Medicaid and life estate - problems for reverse mortgage?

Guest

My elder brother has suggested that my grandparents take a reverse mortgage and said that the bank would give the money on a monthly basis. After they die, the home would be sold and he bank would take the money and if there's any profit then tat can be divided among the children. Is it so? They are nearly 75 years old and have health problems too. They wouldn't even think about selling their homes..they have earlier applied for medicaid. They have a life estate on the property with my elder brother (the 3 are on title). Will the medicaid and life estate pose a problem in getting reverse mtgs?

tgolden · Posted: Wed Nov 07, 2007 10:35 am Post subject: Tony Golden

Hello Hansel,
Welcome. What your brother has told you is correct. If you click on the home page of this site, then choose Reverse Mortgage as the topic you will have a great outline of what the reverse mortgage is about. It doesn't answer all questions as this type of loan can be complicated.

To directly answer some of your questions.

Yes they can get monthly payments for the rest of their life or for a set period of time. They can also pull some money out at closing if need be and get the rest in payments. There are many option.

The first think is to see if the reverse mortgage is a benefit for them. It is not like a forward mortgage and they will only be able to borrow a percentage of the home equity. There are many benefits and concerns to consider so please ask as many questions as possible.

When your grand parents move out, have to go to a care home, sell or pass away. the reverse acts just like a forward mortgage. The loan comes due and needs to be paid off. Any money above and beyond the cost of the loan is to be the property of the heirs. How that gets settled will be by the will.

Medicad is typically not effected. This is money they already own but it is considered dormant assets. It is locked up in the home as can be released by four ways. Take a equity loan which requires income and to be paid back in monthly installments, sell and find somewhere to rent or downsize, leave the money in the home for their heirs or utilize a reverse mortgage to assist their needs while still alive. These are all options and form what I am reading they want to have a better life and stay in there home. That is where the reverse mortgage has become so popular and beneficial. Medicad should not be effected as this is not income it is money they already own. Each case should be reviewed as in some cases and depending on your state, medicad has been effected. If you decide this is an option for your grand parents I will help you determine their medicad situation.

As for the life estate. The life estate can be in place when doing a reverse mortgage as long as it states that your grand parents have full power to mortgage the property. If this is not the case then it can be changed as all parties agree.

I hope this helps and please feel free to ask additional questions. This type of loan requires many questions case by case review. It must fit the needs of the homeowner and looking at all the information in the beginning is vital. Do not approach or let anyone approach your lending needs as a simple mortgage. Reverse Mortgage are more of a financial planning tool then a home mortgage.

Regards
Tony Golden

Guest

But they have to rely on social security income and above that when the reverse mortgage proceeds add up (as they are considered income) won't that increase their income and will that affect their getting any medicaid assistance

tgolden · Posted: Thu Nov 08, 2007 4:05 am Post subject: Tony Golden - Hansel

Hi Hansel,

The reverse mortgage monthly proceeds are not considered income. It is the same as pulling money out of savings. It should not be a concern but each case is should be reviewed as part of the process. If you decide to apply for a reverse mortgage make sure whoever you deal with looks over you individual situation and will varify that they will not be effected.

Like I said, most cases are not effected by doing a reverse mortgage.

If you would like more iformation or a reverse mortgage report showing showing how personally effects your grand parents let me know and I can point you in the right direction.

Regards
Tony Golden

Guest

if you already have medicaid and wish to get a reverse mortgage will this be a problem? Can your medicaid benefits be revoked?

Guest

Hello.

Even if you have Medicaid, you can apply for reverse mortgage and your medicaid benefits will not be revoked.

Jessica

Hi tily,

There are chances that if you have Medicaid and take out a reverse mortgage, you may be declared ineligible for the assistance if you don't use up the funds on the month you receive them. This is so because the funds not being used add up to your total asset amount.

Regards,

Jessica.

Guest

I'm 70 and on social security and still working. Do I need to stop working to qualify for reverse morgage

smithsussane · Posted: Wed Sep 24, 2008 11:21 pm Post subject:

Hi Ivan Lavoie!

Welcome to Forums!

As far as your age is concerned, you can get a reverse mortgage. But I think you need to leave your job for that. Why don't you speak to a reverse mortgage lender and they will help you in a better way.

Feel free to ask if you have further questions.

Sussane

Guest

My grandmother is going into a nursing home. Medicad requires her to sell her home. I want to buy it. What is the minimum amount of money I can pay for it, and still satisfy medicad?

Guest

Hi Jerry R,

There is no minimum amount of money as such. Once the house is up in the market for sale, you can buy it at a price that you can afford.

raymond · Posted: Fri Jul 03, 2009 9:57 am Post subject:

>>Will the medicaid and life estate pose a problem in getting reverse mtgs?

Medicaid (and Medical in California) are both impacted by a Reverse Mortgage. Medicare is not impacted.

With Medicaid, the benefits decrease and can go away entirely if the homeowner has more then a specific amount of money in their bank account - usually $2,000.00. That means the homeowner should receive their funds from the Reverse Mortgage as a Credit Line or Monthly Payment, not the Lump Sum option.

And something most folks don't think about is Medicaid's 5 year lookback. If the homeowners received a Lump Sum distribution from a Reverse Mortgage during the previous 5 years, and they're applying for Medicaid, they'll be impacted. It's best to visit with an Estate Planning Attorney first if that scenario applies to your or your parents.

raymond · Posted: Fri Jul 03, 2009 10:00 am Post subject:

>>I'm 70 and on social security and still working. Do I need to stop working to qualify for reverse morgage

Yes. The only qualifiers for a Reverse Mortgage are age and equity. If you're 62 or older, and have lots of equity, you can get one (as long as the home is your primary residence - at least with the HECM. With some Jumbo's the home doesn't have to be a primary residence).

Guest

Hi. My mom needs in-home health care, and will probably soon have to go into assisted living and beyond. She and her husband have enough assets to pay for this for just a couple of years, then hopefully can get help from medicaid. They have a reverse mortgage line of credit, which they have used only a limited amount. (The house is probably worth $400K and they have drawn only, say $40K from the line of credit.)

My thinking is that they will have to "spend down" these other assets before they can get help from medicaid, so it would make sense to do that FIRST before accessing the line of credit.

First question: Does the above make sense?

Second Question: Would it be a good idea for them to liquidate some other assets (e.g. retirement funds) NOW and repay the line of credit. That way, after they have spent down the other assets, they can get some help from medicaid, and THEN if they need it, begin drawing on the reverse mortgage. That way, when my mom does pass away, her husband will hopefully be left with some equity in the house so he can continue to live there and, if sufficient equity is left, have some resources to live on.

Or will medicaid, in the 5 yr. lookback, have a problem with them paying down the reverse mortgage?

Thanks for any advice!

- D

Guest

The questions you're asking will have serious negative consequences if anything you're thinking about is done in the wrong order. I have my own opinions, based upon past experience, but can't offer them to you because everybody's situation is different and I don't want to be responsible if I get it wrong. You "really really" need to visit an Estate Planning Attorney who specilizes in Elder Care and understands how to prepare for Medicaid when a Reverse Mortgage is involved. And be sure to ask them about their Reverse Mortgage experience. All Estate Planning Attorney's understand how to properly spend-down in preparation for medicare, but not all of them understand Reverse Mortgages. Some of them still think "it's the loan where the bank gets your house". You need someone that truly understands how they work.

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