Has anyone had experience with a disabled person being a life insurance beneficiary and receiving a payout? My BIL is a beneficiary on my fiance's life insurance and he receives Medicare, Medicaid and Social Security. Would a payout affect his Medicaid eligibility? Is the only option to have a special trust set up for him, or could he just sign the check over to a family member to avoid having his benefits cut off?
Sorry if this is more of a legal question. I've tried to ask attorneys as well.
Community doesn't have the same financial restrictions.
If he is on LTC, no, he can't just sign the money over. It would be considered gifting and create a penalty period of no coverage.
You really need to speak with his Medicaid social worker to find out how this works to ensure he isn't left in the cold because of a mistake.
If your husband is able, why not change the beneficiary?
- If he’s disabled from an event stemming from something in childhood till his late 20’s, his income / assets could come under ABLE Act provisions. ABLE just came about past couple of years.
I ask as you say he has surgery every 5 or so years, so if it’s congenital, or childhood disease or from an accident when younger (the classic is young male TBI from auto accident), he or his guardian can use ABLE to set aside $ without it affecting his lower income status needed for most Medicaid programs. I think the ABLE ceiling is 125K and has to be done incrementally / over time and the $ in a bank that participates in ABLE accounts as there’s required state annual paperwork. The $ in the ABLE is in my understanding totally outside of any “count” by Medicaid.
ABLE is a real game changer for disabled who can qualify as it’s totally a DIY and very straightforward to manage. Personally I’d find a participant bank and start an ABLE fund for him in 2022. Even if it’s only $500 in 2022. It just gives a place to park extra $ without worry for Medicaid issues.
The reason I know abt AbLE is I had a cousin who had 1950’s polio and got disability services, so he got info on ABLE. Fortunately his folks set up a pretty hefty Special Needs Trust for him in 1970’s so no need for it. When his parents died, his bro & I became the co Trustees. He was totally competent; it was more physical issues for him. His SNT was irrevocable & used strictly for things that never ever would be covered by insurance, Medicaid or Medicare so had no effect on his eligibility for those. Like SNT bought a car and had it redesigned so he could drive; paid for an aide from an agency to accompany him on trips. His SNT never paid him income directly, so not an issue for Medicaid. It had a planned defund and did couple of years before he died (this actually is important as the State may require a Trust to have the State be the beneficiary of any $ left in a SNT). What I found was SNT has to be done by an atty who is beyond very experienced in disability laws, taxes, Medicaid eligibility. No way to ever DIY it. Maybe find one so they can figure out how to have the beneficiary of your Bf life insurance be a SNT (that gets created now in anticipation) rather than the brother?
Another thought, If this is a big value life insurance policy, & Bf knows he’s likely to die soon, maybe look to do a viatical settlement? I have a friend who buys viatical, apparently they need to be close to 1M nowadays to find an investor to get a decent %. (If not, they are terrible payout). The advantage to viatical is Bf & you & his brother have the $ now to set something up.
Really a solid experienced disability atty needs to be consulted. Your a godsend for your Bfs brother.
My nephew has been disabled since birth. He gets SSD, Medicare and Medicaid. His Medicaid is based on his workability. He is allowed to make 30k a year and have 20k on hand. IMO, if being beneficiary gives him thousands of dollars, then Medicaid for heath stops until its spent down then he re-applies. If Medicaid is paying for his care in a NH, he can't have more than the asset amount his state allows. In my state its 2k. He will need to spend down the insurance money then reapply for Medicaid.
When my nephew came to live with my Mom he had 50k from his deceased Moms insurance. Before I could get him any help, that money had to be put in a Special Needs Acct. Which will go back to Medicaid upon his death.
U get wanting to keep your FBIL healthy but, honestly, would you rather he had quantityover quality? If he is happy I would let it go. Perfectly reasonable adults eat themselves into an early grave everyday in the US. If his blood sugars are stable I wouldn't worry about his weight. I have known skinny little things that had diabetes, so weight doesn't necessarily equate to problems.
As hard as it is, unless a court has declared him incompetent, he is free to live his life on his terms. Trying to control that just causes unnecessary grief and stress.
Perhaps a trust that helps your brother could be researched. This might solve the potential problems, definitely worth asking the attorney.
My fiance is going to speak with an attorney so I'll recommend that he ask about the life insurance/special needs trust. It just seems useless to try to protect his brother through life insurance, then have Medicaid or anyone else take it away from him or have him lose his benefits.
Personally, I would prefer that he stay where he is because he seems happy there. But he changes his mind often, so we don't ever know what he actually wants. He'll say he wants to live there one day, then the next he'll say "well, I could live with you guys". He says what he thinks people want to hear and not what he wants. He also forgets what he says, so if he says he wants to spend Christmas here one day, the next he'll say he wants to spend it there. It's mildly frustrating, so that's why others just make certain decisions for him.