Anyone have experience with the process of dealing with elderly care receiver's house sale in reverse mortgage? - AgingCare.com

Anyone have experience with the process of dealing with elderly care receiver's house sale in reverse mortgage?

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I found a specialist who can handle the processes getting my father some assistance and into a facility but every option requires the elimination of his assets and house. I know a house is frequently exempt however it is in a reverse mortgage and the transition phase between residing in home and moving to a facility will involve floating household expenses until it is sold. Some people say find a lawyer. Does anyone have experience with what a lawyer can do for us? I do not want to pay for something I don't know is needed. Every expense makes a difference. Thank you in advance

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Reverse mortgages can be helpful in covering expenses for an elderly person or couple while at least one of them continues to reside in the home. For a single person, once they need to move out because their care needs can no longer be met in their home, then the reverse mortgage rules require the house be sold.
So while the home may be exempt for Medicaid, usually there is no other way to pay off the borrowed and spent reverse mortgage balance short of selling the house. Any cash balance after the sale must be spent down or converted to a form of asset that is non-countable for Medicaid purposes. Depending on the amount, it may be possible to spend it all down on pre-paid funeral/burial, car, personal items. If the balance is too large to eliminate that way, then consider a Medicaid annuity (see my articles about that topic on this website).
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I am pushing this post back to the top to see if someone can answer this for Michael.
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My husband and I are currently dealing with the probate of his mothers estate and her reverse mortgage. She wasn't on Medicaid so unfortunately I can't help you with that but hopefully I can help you save some money. First, find out the amount owed on the mortgage and the current value of the home. A real estate agent can give you an approximate value or you can obtain an appraisal, which cost around $400. If there is no, or very little equity, in the property you may want to contact the lender about relinquishing the property by Deed In Lieu. If you decide to sell the home FHA requires it be sold for at least 95% of the value determined by THEIR own appraiser. This makes it more difficult to sell a home with a reverse mortgage. Keep in mind selling the home may take a while and after real estate fees, closing cost, utilities, insurance, maintenance, ect there may not be equity available after the sale. Finding the value and payoff is something you can easily do yourself and no need to pay an attorney. When you have this info THEN contact an attorney specializing in Medicaid for advise.
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My mom is not yet on Medicaid (tho the need is rapidly approaching) but we sold her house (with reverse mortgage) last year. We didn't need a lawyer as selling ANY house requires a pay-off from the mortgage company; with a reverse mortgage you simply have less equity. My mom was lucky, she still had some equity left & didn't have to bring money to the closing. Get the pay-off early (the exact figure will have to be adjusted when there's a closing date) but it will take the mystery out and allow you to make a plan.
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Michael - Dadscare has a good idea about looking into a deed in lieu. Keep in mind though that dealing with assets & claims of an estate within probate will be quite different that dealing with assets & debts for someone living. I too am amidst probate for my mom who owned her home & was on NH Medicaid.

Deed in lieu, like Foreclosures & short sales, mean less that the full amount is accepted by the mortgage holder. Deed in lieu may require a "deficiency balance" to be paid (Foreclosures & short sales don't seem to do this). The amount of the mortgage written off will usually mean the mortgage holder will issue a 1099-C /Cancellation of debt for this $ to your parent. The 1099-C is reported to IRS and is fully taxable income. For those deceased, dealing with taxes owed after death in probate is straightforward & they get in line with all the other creditors in the order set by probate laws.

BUT dealing with this for those still alive & needing to apply for or on medicaid, it's going to be way more complex. If they are on Medicaid or "Medicaid pending", all their income must be paid to the facility as the required SOC (share of cost). They won't have the $ to pay a deficiency balance, no $ to pay the many many costs of maintaining & selling the property, so family will have to pay property costs.
AND if a 1099-C is issued (maybe for that tax year or could be later) taxes are due to the IRS on the amount written off plus interst & fees, as its fully taxable income. If taxes are not paid, the IRS as a supercreditor can attach a portion of monthly SS & retirement check..... which then poses problems with medicaud as their monthly income must be paid to the NH as the SOC under Medicaid rules. Family will need to make up the difference to the NH till this is paid off or worked out with IRS or they become ineligible for Medicaid. Also if your state does an IRS income match, the "income" will take them over income limits set by Medicaid. The DPOA will have to deal with either filing taxes with a 982 to offset the income.

A lot of what needs to happen to deal with these issues requires legal expertise and for those dealing with medicaid, it needs to be an elder law atty.

? Michael ? - this "specialist" what exactly is their expertise?.....if one is well versed in medicaid & is getting paid to help, they should know the other pros for tax issues, real estate, drawing up a will or it's codicil, etc.

Dealing with parents property is just going to have costs that unless parents have a good bit of extra $ not needed for care or died with a big enough estate to pay executor & fees, family is going to just have to front the costs & time to get things done, filed, resolved correctly & with legal help.
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We dealt with this & although the house didn't sell before our LO passed, it would have worked out OK. Selling a home with a reverse mortgage is very much like selling a home with a standard mortgage. The difference is that once the occupants of the home who are listed in the reverse mortgage no longer live there, the mortgage holder can call the loan. In our case, the company gave us a year before starting foreclosure proceedings. However, the company would very much like you to sell the home rather than having them take it over. In our situation, the house was and remains "underwater," so there is no possibility of any net gain from its sale. But the mortgage company also quickly established short sale criteria for us based on the appraised value of the home. We recommend to bring a knowledgeable and compassionate realtor or broker on board to drive the sale along with your elder law attorney. We just really needed the listing agreement to qualify our LO for Medicaid. And in our state, Medicaid permitted us to pay a certain amount of money per month for six months for the maintenance of the home.
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Hello - HECM Reverse Mortgages are federally regulated (and FHA insured). You have rights and options. You are not required to tell the lender your plans or give any personal/medical information to them. In general, 1) Your father can be out of the home for 12 consecutive months before the loan can be called due and payable because he no longer occupies the property as his primary residence. 2) You can sell the home for the full appraised value or payoff of the loan balance whichever is less. 3) If you have a POA for property management you can act as his legal representative with the lender.
I work with consumers all the time in your situation. If you want to call me for more detail I am happy to help.
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Thank you everyone! This is all very helpful. I have a better idea of what to research.

Sandy, I am going to do some homework and would like to talk after I have gathered some specific details. Thank you.
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