Will this life insurance policy be considered an asset by Medicaid?

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Q. My mother has early onset Alzheimer’s disease and is moving into a facility with declining spending two years before Medicaid. We are putting all its financial statements in order and are aware of the five-year retrospective. A friend had told me about modified whole life insurance that is advertised more or less as intended for funeral/burial arrangements and is guaranteed to be accepted. Would this type of insurance be considered an asset in the eyes of Medicaid and disqualify it in a few years when we apply for it?

— Try to help

A. We are sorry to hear of your mother’s condition.

But we’re glad she has some help from you.

In order to qualify for Medicaid benefits, applicants cannot have more than $2,000 in book assets, said Shirley Whitenack, an estate planning attorney at Schenck, Price, Smith & King in Florham Park.

“Medicaid law exempts whole life insurance policies from book assets if the face value of the policy is less than $1,500,” she said. “If the face value is greater than $1,500, Medicaid will count the cash value toward the $2,000 limit.”

Modified whole life policies have a cash value, just like basic whole life policies, Whitenack said.

Good luck.

Send your questions to [email protected].

Karin Price Mueller writes the Bamboos column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. To find NJMoneyHelp on Facebook. Register for NJMoneyHelp.comit is weekly e-newsletter.

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