What happens if we sell a home with a reverse mortgage while on Medicaid?

Hangingon61, Medicaid rules vary by state. I'm assuming that your mom is the primary beneficiary of her trust and that you are the successor beneficiary after her death and in that case selling her house will, as others have mentioned, temporarily disqualify her from Medicaid until her assets and income are once again below your state's limits. On the other hand, if you don't sell her home, Medicaid probably won't make you sell it, but will most likely put a lien on it and will want to recover as much as it can, up to whatever outlays it has paid for your mom's care, from any equity remaining after your mom dies. You are correct that the RM lender is paid back first, then Medicaid, then whatever is left (probably nothing) will go to you as the successor beneficiary of her trust.

However, if you, rather than your mom, really are the trust's the primary beneficiary and it is an irrevocable trust that was created at least 5 years prior to your mom's application for Medicaid, then I doubt that Medicaid will have any claim on any remaining equity in the house. If the situation is more complicated than that, then you might want to seek advice from and elder-law attorney who thoroughly knows your state's Medicaid rules. Hope this helps.

The easiest scenario is for the RM -between repayment, interest and whatever fees tacked on - produces zero $ to your mom.

If $ to her, it is income for month received and an asset thereafter and must be reported to Medicaid. Unless the $ less than 2k, it’s going to disqualify her from Medicaid.

Hanging - the RM is secured lending, whatever is in the mortgage agreement has to be abided to first & foremost. If not, loan will be called in. It’s my understanding that RM require the borrower to live in the house and they must pay taxes, insurance, maintain property. Right now your mom is in rehab, she is still just temporarily at the NH under a Medicare post hospitalization rehab benefit. She could go home manana. But the rub will be IF your mom goes ahead and files an application for NH LTC Medicaid to pay for her stay after discharged from rehab. If she does this they are considered to be a resident of the NH and why Medicaid will pay as they are now residing in the NH. It’s not temporary. RM has to be told of the move. If this is a HUD backed RM (I hope it is), HUD has lots of info on RM on their .gov site as to how RMs wind down. 

It’s different than a property owner doing an “intent to return” letter to keep their fully owned home as an exempt asset for Medicaid. RM don’t necessarily recognize “Intent”, its more either you live in your home or you don’t. RM holder & their Family have to let RM know what the owner & family plans on doing with the property within weeks. If family want to buy the house, HUD has specifics how this is done which allows for a bit of time to secure lending. Otherwise RM will sell property.

RM will find out. Realize once you mom goes onto Medicaid, she is required to do a copay of SOC (share of cost) of her monthly income (like SS). Did the NH at all explain this to her & you? All she will have will be a small personal needs allowance. Most PNA are $50 or $60 a mo. That is it! So whatever has to be paid by her under RM terms, you & family will need to pay until RM takes over the loan. To me, it doesn’t make sense to pay to pay taxes, insurance, utilities, repairs, maintenance, etc. on a house that the RM will take possession of & you will not be buying. 

Also about the “Medicaid will not go after heir”, that is an exclusion for MERP aka Estate Recovery. MERP exemptions & exclusions are dealt with as an after death process. Your mom is still alive, your not a heir. It doesn’t mean that you shouldn’t be aware of exemptions or start getting documentation needed for them ahead of time. But until your a heir, not a factor.

Really before you get all worked up in RM/Medicaid/heirs, find out clearly what mom’s likely future health situation is. She’s in rehab now. If she can return home, then no change in RM situation. If she cannot realistically live in her home, then either she moves in with family or stays in the NH, which either way means RM is called in. If sale actually ends up with $ to her, it has to be reported to Medicaid. 

Review the RM to get an idea of how much she owes and interest and fees. How close is this overall figure to what last tax assessor value was on the house? If she is not current on taxes & insurance, these need to be paid or RM will force place these (& it will have fees associated with doing this). It’s rare for a RM to leave owner $$. Usually those are a line of credit RM that still has funds available and property is in a neighborhood with increases in property value and mom’s house is like the comparables recently sold. If the comps are all nice new renovation & up to code, but hers is old house with decades of delayed work, it’s not going to get top $ to offset the RM total. 

Hangingon61, the idea of withdrawing small amounts from your mom's reverse mortgage so as to not set off red flags sounds like fraud that would likely have regrettable consequences for you and/or your mom. You said paying your mom's future burial expense was a concern and I still think prepaying for that with funds from the reverse mortgage is worth considering. But also buying/prepaying for anything else that is for your mom's benefit using funds from the reverse mortgage should be Medicaid-allowable. Such allowable "things" could possibly include paying you to be her caregiver if there is a signed and notarized contract for caregiver services that are deemed necessary by her physician. Bottom line -- I advise seeking legal assistance before making avoidable mistakes.

