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Small Life Insurance Policies Complicate Medicaid Eligibility

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MAY 28, 2001 VOLUME 8, NUMBER 48

Elder law attorneys often discuss characteristics common to the older individuals they deal with. Clients frequently show up early for appointments, are unflaggingly courteous and pleasant to deal with, and seem to enjoy talking about their families and travels.

One other common characteristic, perhaps arising from a Depression-era concern for such things: older clients often have several small life insurance policies, usually policies they have held for decades. Unfortunately, those policies can sometimes complicate matters when clients require nursing home care.

Franklin Miller was such a client. When the Tennessee man was admitted to St. Francis Nursing Home in Memphis in 1997, he owned four small life insurance policies. He had bought the insurance starting in 1953, and the newest policy was already 32 years old.

Mr. Miller’s assets were limited, and the monthly cost of nursing home care was eating into his small estate rapidly. His wife Nona Miller filed an application for assistance from Tennessee’s Medicaid program, which subsidizes nursing home care for those who qualify financially for assistance.

Unfortunately for Mr. and Mrs. Miller, Medicaid considers the value of life insurance policies as an available resource. Upon Mr. Miller’s death the four small policies would pay a total of less than $15,000, but the Medicaid agency decided that the cash surrender value of the policies prevented him from qualifying.

Medicaid eligibility rules are complicated when it comes to life insurance. If the maximum amount payable on death of the policyholder is less than $1500, the value of the policy can be ignored in calculating eligibility. If the total “face amount” of insurance exceeds that small figure, however, the cash value of life insurance must be determined. Even small life insurance policies frequently must be liquidated before nursing home residents can qualify for Medicaid.

Mrs. Miller appealed the Medicaid determination in her husband’s case. She successfully argued that there was no evidence of the cash surrender value Mr. Miller’s life insurance policies, or even whether they had any cash surrender value. In the absence of that information the Medicaid eligibility worker had simply applied a rule laid out in the state’s Medicaid eligibility manual, and had estimated the policies’ value at 60% of the death benefit. That, argued Mrs. Miller, was not an acceptable way to determine her husband’s eligibility for government benefits.

The Tennessee Court of Appeals agreed. Mr. Miller’s life insurance could not be counted against him, ruled the Court, especially if based on a state policy manual rather than actual evidence. Miller v. Department of Human Services, March 5, 2001.

Although the final outcome was favorable for Mr. and Mrs. Miller, Medicaid eligibility took over three years to establish, and another year to confirm. Mr. Miller did not live long enough to see benefits. He died a year before the initial ruling in his favor, and two years before the Court of Appeals confirmed that result. Meanwhile someone–Mrs. Miller, friends and family or the nursing home itself–paid the costs of Mr. Miller’s care for the last two years of his life, waiting for a determination of whether Mr. Miller had bought “too much” life insurance.

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Robert B. Fleming


Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman


Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson


Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

Famous people's wills

Matthew M. Mansour


Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.