How Reverse Mortgages Can Affect Medicaid and SSI Eligibility: What You Need to Know

May 13, 2024

When choosing a payment method for a reverse mortgage, borrowers should be aware that the loan proceeds can impact their eligibility for Medicaid or Supplemental Security Income (SSI).

Individuals aged 62 and older who are considering a reverse mortgage to supplement their retirement income should carefully evaluate how this decision may affect their access to needs-based programs.

Table of Contents

• How Reverse Mortgages Affect Public Benefits and Needs-Based Programs

• Frequently Asked Questions About Needs-Based Assistance

• Understanding Means-Tested Benefits

• Medicaid and SSI Income Limits Explained

• Medicaid Asset Limits: What You Need to Know

• Supplemental Security Income (SSI) Income Limits Overview

How Reverse Mortgages Affect Public Benefits and Needs-Based Programs

Program	Impact of Reverse Mortgage	Notes
Social Security Retirement Benefits	No Impact	Reverse mortgage proceeds usually do not affect Social Security retirement benefits.
Medicare	No Impact	Medicare is not a means-tested program; reverse mortgage proceeds generally do not affect eligibility.
Medicaid	Potentially Impacted	Loan proceeds may count as assets if not spent within the same month, potentially affecting eligibility.
Supplemental Security Income (SSI)	Potentially Impacted	Reverse mortgage funds could be considered a countable resource, affecting SSI benefits.

This table includes columns for the program (e.g., Medicaid, SSI), the impact of a reverse mortgage on that program, and additional notes for context. It's important to note that the specifics can vary based on individual circumstances, and this table provides a general overview.

Frequently Asked Questions About Needs-Based Assistance

How does a reverse mortgage affect Medicaid?

Medicaid is a “needs-based” program. Verifying your benefits with a financial advisor is important to ensure they remain protected. While having loan funds available from a reverse mortgage won’t impact your Medicaid, having too much money in your account at the end of the month might. Make sure to manage your funds carefully to avoid exceeding Medicaid asset limits.

Can a reverse mortgage affect Social Security or Medicare?

No, Social Security and Medicare are not “needs-based” programs. Borrowed loan funds from a reverse mortgage will not affect your access to these programs.

What happens to a reverse mortgage when the owner enters a nursing home?

If the homeowner with a reverse mortgage permanently leaves their home, the loan becomes due and payable. You can be away for up to 12 months for health reasons before the absence is considered permanent. If it’s known that the move will be permanent before the 12 months are up, you or your family should start making arrangements to repay the loan or sell the home.

Does a reverse mortgage count as income?

No, reverse mortgage proceeds are borrowed funds and are not considered income. However, you should consult your accountant because if the borrowed loan proceeds are never repaid and the lender cannot recover the amount from the sale of the property, it could create a taxable event for the estate. Your accountant will advise you on what to do for tax purposes.

Can I request a paper check from my reverse mortgage to avoid running proceeds through my bank account?

Yes, you can receive your funds via direct deposit, which is quicker, but you can also request a check to be mailed to you. The check would be made payable to all borrowers on the loan.

Understanding Means-Tested Benefits

Means-tested benefits are based on an individual’s income and assets. According to the NeighborWorks HECM Counseling Training Manual, reverse mortgage loan advances held in the borrower’s bank account may be counted as assets, potentially disrupting eligibility for these benefits. This manual, used nationwide by certified reverse mortgage counselors, helps inform borrowers about the loan and its potential implications.

Borrowers who choose the lump sum payment option face a high risk of losing eligibility for means-tested assistance, as they are more likely to retain the loan proceeds in their bank account. This retained money is viewed as an asset, which can affect eligibility for programs such as Medicaid and Supplemental Security Income (SSI).

Understanding how reverse mortgage proceeds impact means-tested benefits is essential for making informed financial decisions.

Medicaid and SSI Income Limits Explained

Asset-level limits are crucial for both Medicaid and Supplemental Security Income (SSI). When taking out a reverse mortgage, borrowers can access their home equity through a line of credit, a lump sum, monthly payments, or a combination of these options.

For those eligible for or receiving government needs-based benefits like Medicaid and SSI, choosing the lump sum payment option from a reverse mortgage may not be the best route. Most needs-based programs consider both income and assets to determine eligibility for assistance. While reverse mortgage proceeds are generally not considered taxable income, an unspent lump sum can increase a borrower’s assets beyond allowable limits.

Medicaid and SSI consider all assets, including funds in a bank account, when determining eligibility. Therefore, beneficiaries must understand how receiving and managing reverse mortgage proceeds can impact their eligibility for these programs.

Medicaid Asset Limits: What You Need to Know

Medicaid is a needs-based program that takes into account a senior’s income and assets. These limits vary by state, but in 2024, the typical asset limits for Medicaid benefits were $31,175 for individuals and $42,312 for couples. However, some states may have more generous limits or different criteria.

