One Medicaid planning strategy available for crisis planning is to purchase an endowment contract.  The purchase should not result in a penalty, since the commercially available contract was purchased for fair market value, and should not be counted as a resource since it has no cash value, and pays a death benefit until endowed.  That result was affirmed by a recent Michigan case.   Mis v. Michigan Department of Human Services (Mich. Cir. Ct., No. 06-23722-AA, March 3, 2007).

Virginia Mis purchased a Single Premium Pure Endowment Life Insurance
Contract for $50,000 from the Employees Life Company. If she died
within five years, her beneficiary would receive only accrued
dividends. If she was alive at the end of five years, she would receive
the $50,000 plus interest.

Ms. Mis applied for Medicaid and the state determined the policy was a
divestment, not an insurance policy. An administrative law judge
affirmed the decision, and Ms. Mis appealed.

The Michigan Circuit Court reverses, holding that under state law, a
pure endowment contract is a life insurance policy. According to the
court, the pure endowment life insurance contract "has no cash
surrender value, is an asset with zero value, and is not a divestment."