While Medicaid is overall beneficial to the grand majority of people, there are complicated rules associated with the program that make it confusing as to whether or not they will take your life insurance after death. How can one plan for the future without being fully aware of what can happen to their life insurance policy? Can Medicaid really take my life insurance policy after I was to pass away? In this article, we will discuss some common concerns about Medicaid and life insurance policies and address some potential questions you may have about Medicaid and your life insurance. To begin with, there are two primary concerns about Medicaid and life insurance that individuals commonly are unsure about. These concerns usually pertain to two commonly asked questions by individuals:

  • Can life insurance prevent me from being eligible for Medicaid?
  • Can Medicaid take any of my life insurance proceeds after I was to pass away?

To begin, we will address whether or not life insurance can prevent you from being eligible for Medicaid.

Life Insurance and Being Medicaid Eligible

medicaid life insuranceWith life insurance and Medicaid, there are two primary issues that come to mind, which are assets and income. These two issues pertain to the following factors:

  • Life Insurance as an Asset and Qualifying for Medicaid – Life insurance qualifying as an asset is entirely dependent on what kind of life insurance that you own. Whether it is a term life insurance policy or a whole life insurance policy can provide two different outcomes. A term life insurance has absolutely no cash value, which will not count as an asset. A whole life insurance policy has a cash value and can count as an asset. If your overall cash value puts assets above the Medicaid resource limit, then that could potentially make you ineligible for Medicaid.
  • Life Insurance Proceeds and Medicaid Benefits – Receiving life insurance proceeds in the past could have potentially made you ineligible for Medicaid benefits – only if the proceeds took you over the income limit. Although there are many types of non-taxable income that did count toward Medicaid/CHIP eligibility before MAGI (modified adjusted gross income), MAGI does not count most non-taxable income, which also includes life insurance proceeds. With that being said, it is hard to determine exactly what the future will hold in terms of assets, income, and Medicare eligibility. This is mainly due to the debatable topic of the Affordable Care Act, which leaves the rules of life insurance and Medicaid in an awkward state.

Life Insurance and Medicaid – Can They Take My Estate Proceeds?

With this being another commonly asked question – yes, Medicaid can take away life insurance proceeds after you pass away. This is if you are 55 years old or older, which then allows the Medicaid program to go ahead and take money from your proceeds and pay back the program for any benefits that you may have received during your lifetime.

This is what they label as “estate recovery” and if Medicaid put down money for you to be within an assisted living facility, then the state program will then require your estate to pay back those funds. You can also expect Medicaid to try and recover other funds from your estate such as any debt from hospital bills, prescriptions, and home-based services. With all of this being said, there are ways to help protect your life insurance policy proceeds from being taken by Medicaid.

How to Prevent Your Life Insurance Policy From Being Taken by Medicaid

The most advantageous option and advice would be to make sure that your estate is not the beneficiary of your life insurance policy. The Medicaid program will seek to take money from your estate, and this cannot be conducted if you choose to change the beneficiary of your policy. Therefore, instead of listing your estate as a life insurance beneficiary, list any individual or individuals that you wish to receive your life insurance policy proceeds.

Also, there are limitations as to what Medicaid can withdrawal from your estate. States can elect not to take money from an estate, which would usually only happen if the state determines that taking money from the estate would lead to hardship on survivors or it is not considered cost-effective to pursue any benefit reimbursement from the estate. Either way, there are ways to protect your proceeds from being taken by Medicaid, in which you list an individual or multiple individuals to receive your proceeds instead of your estate.

While this article can provide insight into any potential questions asked, it is also advised to meet with an elder law attorney before deciding to make any decisions about Medicaid or your life insurance policy. Your state may handle Medicaid different from others, which is why it is a must to meet with someone before making any permanent financial decisions.


  1. My sister in law passed away in June. She was on Medicaid. She had a term insurance policy with no cash value given to her when she retired. Can Medicaid take that policy on estate recovery. There was no beneficiary designated. My wife is the power of attorney. We live in NJ.
    Thank you.

    1. Hi Bob,

      If the estate is the beneficiary of the policy (which is true if no beneficiary is named), it is possible that Medicaid will take the value on estate recovery. Check with a lawyer or CPA to confirm your specific circumstances.

  2. My Mother passed away on August 19th. She was a Medicaid recipient via the Qualified Trust (QIT) program. She had a Group Life Insurance policy with her employer for which I was named beneficiary. I plan to use this money for her burial. If there are any monies left over, will Medicaid request the remaining money if I am listed as the beneficiary? I live in New Jersey. Thank you!