Receiving a lump sum from reverse mortgage proceeds can impact Medicaid eligibility. According to NeighborWorks, seniors who receive a lump sum from a reverse mortgage may lose their Medicaid eligibility unless that money is spent immediately. Medicaid recipients must also meticulously track all cash inflows and outflows in their bank accounts.

Given these complexities, seniors must understand their state’s specific Medicaid rules and how a reverse mortgage might affect their eligibility. Consulting with a Medicaid planner or financial advisor can provide personalized guidance.

Supplemental Security Income (SSI) Income Limits Overview

SSI, a federal program designed to support the elderly and disabled, has specific income and asset limits to qualify. For 2024, the income limit is $1,732 per month for individuals and $2,351 per month for couples.

A reverse mortgage can be an effective way to increase cash flow. However, receiving a lump sum from a reverse mortgage might disqualify individuals from SSI in many states, as it can push their assets above the allowable limits. This is because funds from a reverse mortgage are considered part of the borrower’s assets.

Before deciding on a reverse mortgage, it is essential to research state-specific requirements and understand how the proceeds will affect eligibility for SSI and Medicaid. Each state has different rules, and understanding these can help in making an informed decision.

Please note: Medicaid and SSI are needs-based programs and should not be confused with public benefits like Social Security and Medicare. Reverse mortgage loans do not impact your public benefits.

Reverse Mortgages and Affect Social Security & Medicare

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Have a Question About Reverse Mortgages?

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Post your question in the comments below and anticipate a personalized response from Mr. Branson himself, typically within one business day. He's here to illuminate all angles of reverse mortgages, ensuring you're equipped with the knowledge to make informed decisions. Take this opportunity to gain insights from a seasoned professional.

48 Comments on this Article

Sharon
May 20th, 2024

Our mom is in a nursing home being paid for by Medicaid. A sibling wants to buy a house that has a reverse mortgage. If the sibling pays off the reverse mortgage and then establishes a new mortgage for the house, will there be negative consequences for mom's Medicaid? Will it show as income to her bank account?
Reply to Sharon
- Michael Branson
  May 25th, 2024
  
  Hello Sharon,
  
  I cannot give you Financial or Legal advice. You should speak to the program administrator to determine what might affect her Medicaid benefits. As far as I know (and I think you even mentioned it), the benefits are determined by a review of her bank account balance. If that's the case, you need to make sure that your brother's purchase of the home does not result in a large increase in that account. As far as I can see, paying off a loan and taking out a new loan in your sibling's name on a property that no longer belongs to your mom does not affect that bank balance. However, If the sibling pays mom $200,000 and suddenly the account has $200,000 in the account, I would think that would be a different story.
  
  I am sorry that I cannot help you with this more, but you really need to find out what makes your mom eligible for the program in the first place, and that can only come from the administrators at Medicaid. You may want to talk to a financial advisor who is knowledgeable about her program parameters as well, but not to a reverse mortgage company.
  Reply to Michael
Judi
May 13th, 2024

Do you have to have proof, such as receipts for monies drawn and spent from your reverse mortgage, added to your checking account for Medicaid?
Reply to Judi
- Michael Branson
  May 13th, 2024
  
  Hello Judi,
  You should always discuss program requirements for needs-based programs with the program administrator before you get the loan, but I believe you will find that your Medicaid qualification relies solely on the balance in your account at month end. This would mean that you must be careful to only take any take draws you need in the month you need it and be sure to spend the money and have it back out of your account before month end. What you don't want to do is endanger your benefit by allowing borrowed funds to accumulate in your bank account while you are waiting to complete a repair, etc.
  It takes some planning, but if your statement is prepared at the first of each month, just be sure to never take a draw after the middle of the month and then make sure any checks you write are cashed immediately. You just don't want those funds still in the account at the time your statement is prepared by the bank as it artificially raises your balance and makes it appear as though you no longer qualify for the program. And again, be sure that you understand the rules for your needs-based program so that you do not accidentally invalidate your eligibility.
  Reply to Michael
Rebecca
November 19th, 2023

My mom's significant other for 21 years (unmarried) Added her name to the title, and they both are borrowers on the reverse mortgage loan. She is on Medicaid in California, and he is not. He has a small pension and social security. Can the government or state take the house from him if she were to pass before him? They are diligently meeting all requirements to keep home now.
Reply to Rebecca
- Michael Branson
  November 19th, 2023
  
  Hello Rebecca,
  
  This is not a question of the reverse mortgage lender but a question you must ask of an estate attorney. The reverse mortgage will certainly not become due and payable, and either of the two can remain in the home even if one or the other passes since they are both on title and both on the loan. The reverse mortgage will remain valid and in effect as long as at least one of the original borrowers or an eligible non-borrowing spouse is still living in the home and the terms of the loan are being met (taxes, insurance, and any other obligations are being paid and the home is maintained reasonably).
  
