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She has Masshealth and Medicare coverage. We live in Massachusetts, and I'm afraid that the state may go after these policies. She is 90 and has paid for these policies for many years. How do I protect policies?

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momsno1 I agree. I just have to get in touch with them. The whole thing sounded bazaar to me and my sister. My mother bought the life insurance to pay for her funeral, so there really won't be a lot leftover, but I will be checking with a lawyer, too. Thanks, for the heads up.
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No followup from original poster of this question?
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bushels, I believe you've been given incorrect information about what you can do with leftover money. I recommend you run this by an elder law attorney.
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When my mother was in a nursing home for one month and paying it herself (she is now in assisted living) the administrator told me that my mothers' whole life policy would be taken by Medicaid when the time comes that she runs out of money and goes into the nursing home.I was pretty surprised as I thought life insurance was off limits. Wrong. The funeral home told me that we could use the policy to prepay her funeral (not sure how they do this, I assumed they become the owner, but I haven't checked yet). There will be money left over, and I asked what happens to that, and she said we (her children) could use it for our own funeral expenses (prepaid), as Medicaid will take it if we don't. I have dragged my feet as mom is still in the assisted living, and will be there for awhile, but she is almost 94. I only checked with one funeral home, so I will be calling around to see if they were correct, also calling the insurance co. to see if I can make them the owner.
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dianerankkin,
Regarding your original question: If by chance her life insurance contract(s) were used to fund a trust, and if the trust was established longer than 60 months ago, it would not be an asset that Medicaid could touch. Medicaid has a 5 year look-back, as you may already know, so if she had a trust established at least 5 years ago, that's not a countable asset.

However, I would advise that you consult with an Elder Care attorney to address your specific situation, in order to determine assets that Medicaid would count.
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I think we've got two different threads going here. The original question was how to protect life insurance from Medicaid. Now we're talking about using life insurance to enhance your life before you die. Good thoughts, but not pertinent to original question.
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I think we've got two different threads going here. The original question was how to protect life insurance policies from Medicaid. Now we're talking about how best to use a policy to benefit a person before he dies. Good thoughts, but not pertinent to the original question.
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When I worked with an HIV nonprofit in the 1990s, some of the people with AIDS sold their life insurance policies for some fair amounts. Then they would use the money to live and pay for care. The purchaser received the death benefit when the person died. It worked well if there was no beneficiary who would need the death benefit.
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I heard that you can claim that your relative, either mother or grandmother etc, and state they are in their last days and will not live much longer. They will release some of the funds. I found that out to late. They don't advertise this. I had 300,000 and could not keep up the payments. Shortly after I heard a commercial that you could sell the life insurance for an amount agreed upon by you and the Ins company. Also, they will release certain amounts to help pay for their care. I am SICK that I did not see the add re selling the policy. Take action people, don't do like I did.
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michelleshevlin, good luck getting the insurance company to make the funeral home the owner of the insurance policy. We were dealing with AIG and CUNA and neither would do it.
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Forgot to mention, it was necessary for my mom to sign ownership over to us. DigitalBanker, if you cash in the policy you lose the full value. In my mom's case, cash value was around $4,000, but death value was around $6,000. By cashing it in, we would have lost $2,000. As the owners now, we also continue paying the yearly premiums to keep the policy in force and we will also get paid back for those when she dies. Of course, as a whole life policy, the value is also increasing each year. This was the best plan for us because my mom needed every cent of her three small policies to cover her funeral. Just cashing them in and putting the money toward a pre-need plan wouldn't have covered a funeral. As everyone knows, even $6,000 is stretching it, $4,000 wouldn't have begun to cover it.
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Yes, if there is cash value life insurance, the government counts it as an asset, and will use the funds toward his or her care. They are footing the whole bill, which is how they justify taking it. As a private pay daughter of a mother running out of money at 94, I am ready to make the funeral home the owner of the policy, or whatever I need to do to prepay her funeral expenses. Not to get political, but changes to the healthcare system are on their way if the next round passes, to end the ACA. I am sure that the Medicaid nursing home portion will be on the chopping block in some form or other.
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JessieBelle, thanks for the insight, I wondered how no one managed to touch my dad's life insurance policy when he went into a nursing home now that this question has surfaced.

