Applying for long-term care benefits through MassHealth can be a complicated process in part because of the many rules governing how different assets are considered in determining eligibility. As I have discussed before, MassHealth has strict asset guidelines which require applicants to have no more than $2,000 at their disposal while spouses of applicants who are still living in the community can have up to $109,560. In addition to their savings, however, many seniors also have accounts set up for their retirement, such as individual retirement accounts (IRAs) or Keogh pension plans, as well as life insurance policies. In many instances these assets need to be considered when determining MassHealth eligibility.
An IRA or Keogh pension plan will be considered a countable asset by MassHealth in its entirety less the amount of any penalty for early withdrawal. However, if you own a business and have established a Keogh plan for your employees other than your spouse, then the Keogh plan will not be counted by MassHealth. Practically speaking, this means that MassHealth applicants holding either an IRA or Keogh will have to either transfer or spend down these accounts before they will be considered financially eligible.
Life insurance policies are assets that are often overlooked by MassHealth applicants when organizing their estate for MassHealth eligibility. However, if a life insurance policy has a face value exceeding $2,500, then the total cash surrender value of the policy as of the date of admission to a nursing home is considered a countable asset. This can cause problems for the MassHealth applicant, if not planned for ahead of time, because once in the nursing home there are few alternatives to cashing out the life insurance policy and paying it over to the nursing home in order to become MassHealth eligible.
One asset that is not counted for MassHealth eligibility is term life insurance, since it does not have a cash surrender value thus making the asset inaccessible to the MassHealth applicant. In addition, term insurance generally has a designated beneficiary so it will avoid probate upon the death of the insured and be completely clear from the costs of long-term care.