  To determine the rights of Medicaid in your state, you need to speak with an attorney who routinely works in this area of the law. Medicaid is a "loan" to be repaid by the estate to the extent possible with the individual passes. Still, I have never heard of Medicaid or any assistance program attempting any recovery from an estate when there is more than one person on title, and there are still people living in the home. I am not an attorney and cannot give you any legal advice. I honestly do not know what possible and what Medicaid prohibits. Not only do I not know the laws, but our mortgage licensing laws also prohibit us from giving legal advice, so even if I thought I knew the answer (which I do not), I could not.
  
  I recommend contacting an attorney in your area who can answer your questions about the Medicaid process and their ability to recover from an estate. There is a lot of information about this on the internet, but each state operates its own Medicaid program under a general set of rules established by the federal government but with specific state rules. For this reason, I would not want to direct you to a general source that may not know all the answers for your state. If you feel that the cost of an attorney is out of your reach at this time, you may be able to find free legal aid available in your area as well. This really should not be a difficult question for anyone who works with legal services for seniors to answer.
  Reply to Michael
Allyson D.
October 26th, 2023

Hello,

My name is only on the deed, and my husband and I are separated. I also have a mortgage that I am paying. I am disabled and on SSDI and receive a pension from my job. Does he have to be notified or a part of the process if I am accepted? He has not lived here for over two years. We are going to divorce eventually. Please advise.
Reply to Allyson
- Michael Branson
  October 26th, 2023
  
  Hello Allyson,
  
  If you are still legally married, then yes, he must be notified and there are some things he must be part of. Since he is not living in the house and you own the home on your own, he does not need to be a borrower on the loan but until you are fully divorced, he does have some participation in the loan as an ineligible non-borrowing spouse (separated is still your spouse).
  Reply to Michael
Katie
August 15th, 2023

Hi Arlo,

Thanks for the informative article. My uncle recently passed and was a Medicaid recipient with a reverse mortgage on his home in Virginia. Medicaid has submitted a request for repayment. The combined cost of the Medicaid claim and the reverse mortgage exceeds the home's market value by about $180,000. DMAS in VA can place a lien on the property for the amount of the Medicaid claim.

If this happens, what is the order of payment to creditors? Would Medicaid/the lien be satisfied before the reverse mortgage is paid, or would the mortgage loan be paid first, leaving the estate insolvent for the remaining $180,000 Medicaid claim?
Reply to Katie
- Michael Branson
  August 15th, 2023
  
  Hello Katie,
  The reverse mortgage has a prior lien position, so Medicaid, like any other junior lien holder, can only step in after the mortgage has been satisfied. I am assuming that you have no intention of selling the property because either way, lien or no lien, there is no equity in the home, and a sale would be futile. If the property goes to a foreclosure sale from the reverse mortgage, the only way that any junior lien holder would be able to collect would be if someone bid higher than the opening bid of the reverse mortgage lender, which would consist of the outstanding balance plus accrued interest, MIP, any amounts paid on behalf of the owner by the lender or HUD (i.e., if the lender or HUD had to advance insurance or taxes to protect their interest in the property) plus any costs incurred with the foreclosure. If another party bids higher than the opening bid from the foreclosing lender, anything above and beyond the amount owed to the lender would go to the homeowner or any other lienholders and then to the owner. You said the combined costs of the reverse mortgage plus the Medicaid expenses exceed the home's value by $180,000, but if the reverse mortgage plus costs alone equal or exceed the value, there is nothing left for Medicaid or any other buyers to seek after the amount owed to the reverse mortgage lender.
  That leaves you with a few scenarios. If the reverse mortgage balance alone is equal to or greater than the property value, the odds are that no one else will bid at the auction and pay more than fair market value to retire the reverse mortgage, let alone the reverse mortgage and any other liens. In that case, I doubt that Medicaid would even record a lien. If the balance is lower than the property's value, Medicaid could file a lien, but that still does not protect them if the underlying lender files a foreclosure. If the reverse mortgage lender forecloses and no one bids higher (there is no money due to the homeowner or any junior lienholders after the sale, it all goes to that lender), the junior lose their security in the property. There would be no funds to pay them as there would be no excess proceeds. To protect their equity, they would need to cure the default on the underlying lien or pay it off and sell it themselves. The default on the reverse mortgage is that the borrower no longer lives in the home, so they cannot cure the default by paying past due amounts (the borrower no longer lives in the home as his primary residence), so the foreclosure would continue. There is no way to stop the foreclosure by the junior lienholder.
  Reverse mortgages are non-recourse debt, which means that if the property sells at a foreclosure sale. That is just one of the good things about the mortgage insurance borrowers get with reverse mortgages. As far as Medicaid is concerned, though, I am not an attorney. I suggest you contact an attorney specializing in this area for Virginia to determine what, if anything, you should do now to get everything in order.
  Reply to Michael
Sandy H.
March 15th, 2023

Medicaid estate recovery applies to everyone who has used these benefits after the age of 55. A power of attorney is required to notify the state attorney general office to recover all monies due from the use of Medicaid. Does this happen before the reverse mortgage gets paid back or after leaving all other assets to repay Medicaid?
Reply to Sandy
- Michael Branson
  March 15th, 2023
  
