Medicaid and reverse mortages?


If someone is by necessity having to go into assisted living/nursing home and has to spend down to qualify for Medicaid, does this spend down include his reverse mortgage? Or is this amount exempt and he is able to keep this amount or even consign to his son?

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Puzzle - you know there may be other issues with RM besides income. Do you have the contract so you can read what would make the RM fall from compliance?

I think you have to be VERY careful with RM. Under FHA backed RM, if the owner moves from the house or other reasons below, the reverse mortgage is out of compliance on the agreement and will be due in full. Please go over the agreement to see what the policy reads.

If you do a RM there are 4 things that can be a problem for compliance and cause the RM to be due:

1. FAILURE TO PAY - property taxes, homeowners/flood/wind insurance. One issue with RM is that instead of the homeowner selecting their own insurer, the insurance is folded into the RM and uses insurers that the RM selects and the costs will be more that the homeowner is used to paying. Also if they go onto Medicaid, they are fully expected to do a co-pay of the monthly income to the NH, so there may not be the $$ to may for their house costs the RM expects them to pay. (Like their property taxes).
2. MOVING TO A NEW RESIDENCE- if reverse mortgage property stops being your primary, you are out of compliance with loan. So if you move into a NH, you are required to pay your loan.

3. BEING OUT OF THE HOME FOR MORE THAN 1 Yr - the loan will come due. Most policies have this.

4. ALLOWING THE PROPERTY TO DETERIORATE - being away for a while, like a trip or cruise is allowed but if the property gets run down while you are away, the loan could be called in. After Hurricane Katrina, some homeowners who had RM, got letters w/detailed questionnaire as to the status of the home, how it was being secured, status of repairs, utility information - this was all about calling in loans that were in areas with uncertainty. And Katrina was in 2005 before the real estate market tanked. If dad is now in a NH, who is going to be there to take care of the details on keeping the house in tippy top condition?
really read the contract. Good luck.
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Most reverse mortgages give a monthly payout. If he is spending it all on his care or home maintenance they might subtract it out. But everyone's exact situation is different. It sounds like you need a good eldercare attorney or at least an estate planner who knows more about Medicaid. The truth is Medicaid is not in the business of preserving assets for heirs, at all. With so many of the baby boomers needing care, they can no longer afford to leave any money on the table so to speak! It didn't use to be this way, but it is now.
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I googled it and still don't understand! Do they get a monthly payment or a lump sum?

The lump sum has to be spent in the month received, or it will be counted, they say.
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Best to ask the Medicaid office - I would guess that the income from the reverse mortgage would be counted as income. They exempt the home you are living in or intending to return to, and will look to get estate recovery for whatever they pay towards care.
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