If your home is free and clear, and we set up your HECM Reverse mortgage as an increasing line of credit, you can request proceeds at any time in any amount. If you spend those proceeds in the calendar month you receive them, they are not counted against your eligibility. If you have a current mortgage, it can be paid off with the HECM Reverse and the balance of funds put on the increasing line of credit. The same will now apply. You can eliminate your mortgage payment, access thousands of dollars of home equity to improve the quality of your life, do repairs on your home, or use the money for any other reason, without
jeopardizing your Medicaid or Medical benefits.....
In order to be eligible for Medicaid, you must qualify based on your earnings, family size, and disability status – these are all factors that may vary by state. Eligibility is also affected by whether you’re single or married. For example, single, unmarried seniors with Medicaid coverage that covers long-term care can’t possess countable assets that go over a certain limit. Those same individuals are also restricted on a monthly basis for income.
By the same token, married seniors cannot possess countable income that goes over a certain number month to month. With that said, you are allowed to keep a specified amount of income per month which varies if you’re single or married.
A reverse mortgage may affect your Medicaid eligibility depending on what reverse mortgage payout method you choose. In most states, one of the Medicaid eligibility requirements states that the recipient must not have more than $2,000 in countable assets (or $3,000 between married couples).
What are typical Medicaid countable assets?
Assets typically use for Medicaid eligibility include:
Assets Medicaid doesn’t count for eligibility may include:
Is a reverse mortgage considered income for Medicaid?
No, payments from a reverse mortgage are categorized as loan proceeds. This is also why reverse mortgages don’t impact your taxes.
Note: You can get your reverse mortgage payout in the form of a lump sum payment, a line of credit, monthly payments, or a combination of those options.
How does this apply to a HECM?
A reverse mortgage doesn’t affect the Medicaid income eligibility requirement because the payout does not count as income; rather, they are loan proceeds. However, if you choose a lump sum disbursement for your payout, but do not spend all of the proceeds, any leftover funds are considered countable assets after 30 days. If you exceed your asset limit, you may be ineligible for Medicaid coverage.
How does this apply in real life?
Let’s say, for example, that you’re single and you have a Medicaid eligibility requirement of $2,000 in countable assets. You receive a lump sum of $5,000 from reverse mortgage proceeds but you only spend $3,000 of the funds during the month in which you received the payout. You put the remaining $2,000 in the bank. After 30 days, you would become ineligible for Medicaid because that money is then considered an asset.
Bottom line: A reverse mortgage payout doesn’t immediately disqualify your
Medicaid benefits, but it’s important to be mindful of how you spend your loan
proceeds within a given amount of time. For more information and to see how
we may make this work for your clients, call us today.
Thanks to Barry Sikov at Belair Insurance Services, Inc. for his input to this article.
Marc has 36 years in financial services and 6 years in teaching.
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