  Hello Sandy,
  
  I think you really need to speak with a financial advisor or your estate attorney to figure out how this will work for your circumstances. I am not licensed to give this type of advice and in all honesty, not trained in these programs and would not want to advise you incorrectly.
  For instance, I do know from the little I have read about this topic that there is a lot of concern about people trying to find ways to avoid the payback and so Medicaid, Medical, and other needs-based programs that are required to utilize estate recovery programs often use different rules for waivers and exemptions as well as "look-back" rules to prevent people from being able to circumvent recovery.
  Furthermore, I wonder if a loan/lien, even if recent, would affect this process or not. I am unsure how the timing would involve a reverse mortgage vs. any other loan or if you are asking about any specific state or federal. Still, if you are looking for information about national, the website to begin your search is https://www.medicaid.gov/medicaid/eligibility/estate-recovery/index.html. Forms are also listed online.
  For instance, California is https://www.dhcs.ca.gov/services/Pages/TPLRD_ER_cont.aspx, and you can find any other state simply by typing "Medicaid estate recovery program" followed by the name of the state for which you are inquiring. I wish I could be of more assistance, but I don't want to lead you astray.
  Reply to Michael
Cathy O.
January 12th, 2023

Hi Arlo,

My brother who is on Medicaid and SS disability is presently living in my parents home. The house is still titled in their trust (they are both now deceased). Does the house need to be in his name to apply? Would he lose his Medicaid benefits if he puts the house in his name? The purpose of the loan would be to buy out the other two siblings.
Reply to Cathy
- Michael Branson
  January 12th, 2023
  
  Hi Cathy,
  I cannot give you accounting or legal advice and you and your family really need to talk to the administrator of the program for your brother's Medicaid to determine the benefit eligibility but please allow me to explain what I do know for sure and what I do to help you seek out the correct people to ask. The reverse mortgage is due and payable when the last borrowers on the loan are no longer living in the property.
  Once the lender realizes your parents have past, they will call the loan due and payable, and it doesn't matter if the title has been changed or not. Therefore, the sooner the family can determine what they want to do with the home and pay the reverse mortgage off the better (always easier to do it in your own timeframe and on your own terms than after a notice of default has been filed and a foreclosure has been started).
  
  About his benefits, you really should talk to a representative of the administrator to determine what the program requirements are. For example, when we speak with borrowers looking into reverse mortgages, most find with their needs-based programs, that they cannot have more than a certain amount of money in the bank each time a statement is prepared.
  The fact that they have a loan they can draw from when needed is not an issue for most if they do not draw from the loan and leave the cash in their account at the end of the month when their statements are produced. If they draw money and use it as needed then their balance is back down under the threshold for the program by the time the statements are printed, they are fine.
  The programs typically do not penalize people for taking borrowed funds to live but again, I cannot assure you of anything for your brother because I cannot advise people on those programs, and I have never seen his information even if I could. I can only tell you that you should speak to the administrators because it has been reported to me that it did not affect others with similar benefits if they were careful to stay withing the parameters of the program requirements.
  
  About the house being in your brother's name to apply, that would depend on the loan he was attempting to obtain. And are we talking about him receiving his own reverse mortgage or a conventional loan? There may be restrictions on the amount of money he can receive in a lump sum on the home depending on the type of loan he is attempting to close as a reverse mortgage would not give him access to 100% of the available funds in the first 12 months unless he was paying off existing liens.
  If he is applying for a reverse mortgage, the trust would need to be distributed and he would need to have the title in his name prior to starting the loan. I cannot speak for what other lenders may or may not require though for other loan types.
  Reply to Michael
Teresa
December 13th, 2022

Can the payment and interest that is charged be considered as a house payment when applying for the Snap program?
Reply to Teresa
- Michael Branson
  December 20th, 2022
  
  Hello Teresa,
  
  I would doubt that the program would allow you to consider interest that accrues but is not paid when considering an individual's monthly obligations, but I would highly suggest that you contact the administrator of the SNAP program in your area to request the answer to this question.
  As you are aware, the SNAP program is the Supplemental Nutrition Assistance Program and it is the nation's largest anti-hunger program, formerly known as the Food Stamp Program.
  The program is a "needs-based" program which is available to those who have a demonstrated need based on low incomes. Because this is an important issue that can affect you or the individual who needs the assistance, you should not look to a reverse mortgage company who does not administer the program for your answer in the off chance that they may get it wrong.
  Contact the SNAP program administrator in your area to discuss your specific circumstances and what may or may not be taken into consideration.
  Reply to Michael
Michael Branson
August 19th, 2022

Hi Arlo,

How will a reverse mortgage line of credit affect my MediCal and Calfresh benefits?
Reply to Michael
- Michael Branson
  August 19th, 2022
  
