Many people who own a life insurance policy are not familiar with the process that allows you to convert that policy into a long-term care benefit plan. This conversion process transfers ownership of the life insurance policy from the owner to an entity that acts as a benefits administrator. Since the owner no longer holds the policy in his or her name, the asset will not count against this person for the purposes of Medicaid qualification.
The new benefits administrator will assume the responsibility of paying the monthly premiums on the policy and then pay the previous policyholder a series of monthly payments based on the value of the policy. These payments may be used to pay for long-term care such as nursing home bills or hospice care.
For example, if you have an aging parent who has dementia and can no longer live in the home, the life insurance policy owned by that aging parent may be converted into a long-term care benefit plan that pays a certain amount monthly towards the cost of assisted living in a memory care unit. It is also possible to have a lump sum set aside from the policy to cover future funeral expenses.
The advantage of doing this conversion is that you are no longer paying monthly premiums and the payouts received do not count against the individual seeking to qualify for Medicaid coverage in the near future. A long-term care benefit plan is recognized by Medicaid as an acceptable spend-down during the five-year look-back period. Also, the payments received from a long-term care benefit plan can be used to pay for any kind of care-- in-home care, assisted living fees and hospice care.
The disadvantage would be that you must have an immediate need for some form of acceptable long-term care because the monthly payments are made directly to the long-term care provider not the individual who previously owned the policy.
If you are interested in evaluating your current life insurance policy to determine if this conversion to a long-term care benefit plan would be the best plan of action, contact Stouffer Legal in the Greater Baltimore area for a consultation with one of the experienced Elder Law attorneys.
