Can Medicaid Take A Life Insurance Policy? 
Medicaid allows persons going through a Medicaid spend down to hold onto a certain number of assets -LRB- $ 2,000 for an individual , much higher for a couple . -RRB- $ 1,500 of life insurance cash value in one policy is allowed in addition to that $ 2,000 limit . Let 's assume you are a widowed female in a nursing facility and your private funds are dwindling , so you are getting ready to go on Medicaid to pay your living and health care expenses . You have a life insurance policy with $ 10,000 cash value . What will happen to it ? 1 -RRB- You are allowed a final expense policy , so you could possibly assign that over to a funeral home or put it in a irrevocable trust to be used for funeral expenses . This would most likely be a feasible choice if the face amount of the policy is $ 15,000 or under . 2 -RRB- If the face amount is much larger than the cash value , you might be allowed to take a loan against your policy to get the cash value under the allowed amount , then use the loan to pay for your nursing home costs . That way you can still preserve your policy , even though you will be paying interest on the loan . 3 -RRB- In this example , there is no spouse , but if there was , you could transfer the ownership of the policy to your spouse , as long as it was compliant with Medicaid rules . If you have a disabled child , the policy could be transferred to a trust for them . 4 -RRB- You could convert your life insurance policy to a Long Term Care Benefit Plan that will enable you to keep a portion of the death benefit while legally using the policy to pay for your long term care costs . 5 -RRB- You could liquidate the policy and spend the cash on purchasing an allowable funeral policy or on your medical care . 