  This is a question for your medical and cal fresh coordinators. I believe your benefits are needs-based and depend on you not having more than a predetermined amount of liquidity in the bank, correct? If so, you can get a reverse mortgage and make sure you do not ever endanger your benefits by never taking more money than you need and will spend in the same month. For example, if you need $500 to repair something in your home, you can take a draw but pay for the repair before the end of the month so that the funds are not still in your account at month end when your next bank statement is prepared. That way, you had $1,000 in your account in May, you took a draw to fix your plumbing but still only had $1,000 in June.
  But you need to speak with the people who coordinate your programs. Make sure that this is how your programs operate, directly from them, before you get the loan. A reverse mortgage is not an asset and does not affect your qualification for needs-based programs but if you begin to accumulate cash in the bank, that will affect your qualification, so you need to be sure you understand how your program works and you do not adversely affect your eligibility.
  Reply to Michael
Kimberly B.
August 16th, 2022

Hello Arlo,

An elderly woman took a reverse mortgage out several yrs. ago, she also has her 2 disabled daughter's also over 65, and a 12 yr. old grandson all living in this house. Mom is ready for assistive living but is afraid to leave due to fear of her daughters would have no place to live alongside the grandson. Both daughters are on SSI, so their income falls below poverty. Would the daughters be able to stay in the home if their mom leaves? Kim
Reply to Kimberly
- Michael Branson
  August 16th, 2022
  
  Hello Kim,
  
  If the daughters are also on the loan, then they can stay in the home for their lifetimes as well. If they are not, then unfortunately, the loan would become due and payable after the borrower permanently leave the property. The reverse mortgage is not and never was intended to be a multi-generational loan.
  It simply doesn't work for mom, then the daughters, then conceivably the grandson to continue to live in the home with the same reverse mortgage ad infinitum. The two daughters, if both over 62 can qualify and get a reverse mortgage of their own but they would need to qualify under the current guidelines with their income (disability can be used) for a new loan.
  Reply to Michael
Judy
May 9th, 2022

Hello Arlo, my husband and I are both on SSI and are pulling our Social Security Benefits (we are older). My question is .... we have a reverse mortgage with set aside money we can pull out. Because we are on SSI will we be asked to pay back any funds we pull from our set aside money?
Reply to Judy
- Michael Branson
  May 10th, 2022
  
  Hello Judy,
  Reverse mortgage proceeds do not affect social security benefits but can affect needs-based programs such as Medicaid, etc. if you have any questions about whether your program requires you to meet certain criteria to remain eligible, you should speak with a qualified consultant familiar with your program.
  Even with a program that you need to supply bank statements to show your assets do not exceed certain levels to remain eligible you can still pull funds from your reverse mortgage, but you need to be sure to take only what you need and use them before the end of the reporting cycle so that when you send your bank statements again your balance is below the required level so that your borrowed funds do not invalidate your eligibility.
  If you just receive regular social security though, those payments are not affected by your reverse mortgage proceeds. As I said though and it bears repeating, we always recommend you verify though if you have any questions at all.
  Reply to Michael
C. Johnson
March 9th, 2022

My Mom passed away and had a reverse mortgage. She used all of the equity. She was on Medicaid and they have a lien on the house for their services. I would like to do a deed in lieu but there can't be a lien against the property. The estate is insolvent. What are my options?
Reply to C.
- Michael Branson
  March 9th, 2022
  
  Good Morning,
  
  You are correct that they cannot accept a Deed in Lieu of Foreclosure as they would "inherit" the Medicaid Lien as well. At this time, the lender must opt for a foreclosure as the junior lienholder, Medicaid, would need to come in and pay off the senior lienholder and then sell the home themselves to protect their lien position if they felt that was beneficial. If not, their lien will be removed with the foreclosure sale.
  So, your option at this point is simple. Remove all personal property from the residence. Call the lender and tell them the home is vacant and that it is not secure and that you are not interested in maintaining or keeping the home, that they should secure the home and begin foreclosure immediately.
  
  The lender should send someone to the house to secure it (change the locks) and begin foreclosure. Once the foreclosure is complete, they will own the home but you are under no obligation to do anything else. The loan is a non-recourse loan which means the lender cannot look to the estate or any heirs to repay the loan or any deficient amounts if the foreclosure sale does not net enough to repay the loan.
  I am not an accountant so I cannot discuss what implications, if any, an insolvent estate might have and it would be wise to discuss with a tax specialist. You need to do the final tax returns anyway so it would be a good time to resolve any other questions you may have.
  Reply to Michael
Brian C.
March 8th, 2022

My wife and I have a reverse mortgage. she is on Medicaid and we need to get a grey divorce to protect assets and to increase our SS benefits by her then applying for benefit based on a previous marriage. Her having to leave the property if I died is not an issue as I am her sole cater so she would have to move into nursing care.