    1. Hi Robin, this is getting away from a life insurance question and into a question of estate recovery laws. Just like with divorce, bankruptcy, court rulings, IRS liens, and other specific legal situations, the rights of certain parties to seize other parties’ assets is highly nuanced and dependent on the exact situation and laws governing them. You will need to speak to an attorney, unfortunately. In general terms, New Jersey does allow for medicare estate recovery, and they may have a right to the money paid out. There are however several exceptions. You can read about estate recover in new jersey here.

      1. My mother was forced into a nursing home by PACE,in Councilbluffs,Iowa, they threatened to take her Medicaid, she passed in 2018,her 3 daughters,Im one of them,had policies she bought for us throughout her life,the nursing home,or medicaid took our money from these policies,I didnt sign anything,is this legal?

        1. Yes it may be. Check with an attorney to be sure.

    2. We live in Wisconsin. Our daughter has a terminal disease and unknown life expectancy. She just started on Medicaid July 2019, being 19 yrs old, she is unable to work.
      We have life insurance on all our children. I believe my husband & I we’re listed as beneficiaries, but God forbid this happens any time soon, will the state take the life insurance money since she is on Medicaid?

      1. I’m very sorry to hear about your daughter’s illness, and I hope she is able to live a long happy life. I don’t believe they will be able to since your daughter is not in long term care, and the life insurance will not flow through the estate since you are listed as beneficiaries. I can not give legal advice though, and you should contact an attorney to ask this question.

  3. I am receiving Medicare and Medicaid i have been informed by life insurance that i will receive a check from my husband’s who passed away 2 yrs ago will it affect my Medicare and Medicaid??

    1. Hi Eugenia. This sounds like a simple question, but it is highly complex. The short answer is, it may affect your benefits. You will need to speak with an attorney about your specific situation.

  4. My sister in law is in a nursing home and is receiving Medi-cal benefits. She has a $10,000 policy that my husband, her brother, has been paying for several years. Her brother is the beneficiary, but not part of her estate, as she has no estate. Can the state of California take the money when she passes away?

    1. Hi Gillian. Since we are not lawyers, we can not provide legal advice on your specific situation. However, you can review the estate recovery laws in California for Medi-cal benefits here As you can see, for members who die after January 1, 2017, recovery will be limited to portions of the estate that pass through probate. Life insurance death benefits with named beneficiaries do not pass through probate, but if no beneficiary was named, it would pass through probate and be subject to estate recovery. Keep in mind that with anything legal, there are exceptions so please consult with an attorney.

  5. If I have a life insurance policy and have medicare & medicaid will they take it from my children who l left beneficiary? I live in NY. Should I put one of my children as ownership?

    1. Hi Paula, you should contact an attorney. In general, your best bet to avoid estate recovery is to name a beneficiary so that the money is not paid directly to the estate. An ownership transfer also may make the payout taxable, which is not ideal. Estate recovery and taxation are two complex fields that require expert advice from someone bound to you as a fiduciary.

      1. My father is in a nursing home and will be applying for Medicaid. It was suggested that ownership of the policy be transferred and I, his daughter, should become the beneficiary. My mother, his wife is living also. Im not clear on why or to whom ownership should be transferred, to my mother? What happens when it’s transferred? We are in NY. Thank you.

        1. You should definitely consult an attorney on this issue. The key for estate recovery is to have a beneficiary named. I don’t know about whether or not your mom can own the policy.

  6. My uncle was on Medicaid. He left a life insurance policy to my dad, but he has since passed, which makes me next in line to get it. After his death the state put a lien on his estate, in which he had nothing-no home, no property, no kids or wife, in order to collect money from his stay in a nursing home and care. I wrote a hardship letter and was turned down. The amount is only 14,000. Now they want to take all of it, leaving none for family. I still don’t know how they can take it? They said I could appeal and am looking into it, but it would cost more for an attorney than the money is. Thoughts?

    1. Hi Bill. I wish that I had a better answer for you. If the laws in the state of jurisdiction allow for this type of estate recovery you probably don’t have a case anyway. The difficult part to reconcile is that if your uncle had changed beneficiaries from your Dad to you, it wouldn’t be subject to recovery on his estate. My advice would be to call a highly reputable lawyer and discuss the situation. See if he thinks that you have a chance to win the case, and set a maximum dollar amount that you will be willing to spend to do it. As you say it is a small policy so it probably isn’t worth retaining legal services. You can try to appeal without an attorney since you have nothing to lose. Good luck.

