Is your Life Insurance Term or Whole Life? Term insurance has no "cash value" as well as some other plans such as Railroad Retirement and Teacher’s Retirement Insurance. The State (the Providers of Public Aid) deem this type of insurance as an "available resource" and will not demand a spend-down, or payback, of the asset in order to qualify for the benefit. However, if your insurance is of Whole Life type (having a cash value), then the policy may have to be cashed-out and those proceeds placed into a funeral trust. In the alternative you may request that an irrevocable (absolute) assignment be made on the policy making the funeral home the beneficiary, this will have the same effect so that your assets can be used for your pre-arranged funeral benefit. Some insurance companies will not accept these irrevocable assignments and choose to interpret the law as finding them to be collateral assignments. To date, this has not been challenged in the Illinois Courts, but these irrevocable trusts are acceptable to the State of Illinois. The only issue you will encounter is that all though your insurance will not prevent you from accepting your PA benefit from nursing home care, the funds will disallow a corresponding Public Aid Burial benefit. But, if you’re lucky enough to have sufficient life insurance to cover your funeral, then the PA burial Benefit of $1,000 is of no consequence.