So does a dissolution effect existing reverse mortgage or will it just continue. The dissolution will involve a quit claim deed so there will be no change on the deeds. As long as I live in the property does the reverse mortgage company even care? Thanks for your help.
Reply to Brian
- Michael Branson
  March 8th, 2022
  
  Hello Bryan,
  As long as at least one original borrower is still living in the home and still on title, either of you can leave the home or you can change title to add or subtract people. You just need to be sure at least one original borrower is on title and living in the home.
  Reply to Michael
Violette
July 25th, 2021

Hi, I have a mother who gets $1000.00 social security and I am her care giver.
She needs to have more help to take care of her. She has as house under her name, and it is in trust. Can she apply for reverse mortgage? If she gets reverse mortgage her SSI benefit will be the same or not? We need more money to take care of her. Please let me know, Thanks ARLO!
Reply to Violette
- Michael Branson
  July 25th, 2021
  
  Hello Violette,
  
  Social Security benefits are not affected by reverse mortgages whereas some needs-based programs can be if you allow funds to accumulate in her bank account.
  If she receives Medicaid or other programs where she must supply bank statements to prove she does not have more than a certain amount of money in the account to remain eligible for the program, they you need to be sure you never take too much money from the reverse mortgage at a time and leave it in her bank account.
  It means that you would need to be careful to only draw needed funds from the mortgage at the beginning of the month and make certain they were used and back out of the account before the end of the month or the cycle when her statements are prepared. If this is the case, I would encourage you to seek assistance from a financial consultant to be sure you do not endanger her benefits.
  
  The trust just needs to meet HUD requirements and if it does not currently, there can usually be amendments drawn to allow it to fit into the program parameters.
  It would be best to have the trust reviewed before starting the loan to be certain though because occasionally, we do run into a trust in which the hopeful borrower is not eligible for the loan under the terms of the trust and the trust is irrevocable meaning they cannot make the necessary changes to make it eligible.
  Reply to Michael
laura
March 12th, 2021

I am not at the age where I can do this but I am grateful for this helpful website full of information and explained very well. Thanks again.
Reply to laura
Madeline M.
May 3rd, 2020

I am the sole owner (only my name on the deed) of our house in Mass. My husband is on Medicare and MassHealth. If we both sign the application for a Reverse Mortgage, will any money from a Reverse Mortgage be assessed as income causing him to lose his MassHealth benefits? Also, can we take small amounts of the money as we need it instead of the full amount? Will interest be accrued on that small amount or is it on the whole amount, whether we take it or not?
Reply to Madeline
- Michael Branson
  May 3rd, 2020
  
  Hello Madeline,
  
  Cash you receive from a reverse mortgage is borrowed funds; it is not income. Therefore, any money you draw from the loan is not reported as income and would not affect your benefits if the benefits are dependent on your income not exceeding preset levels.
  Now, having said that, some programs require the recipient to meet certain conditions that are not income related or may include a component that is not part of the income.
  For example, some programs limit the amount of money eligible recipients may have in the bank to be eligible for the program (presumably to prove they really need the program). If you have such a requirement on your program, I encourage you to sit down with a financial counselor to go over your plans to make sure you do not endanger your eligibility.
  
  The problem you could run into if you qualify for the needs-based program and you get a reverse mortgage in such a case, is by drawing funds and letting them accumulate in your account in such a manner that you allow the balance at reporting time to rise above the allowable amount.
  There is no problem having a reverse mortgage, but you must take care so that your draws do not happen at a time in the month or in an amount so that when you must report your liquid assets you do not exceed allowable program limits.
  To answer your other question, yes, you can get a line of credit and only draw money as you need it and then you only accrue interest on the funds you have actually drawn, not the total line amount available to you if you haven't drawn the funds yet.
  This is another good reason to only draw the funds as you need them because it keeps your interest charges down on the loan as well as protecting your program eligibility.
  Reply to Michael
Priscilla
February 12th, 2020

My father is in a nursing home on Medicaid. My mom is on Medicaid and living in their home . I live with mom and my sister. The house is in a irrevocable trust. I am the only trustee. Can I apply for a reverse mortgage or will that jeopardize my parents Medicaid? I do not want to do anything to cause problems.
Reply to Priscilla
- Michael Branson
  February 12th, 2020
  
  Hello Priscilla,
  
  I am sorry, I'm afraid I cannot answer this for you based on the information provided. It sounds like you have several issues and Medicaid may not be the worst of them.
  Borrowers on Medicaid can often still obtain a reverse mortgage but must be wary of not violating the terms that allow them to receive their benefit.
  For example, usually, it is a lack of liquid assets that make a borrower eligible and borrowing money in and of itself does not endanger the benefit whereas having the funds in an account when borrowers have to supply their bank account information might.
  We always direct borrowers to discuss this with their financial advisors so that if they do decide to go forward with a reverse mortgage, they always time their draws so that they make the withdrawal so they have time to receive the money and make needed purchases so that the funds are not still in the account at month end when the bank accounts must be analyzed for eligibility.
  What that amount may be in their circumstances and how feasible this is for them would be a decision they would have to make after careful consideration of all factors.
  Many borrowers on assistance programs are also reverse mortgage borrowers. They just need to be sure they do not endanger their needs-based programs by having excess funds in their accounts which is fruitless since they are borrowed funds, not earned income or gifted funds, etc.
  
