A conversation with a potential client today reminded me of an important question that comes up from time to time. Even scarier is how many times; it may not come up, thereby preventing the discussion and the subsequent necessary information to determine how best to structure their Reverse Mortgage proceeds.
We all are familiar with the ads on TV and radio, often with a smiling and encouraging celebrity spokesperson lulling seniors into a sense of security with their claims, that “Reverse Mortgage proceeds will not affect Social Security benefits”. Yes, that is true, but what about those seniors who receive Medicaid/Supplemental Security benefits or other “needs based” income?
The good news is that structured correctly, a borrower who receives Medicaid/Supplemental Security benefits, can not only improve their daily lifestyle with additional monthly income, but they can do so without affecting their “needs based” benefits. However, without the discussion and care to make sure the borrower understands and the loan is structured properly, the resulting asset reevaluation may/could result in a reduction or loss of benefits.
In a MarketWatch question and answer forum featuring the advice of housing writer Lew Sichelman, Sichelman addresses what he calls a little understood and under-publicized aspect of reverse mortgages: their impact on Medicaid eligibility.
“If a patient takes out a reverse mortgage and receives a lump-sum, they’re often ineligible for Medicaid to pay for nursing home care,” the column begins. The rules are complicated, the article explains, but Medicaid allows a patient to have not more than $2,000 plus a house and automobile. A large, lump-sum payment can impact that dollar amount in the month when it is received, according to Sichelman.
According to LongTermCare.gov, from the U.S. Department of Health and Human Services, “As long as you spend the payments you receive in the month that you receive them, the money is not taxable and does not count towards income or affect Social Security or Medicare benefits.” Such payments also do “not count as income for Medicaid eligibility.”
LongTermCare.gov also states that if the total liquid resources are more than $2,000 for an individual or $3,000 for a couple, this could make the person ineligible for Medicaid. However, if you receive monthly payments that you spend on your ongoing expenses, and don’t accumulate savings, you may be all right. For details on choosing how to receive reverse mortgage proceeds.
What does all this mean? Simply put, “If the proceeds (from the reverse mortgage) are in a line of credit and being accessed and used within the month they are received, there has been no conflict. The same goes if a couple establishes a monthly tenure payment. The payment should not be in excess of their needs for that given month. This will avoid a build-up in the savings account that then could be looked at with (Medicaid) eligibility concerns.” Individuals currently receiving – or who anticipate receiving – Medicaid should consult an accountant and a financial advisor in order to make certain that they are aware of all of the potential ramifications
For more information on reverse mortgage proceeds or other related questions, Call Becky Smith, Reverse Mortgage Specialist. 800 935 3639 or visit beckysmithhomeloans.com or on Facebook at beckysmithhomeloans.