed it to a life insurance, which Medicaid may soon take as it has a cash value of about $2,000, and had me become the policyholder. Since the life insurance is still for her, can Medicaid still take it? We've looked into withdrawing it and going through the funeral home's insurance but due to the penalty we'd only get about $700 back. What do we do? Thank you in advance.

 

[FlyingRon]

I think you misunderstand things. Lincoln Heritage's "final expense" insurance is just a small life insurance policy. She wasn't likely "switched" to anything. The money is paid to the beneficiary and is safe from Medicaid attachment (unless she named her estate as the beneficiary). You need to first find out if she has a term or whole life policy. Term policies never accumulate a cash value. Whole life policies can have a cash value but it will not be taken by medicaid while the insured lives. If it accumulates too much it can disqualify her for Medicaid. What that limit is varies from state to state (and you chose to delete rather than answer the question about your state).