Life Insurance Change Ownership -- Medicaid Impact?

by Elvia

My mother has a $10,000 life insurance cash value of $3800. Is there a penalty to change ownership to qualify for medicaid?

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Jan 15, 2014
Life Insurance Transfer can be a Gift
by: K. Gabriel Heiser

Since the cash value is $3,800, there will be a gift of that amount if you change ownership from the prior owner/insured. That will cause a small penalty, maybe a month or less, depending on your state of residence.

Instead, consider borrowing against the policy to reduce the cash value as low as possible, and then use the money to pre-pay for a funeral/burial policy, purchase personal property, etc.

--K. Gabriel Heiser
author "Medicaid Secrets" (

Dec 08, 2014
Life Insurance Ownership
by: Anonymous

Mom had a 10k life insurance policy and at the time, the CSV was $2100. Already was Medicaid eligible. Transferred ownership to daughter & assigned to Funeral Home at the same time. Changes were submitted @ Medicaid recertification immediately. It is no longer a Medicaid asset of mom and CSV is no longer a countable asset. Will Medicaid impose a transfer or gifting penalty as is it is no longer an asset. All transfer and the irrevocable funeral contract was provided as proof and caseworker did not question during the recertification period. It showed it's not my mom's asset. This is state of NJ.

Please advise as unsure don't want it to be an issue later.

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