Can My Father Cash in a Life Insurance Policy Without Affecting My Mother’s Medicaid?

Question:

My mother is in a nursing home here in California and is on Medi-Cal (Medicaid). My father has almost depleted his bank account and needs money for dental work. He has two life insurance policies (my mom is the beneficiary). One is for $25,000 and the other is for $10,000. He would like to cash in the $10,000 policy (the cash-in value is $5,000). Would the cash-in value be considered my mom’s income? If it is considered her income, would that disqualify her from Medi-Cal?

Answer:

No, the life insurance policy would not be considered income. The cash value of a life insurance policy is an asset that the state looks at when determining Medicaid eligibility. If your father cashes in the policy, it is no different from him moving money from one account to another. It does not increase the level of your father’s assets, and it should not affect your mother’s Medicaid coverage.

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