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.

Reverse Mortgage Affects on Medicaid

How Reverse Mortgages Affect Public Benefits and Needs-Based Programs

ProgramImpact of Reverse MortgageNotes
Social Security Retirement BenefitsNo ImpactReverse mortgage proceeds usually do not affect Social Security retirement benefits.
MedicareNo ImpactMedicare is not a means-tested program; reverse mortgage proceeds generally do not affect eligibility.
MedicaidPotentially ImpactedLoan proceeds may count as assets if not spent within the same month, potentially affecting eligibility.
Supplemental Security Income (SSI)Potentially ImpactedReverse 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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