  However, you have a different set of circumstances. I cannot possibly know from what you are telling me if the trust would be approved. There are a number of circumstances that would have to be met for the transaction to be viable and the trust would have to meet HUD requirements with you being the Power of Attorney (POA) and mom and dad being incapacitated in order for you to act as that POA.
  There would be doctor's notes required and I could not tell you if your circumstances would meet all HUD requirements at this point. I can tell you though that a lender would be able to answer all these questions quickly after a review of the POA and trust.
  
  The final thing I would caution as well is that as soon as mom no longer lived in the home, that loan would become due and payable. If you and your sister are also living in the property at that time, you would be required to refinance the loan if you wanted to remain in the home or you would have to sell the property.
  If neither happened, the lender would be forced to begin foreclosure. Something to think about, especially if you think it might not be too long before mom also had to enter an assisted living facility.
  Reply to Michael
Michael Branson
November 4th, 2019

Hello Arlo,

Thank you for your very helpful site. Mom's been in her home for almost 50 years. We did a reverse to keep her in it if possible. She's now turning 87 & we are looking at a facility. No longer safe for her to be in her home alone. Cannot afford a full-time live-in caregiver. None of her 4 daughters want the home as their own. I understand if a daughter did, they'd have to pay in full what is owing, correct? Mom is the only one on title and on her loan. We do have POA in place for 2 of her daughters. Question - if we are down to 40k or so in remaining equity can we safely spend it down and not jeopardize her long-term Medicaid care? Sign it over and walk away with the equity spent? - Bank then takes it. I understand it should be empty, vacated and broom clean for Banks possession? thank you for your help!!

Maureen
Reply to Michael
- Michael Branson
  November 4th, 2019
  
  Hello Maureen,
  
  If one of the heirs wants to keep the home, they would have to repay the obligation or 95% of the current market value, whichever is less. The amount available would be based on the amount remaining on her line, not the amount of equity.
  I would suggest you contact a real estate professional to determine the amount the home would most likely sell for and compare to the amount owing on the loan. There may be some benefit to selling the home.
  As far as any other needs-based benefits she may be receiving, I cannot advise you in that regard. You really need to speak to a Medicaid specialist to be certain you do not do anything that would run afoul of their requirements for her eligibility.
  
  The last question you asked was about the broom clean requirement. That is a requirement to do a Deed in Lieu of Foreclosure. If you plan to Deed the property back to the lender, you should contact them in advance to be sure they are able to accept a Deed in Lieu of Foreclosure and what they will require to do so.
  They will have to do a title search and a few other things in advance before they can even tell you this and if you have not presented your paperwork to them to show that you have authorization to speak to the lender on mom's behalf, just the POA will not suffice so you will want to begin that process as soon as possible as well.
  If the lender already has mom's authorization to work with you, you are in a good position to begin the dialogue but I would still contact a real estate professional first so that you know which way is the most beneficial for you to proceed before you ever contact the lender.
  Reply to Michael
Sandra S.
August 12th, 2019

Can a person be removed from a reverse mortgage in order to go on Medicaid?
Reply to Sandra
- Michael Branson
  August 12th, 2019
  
  Hello Sandra,
  
  I am not sure I understand your question. Are you asking if the loan may be paid off so that the borrower can be eligible for Medicaid, if one borrower can be released from a loan keeping the loan active for another person still on the loan or something else? Because the loan can always be paid off at any time without penalty.
  Just like any loan, you cannot "release" a borrower without paying the loan off so it would take a refinance to eliminate one or more borrowers from an existing loan. And I think you should verify that you even need to be removed in the first place.
  It might only need to be a change in the method or amounts of funds that you receive from the loan so that you do not have more than a certain amount of money in your account at any one time. You probably should speak with a financial advisor to determine exactly what you need before making any moves that may adversely affect your situation.
  Reply to Michael
Pamela F.
August 3rd, 2019

Can the bank sell the house if you are on disability and live there?
Reply to Pamela
- Michael Branson
  August 3rd, 2019
  
  Hello Pamela,
  
  Lenders can exercise the terms of the Note and Deed of Trust under which the owner of the property borrows money.
  If you borrow money using the home as collateral and the lender later tries to exercise its right to foreclosure sale due to default, the terms of the loan are not typically changed due to disability.
  However, there are usually programs and other avenues available to owners who find that they need assistance in many areas. If you find that you need such assistance, I would suggest that you contact a HUD counseling agency in your area to request assistance.
  HUD has a site online at https://apps.hud.gov/offices/hsg/sfh/hcc/hcs.cfm at which you can find HUD counselors and the CFPB also runs a site at https://www.consumerfinance.gov/find-a-housing-counselor/ at which you can find counseling services. You might start at one of these places.
  Reply to Michael
JIM
August 1st, 2019