  7. Hi,
    In 2014 I opened a small whole life Insurance policy for my mother. I am the policy owner and she is considered the insured name on the policy. This past spring she became long term care in a nursing home. We live in Massachusetts and from what I am reading online is that Medicare can only use whole life insurance as an asset if my mother was the policy owner. Is Medicaid entitled to the cash value of the whole life insurance policy?

    1. Hi Matt. No, they are not entitled to the proceeds assuming the situation is as you describe.

  8. My mother was on Medicaid in a nursing facility and passed. After her death we found a very small life insurance policy ($4,000.00) with the four children named as beneficiaries. Will Medicaid contact us for recovery? It was not left to her estate as there is no estate.

    1. Probably not, but you will need to research the laws in your state.

  9. Lisa A Blanchard

    My mother has a permanent life insurance policy for her sister(my aunt)she was in a nursing home for a while until my sister discharged her and is now has her living with her & receiving pay through a program associated with medicaid. My mother has since passed away but always had me listed as the beneficiary because my aunt does not have any children and never married, can medicaid take over the policy, the amount is $7,000 my aunt lives in New York & I luve

    1. Please consult an attorney. Most likely they can not from the sounds of it.

  10. My mother passed away in December and we have been informed that her estate is responsible for paying back Medicaid assistance paid for the care of her second husband. He passed away in 2012. My mother had a life insurance policy with my sister as the beneficiary. Can Medicaid claim that money even though the estate is not the beneficiary? We live in Minnesota.

    1. No they can not, because a beneficiary was named it avoided being a part of the estate.

  11. My mother has 2 Universal Life Insurance Polices. She has listed 3 children to split the money upon her death. We have had to put her in a resthome and we are getting ready to apply for medicaid. Can Medicaid take the Money & Polices ? I am in North Carolina. Thanks so Much !!!

    1. Usually, if a beneficiary is named the benefits avoid estate recovery. Double-check with an attorney.

  12. My mother is in a NH for long term in Kentucky. and has applied for Medicaid which is on hold because she has 2 insurance policies totaling $10,000 for her burial. with myself and my brother are listed as beneficiaries can the deny her Medicaid? and what happens to her policies

    1. Andrew @ LifeAnt

      Hi Barbara,
      If those policies are term policies, then she should be fine, since term policies have no cash value. If they are whole life policies, then it’s possible that there could be a problem and either Medicaid would deny her or she would have to surrender those policies.

  13. Both my husband and myself are cancer patients in and out of treatment but doing fairly well. As of today no life insurance. Is there a term policy available with our health history and if we name children as beneficiaries is the payout safe from estate recovery in Wisconsin?

    1. There are guaranteed issue policies available to you. See our write up here Guaranteed Issue Life Insurance Explained, and give us a call or fill in our quick form if you want to discuss this further. Thank you!

  14. A friend of mine died that was receiving medicaid. Medicaid has approved to pay for his funeral. However I just found out their childrens mother has a life insurance policy she has been paying on and has herself as beneficiary. I would like for her to keep what she has for her children. can the medicaid be used for funeral

    1. I don’t understand the relationship between those statements. If they are not married their finances should not be related. Can you elaborate? She should name the children as beneficiary if she has not, and if she intends the money to go to them without being subject to Medicaid Estate Recovery.

  15. I have medicare and medicaid. I live in Tennessee. My daughter is my beneficiary. It has a cash value. Should I cash it in and use it to prepaid for funeral. Will Medicaid take the cash value from me.

    1. Yes I believe that they will. You should consult with an attorney about whether or not you can transfer the value of the policy to your daughter now, or if you are better off naming her beneficiary and holding the policy. You may also be able to transfer ownership of the policy to your daughter.

  16. Christopher Swierczek

    my mom passed this month and was in a nursing home on Medicaid, i found a life insurance policy that iam named the beneficiary on for 8000 can they come after that?

    1. Andrew @ LifeAnt

      Hi Christopher,
      If you’re the beneficiary, then no, Medicaid wouldn’t take that away. She was the one paying the policy and designated you as the beneficiary, so you are the owner of that money now. You shouldn’t have any problems with Medicaid on that and can collect the benefit.

  17. I am 73 years old, widowed and renting in Ohio. I want to buy myself a 10 or 15 year term life insurance policy with my two children as beneficiaries. If I have to go into a nursing home in the future, use all of my savings to pay for it and have to go on Medicaid, can Medicaid take the proceeds of that term life policy from my children in a “recovery” action?
    Thank you for your help.

    1. It depends upon where you live, but in most states the answer is NO

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