Hanging - your mom needs her own atty to shepherd her Medicaid application and deal with the wind down of the RM. All sorts of legal issues are looming for her. From gifting of car payments to you to having 40k in assets from the RM. I’d suggest mom take some of the 40k from the LOC RM and hire a NAELA or CELA atty & like yesterday & before the Medicaid application even started. Please please do this for her, the intricacies of getting through all this are way out of your league.

Your mom has community based Medicaid which has different criteria for income & assets. Under community based they can have higher income & assets than for LTC in a facility (NH or Al) Medicaid. The $ from the LOC RM has been likely considered a LOAN ADVANCE to her. Loan advances are not income for taxes. Her income is her $700 a mo from SS & that is reported for taxes. My guess is that the withdrawals from the RM - as its a Line of Credit type of RM - has not set off any red flags for community Medicaid as community Medicaid does not look to see if every month her assets are within Medicaid limits. So say last May she got her $700 SS & did a draw of 9k from the LOC RM and only spent 3k, leaving her at the end of the month with $6,700. That $6700 can be considered an asset for Medicaid for June.  The problem will be that once this surfaces it might pose an ineligiblity review for her community Medicaid & if Medicaid does a clawback on her community Medicaid due to ineligibility, this morphs into a huge problem. If this happens it’s not a DIY but needs an atty to deal with the fallout. Do you understand how serious this can be? Mom needs an atty. 

If it’s going to be that she cannot move back home after rehab is over, then she will need to apply for LTC Medicaid. And by submitting the application, it allows for Medicaid an all access pass to her medical & financial life back to Spring, 2013. Any funds not spent of her care or her RM property can be questioned by Medicaid. Your posts read you want to do smallish transfers of $1k-$1500k from mom to you with the idea that it’s too low to be found. It’s gifting and it will surface. Folks on the site have posted that their elders Medicaid application stall due to a single transfer as low as $250 or regular transfers under $100. Your mom’s banking history going back 5 years will have checks for payments made by mom for YOUR AUTO. It’s gifting and will surface with a transfer penalty inquiry done. Once something surfaces, the application will get red flagged. That means the state does a line item review of 5 yrs of banking..... If you’ve used your dpoa ability to do obvious self-dealing, medicaid can ask APS to look into the situation. Stuff like this snowballs. Mom cannot pay for the attorney that you will need. 

Whatever she’s given you will surface. And although it may not be an issue for community Medicaid, it will be an issue for LTC Medicaid.

The 40k left on LOC, I’d bet will be viewed by the state as an asset available to her. 

The hot mess on this will be who is the priority for the 40k funds...... is it the NH? Or the state to reimbursement for costs community Medicaid already paid on her? Or the RM which is secured lender? or you as her dpoa to determine how to spend down the 40k?  

Also when mom & you meet with the attorney, be blunt & accurate as to whatever gifting was done. If mom has been paying your care loan and paying other accounts in your name or giving you $ here & there, tell the attorney from the get go. 

Since you are taking care of your mother and her affairs, you really need to have a signed personal care agreement with a specified fee and list of things you do for her. Your mother just recently appointed you her POA, hopefully she will be able to sign a care agreement with you.

This will allow her to pay you from the RM money and would not cause a problem with Medicaid.

Here is a sample form from Agingcare.com

https://www.agingcare.com/documents/personal_care_agreement_AgingCare.pdf

Hangingon -

The information provided by other posters could be very relevant and helpful when it is time to sell the house. You might want to refer to their posts later on.

Also, when you call the RM bank, ask to speak to someone knowledgeable about how they handle the sale proceeds after paying off the RM loan when Medicaid is involved. You might get some good information from them.

I don't believe risking good care for your Mom thru Medicaid is something you want to give up because she gifted money. Is there no way for you to make the money on your own. Are you eligible for social security?

Becky04473 to answer your question about social security, no I’m not eligible for ss yet (I’m 57 yrs old) & I’ve been close to & considered “poverty level” pretty much my entire adult life even though I’ve always worked 2 Jobs.
If I lost just 1/4 of my income that would put me in the poor house & that frightens me to death because I would be evicted from my apartment & I have many animals so to live on the street wouldn’t be something I could do so where would I go??
This is so much stress & it’s affecting my health.
I already have HBP but I take meds to control it but lately I’ve been getting chest pains from all this stress, especially when I come home from seeing my mom in the rehab place.
The last thing I want to do is jeopardize my mom’s options for where she’s going to spend her last days but not only do I have to orchestrate that for her but I have this constant worry about my own financial woes..

Hi Hangingon -

I think I have some good news for you. Here is some more info regarding Medicaid and RM. See the link below.

reversemortgageguides.org/reverse-mortgage/medicaid-and-medicare/

From what I gather, it's NOT a problem to receive $$ from RM, but the $$ has to be spent. It can NOT be put in an account and accumulate above the allowable limit because after 30 days, that money will be considered ASSETS.

More reason for you to have a personal care agreement with your mother, so she can 'legally' pay you in the eyes of Medicaid.