I'm on SS & SSI, Medicare & Medicad & 77 yrs old, no mortgage in MI. Can I obtain a 2nd mortgage (HECM)? Can the lender send a payment directly to creditor(s) without going through my bank account so I technically don't receive the money so my SSI & Medicad aren't affected?
Reply to JIM
- Michael Branson
  August 12th, 2019
  
  Hello Jim,
  All payments must go through the borrower, they cannot go to third parties. However, you should check with the providers of your benefits. Most programs use the balance in the account at the end of the month.
  Any draws you take from the loan at the beginning of the month and use before the end of the month to pay creditors so that the balance in your account remains below set requirements should not adversely affect your benefits under those needs-based programs.
  I would absolutely advise you to verify this with those providers prior to doing anything but I think you will find you will not endanger your benefits as long as you do not let funds accumulate in your account at the end of the month come time of statements.
  Reply to Michael
Cindy
June 25th, 2019

My Father has a reverse mortgage on his home and has recently been declared incapacitated. I am the power of attorney. Is it possible for my husband and I to pay off the reverse mortgage and own the home? Do I need to put my Dad's name on the title? If he ends up using Medicaid, can Medicaid cease the home even if we have borrowed the money to own the home and our name is on the title? I am on his will. Would the home then become mine after he is deceased? Is it possible to be able to rent the home out while he is still alive after having paid off the payoff amount from the reverse mortgage? Thanks for answer all my questions.
Reply to Cindy
- Michael Branson
  June 25th, 2019
  
  Hi Cindy,
  
  I am sorry, I cannot answer most of your questions for you and strongly suggest that contact an attorney for the answers you seek. I can tell you that you can pay off the reverse mortgage at any time without penalty. Whether or not the POA is valid for the transaction will depend on how it is written, whether dad had capacity at the time, etc.
  If the lender already has a copy of the POA and dad sent them notice to accept your direction on his behalf before his incapacitation, there is no problem and they will accept your payment will no questions. If not, they will need additional documentation before they can just accept a POA not knowing if it was signed while dad still retained capacity. They will let you know what they need though.
  
  If dad is still living in the home, you can rent out a portion of the property whether you pay off the reverse mortgage or not. HUD allows reverse mortgage borrowers to rent rooms, etc. if they are still living in the property as their primary residence. Once the loan is paid in full, you and dad can do anything you want with the property even if that means dad will no longer occupy the home.
  
  About the title, the attorney will help you there. I don't know if a POA is legal for something deemed a self-serving act (transferring title to yourself). The attorney can certainly advise you in all matters relating to title and he can make certain that the chain of title will flow to you after his passing as well, especially if you are dad's heir and are paying off the reverse mortgage.
  Talk to the attorney, a will doesn't automatically transfer the title there is usually a probate involved. I can't advise you of Medicaid's rights/abilities, but your attorney can.
  Reply to Michael
J Morgan
February 15th, 2018

A Supplemental Needs Trust can store payments from a reverse mortgage, and the trustee (friend, kid or other legal entity) can dole the $ out for all eligible needs, which can be written to include pretty much anything you might require or desire (within guidelines). Am I right about this?
Reply to J
- Michael Branson
  February 15th, 2018
  
  Good Afternoon,
  We are not attorneys or CPA's and cannot give legal or tax advice. This is a great question and one that you really need to direct to your tax attorney/CPA to determine any tax liabilities. With regard to the borrowers' payments, those payments must made from the lender directly to the borrower(s) or the borrowers' trust that has been approved by the lender as meeting HUD guidelines and that holds title to the property.
  From there, the lender does not monitor what payments are made from the trust monthly.
  Any liability for the use of the funds may go back to the trustee from any other possible heirs so again, this is a question for your competent legal counsel.
  Reply to Michael
Lucy
March 12th, 2017

My sister just entered a nursing home and we must apply for Medicaid long term care. She is co-owner of the family home with my brother. There is a reverse mortgage on the property and it is for sale. Will this disqualify her for Medicaid eligibility and will she incur a penalty if the house sells?
Reply to Lucy
- Michael Branson
  March 13th, 2017
  
  Hi Lucy,
  Â
  We are not attorneys or licensed to give this sort of advice.Â I'm sorry, I don't know all her particulars and even if I did have her full information, I am prohibited by licensing to provide any sort of advice in this area.Â I would suggest you contact a licensed elder care attorney to discuss this issue and all your possible planning needs.
  Reply to Michael
Marcie Murray
September 16th, 2016

The utter Unfairness of denying an impoverished senior who needs Medicaid help above Medicare for monitoring ongoing pricy health concerns (cancer), only because she requires the ability to pay her property taxes and homeowners' insurance, let alone rural home/property upkeep/repairs, (easily above a $2000 limit at times) and thus: a reverse mortgage is her only recourse, is boggling to the imagination. She takes care of a disabled relative who would lose his SSID did he share the property deed as was intended in their parents' will.
Reply to Marcie

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