If your Elder has a life insurance policy, is going into long term nursing care, and is applying for Medicaid, the monetary value of the life insurance policy is considered an asset. In order to prevent Medicaid from taking all assets (bank accounts, stocks, bonds, property, insurance) the life insurance policy should be "cashed in" and the money used to prepay funeral expenses. Dad had a life insurance policy he purchased through the Veteran's Administration. To cash in the policy, I had to have Dad's military discharge papers and a copy of the Power of Attorney. The funeral director took the check, divided it in half to cover expenses for both my parents. The money was then put into a funeral trust fund. The trust is administered by a bank. The bank sends a yearly statement of the money in the account for Medicaid and tax reporting. It's a relief to know Medicaid didn't get everything, and there's money set aside for the funeral costs.
I'm not a lawyer, don't pretend to be one. What's offered here is my experience going through the Commonwealth of Massachusetts system. Your state regulations may be different. An attorney well versed in your state's Elder care laws is worth the fee.
My grandparents never owned a house; they spent every penny they ever earned. They had no savings for old age. It was a good thing in the end. They both lived a long time, and all they ever paid to the nursing home was their social security checks.
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