Warning: Reverse Mortgages Can Affect Medicaid & SSI
Depending on which payment route a borrower chooses for a reverse mortgage, the loan proceeds could affect Medicaid or Supplemental Security Income (SSI) eligibility.
Those who are 62 and older and are looking to supplement their retirement income through a reverse mortgage should also consider the implications this decision could have on any needs-based programs.
Means-Tested Benefits
For means-tested benefits that are available based on income and assets, reverse mortgage loan advances that are held in the borrower’s bank account may be counted as assets and thus may disrupt eligibility, according to the NeighborWorks HECM counseling Training Manual, which is used nationally by certified reverse mortgage counselors to inform borrowers about the loan and its possible implications.
Borrowers who choose the lump sum option for payment have an exceptionally high risk of losing eligibility for means-tested assistance, as they are more likely to reserve the proceeds from their loan in the bank account. This money is viewed as an asset.
Medicaid/SSI Income Limits
Asset level limits are an important and common factor that Medicaid and SSI share. When borrowers take out a reverse mortgage loan, they can receive their home equity through a line of credit, a lump sum, monthly payments, or some combination of these three options.
But for those eligible for and receiving, or expecting to receive, certain government needs-based benefits, there may be better routes than the lump sum payment option for reverse mortgage proceeds.
Most needs-based programs consider income and assets when determining whether an individual qualifies for government assistance. While reverse mortgage proceeds generally don’t qualify as taxable income, the unspent balance from a lump-sum reverse loan could put a borrower’s assets over the limit.
Medicaid and SSI consider a recipient’s assets—including money sitting in a bank account when determining eligibility.
Medicaid Asset Limits
Medicaid is another needs-based program that considers a senior’s income and assets, although limits vary from state to state. In 2023, typical asset limits for Medicaid benefits were $8,400 for an individual and $12,600 for a couple, although some state limits are very generous, and others have no limits at all.
Because of these limits, a Medicaid-eligible senior who receives a lump sum from reverse mortgage proceeds will likely lose eligibility, according to NeighborWorks, unless that money is spent immediately. Additionally, Medicaid recipients must account for all cash in and out of their bank accounts.
Supplemental Security Income (SSI) Asset Limits
SSI, a federal program for the elderly or disabled, requires participants to have an income beneath the national poverty level and consider assets. In 2023, the program had a universal asset limit of $2,000 in assets for individuals and $3,000 for couples. So, reverse mortgage borrowers who choose the lump sum option would likely become ineligible for SSI assistance.
And, if borrowers received SSI benefits when their asset levels were above the limit, they may be forced to return that money through reductions to their Social Security checks. Still, borrowers need to make informed decisions about how they want to receive their loan proceeds, especially when considering means-tested benefit programs. A reverse mortgage is a handy tool for increasing cash flow.
Although a lump sum wouldn’t necessarily rule out Medicaid eligibility for seniors in some states, it often eliminates necessary qualifications for Supplemental Security Income. There aren’t any conventional methods for getting around these asset limits, as funds stemming from a loan done through power of attorney would still be attributed to whoever is on the deed of the home.
Reverse mortgage borrowers should look into their state’s requirements and determine how a reverse mortgage will affect their eligibility before deciding which kind of payment they will choose.
Note: Medicaid and SSI are needs-based programs not to be confused with public benefits such as Social Security and Medicare. Reverse Mortgage loans do not affect your public benefits.
Needs Based FAQs
How does a reverse mortgage affect Medicaid?
Can a reverse mortgage affect Social Security or Medicare?
What happens to a reverse mortgage when the owner enters a nursing home?
Does a Reverse Mortgage count as income?
Can I request a paper check from my reverse mortgage to avoid running proceeds through my bank account?
ARLO recommends these helpful resources:
August 15th, 2023
August 15th, 2023
March 15th, 2023
March 15th, 2023
January 12th, 2023
January 12th, 2023
December 13th, 2022
December 20th, 2022
August 19th, 2022
August 19th, 2022
August 16th, 2022
August 16th, 2022
May 9th, 2022
May 10th, 2022
March 9th, 2022
March 9th, 2022
March 8th, 2022
March 8th, 2022
July 25th, 2021
July 25th, 2021
March 12th, 2021
February 8th, 2021
February 8th, 2021
May 3rd, 2020
May 3rd, 2020
February 12th, 2020
February 12th, 2020
November 4th, 2019
November 4th, 2019
August 12th, 2019
August 12th, 2019
August 3rd, 2019
August 3rd, 2019
August 1st, 2019
August 12th, 2019
June 25th, 2019
June 25th, 2019
February 15th, 2018
February 15th, 2018
March 12th, 2017
March 13th, 2017
September 16th, 2016