If the insurance is a countable cash asset, I would definitely call the insurance company and see about cashing in. A smart move would be to use some of the money toward a preneed or go ahead and pay off his funeral so that very stressful expense is already out of the way. I would find out what his wishes are and take him to the funeral home to let him make his preneed ahead of time. Depending on how much time he may have left, it may actually be a smart move to let him go ahead and pay off his arrangements in full depending on how much money is in the policy. If he's been paying on this policy for long enough, then he probably has enough money to go ahead and just pay off his preneed ahead of time so the family doesn't get stuck with this particular expense. 

* If Medicaid must to get involved and pay for her care, it's a very good idea to let the funeral home own the preneed policy. That way, she won't have to worry about it being a cash as that if the funeral home owns it. I've known some people in the funeral industry and I know about this little trick

One thing to remember is to do your homework. We often don't find things out until we get stuck with a dilemma. Such was the case when my dad died and elder fraud was later discovered. This is only one good example of why it's always a good idea to do your homework and research things that involve you personally. Again, we often don't know what to look for until we get hit with a problem we were unprepared for. 
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Digitalbanker, life insurance is only a concern if Medicaid is needed. Whole life insurance is a countable asset that has to be cashed in and spent down if Medicaid is needed.
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My dad went into a nursing home and still had his life insurance policy when he died and no one touched his. It was somehow protected and maybe in part because he had plenty of money to pay for the care he got. I think another reason might be because of the private insurance he had, but no one went after his life insurance policy 
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When we put our mother on Medicaid, we used a family law firm to help us file and were told we could have the ownership of her policy changed to my name and I would take over the payments. This policy had no cash value so was of no interest to Medicaid. Our choices were to do this or cancel the policy.
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When your Grandmother purchased the policy what was the intent?
Was it not to provide an income or means to support or pay for her health, care and provide a way for her to live comfortably?
By using the policy to provide for her now, being able to choose a place that if for a while is private pay then when funds run out she may be able to remain on medicaid she is using the policy for what it was intended to be used for.
If the money is available why try to "hide" it and apply for Medicaid if that is what you are asking about?
Using the funds available you will have a wider choice of facilities.

I am not even going to get into the fact that you may be asking for taxpayers to provide funding for her housing/long term care when she can afford it.
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We bought my mom's policies from her for the current cash value, then she took that money and put it in a pre-paid funeral which qualified for exemption by being within the amount the state allowed. We are now the owners of the policies. When she dies, we will cash them in, repay our loan, and the balance will be added to the amount of the pre-paid plan. In this way, we were able to preserve the full face value of the policies. The easier way would have been for the insurance companies to agree to the policies being assigned to the funeral trust, but we couldn't get them to do it.
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Are you saying she has life insurance with Masshealth and Medicare?
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From what I understand insurance policies have to be cashed in to go towards her care. The only policies that don't count are ones carried by employers. Upon cash in, monies can be used for funerals and I think expenses. Like flowers, Stone and luncheon.
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Do they have cash value? I'd see an expert as JessieBelle says. With those that I know, the cash value of the policy is counted towards their total asset limit. However, I'd question if prepaid burial packages count. I'm not sure. I'd get a full consult with an expert before you apply, so you know what to expect.
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You really can't if she needs to go on Medicaid within five years. Life insurance policies are countable assets if they are large enough and your grandmother is the owner of the policy. What may be helpful to you is to consult with an eldercare attorney to see what options are the best for your grandmother's property and policy. Make sure the attorney is knowledgeable about Medicaid rules for the state in case your gma needs assistance in the future.
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