Hangingon61 Asked December 2017
Medicaid and reverse mortgage; Will any proceeds from the sale of mom's home get taken by Medicaid?
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Widowed Mom in Illinois has been on Medicaid since 1992.
Took out RM in 2003 to pay off CC debts.
House is in living trust w/me (daughter) to inherit upon her death.
She may be having to go into a NH.
Terms of RM say after 1 year if moms no longer living in her house, RM will no longer be in effect & loan will become due immediately, so it will have to be sold.
Couple of questions:
Will any proceeds (if any) from the sale of moms home get taken by Medicaid?
Also, if mom should pass while she’s living in her home (before entering a NH), what $ will I owe to anyone (besides the amount due to RM for loan)?
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House sale if it produces proceeds from the sale will become income for the month sold and becomes a asset for the time thereafter for mom’s Medicaid eligibility. It is a reportable event for Medicaid as it affects eligibility.
If your looking for suggestions, here’s my thoughts:
- I’d be cautious for you contacting the RM as you don’t want to cause them to open a non compliance review on the loan.
However, you do need to find the rm paperwork and get an idea of the payoff amount (to get release of the RM deed). RM are notorious for being a bad deal for heirs. So read clearly carefully to get an idea of where $ is.
- contact a Realtor or two to do a listing review to find out hat house likely to sell for. Any Realtor with MLS firm has a program to get this done easily. I think (but not sure) if prop owner wants to sell, they can find and get their own Realtor to do the listing if they are still living in the house. But if they die or have moved out from house, any sale or Realtor has to be done through the RM. RM should read as to what’s what. If I’m right, think as to which way works best for your mom & you / dpoa.
- if it’s looking like there will actually be proceeds of the sale to your mom, plan on how to handle to lessen its impact for Medicaid. For example let’s say it shakes down that mom actually ends up with 27k after RM paid off. Not a lot of $ but enough to take her over Medicaid limits. Now if you could schedule act of sale for the 2nd or 3rd of the month, it gives mom almost the full month to do a big spend down so she ends the month once again poor and within Medicaid limits. Otherwise she becomes ineligible for a couple of months and has to totally do a new Medicaid application..... Comprende? Like mom does a completely paid off Medicaid compliant funeral and burial (9k), dental work (11k), new eyeglasses, walker & hearing aid (7)..... so all 27k spent within the month. No Medicaid issues. But she needs time to do and clear her bank,so closing needs to be as close to the first as possible. She can put this into the listing agreement.
- make sure mom is all current on insurance and taxes as RM has those costs are her responsibility. Sometimes buyers get seller to pay taxes forward as an incentive for the sale. Really property sales are so locally dependent... I’m in New Orleans and in some areas there’s no inventory so sellers can be choosey but most areas are buyers markets.
- if house sells and no $ to mom, Medicaid should be informed but should not affect her eligibility. In her annual renewal there should be a questionnaire with a ? on asset transfer, so they get informed that way. Or she sends a letter with a copy of the act of sale showing zero to her, the month sale done.
- Medicaid in theory does have a claim or lien on her estate or assets due to MERP / Estate Recovery. But it’s an unsecured cksim unlike a mortgage which is secured. So if there’s funds it’s moms totally for the month received. First month important.
Good Luck! And let us know how it works with RM.
But I do have to say that IF there is any $$ left from the sale of my moms house, I know for a fact that her burial is only going to be a direct cremation (her ashes will be interred w/my sister who is in a mausoleum that my mom paid for when my sister passed back in 1975, so that’s already paid for).
She doesn’t want any service, nothing.
From what I learned, where we live, a low cost direct cremation would run anywhere from $800-$1100.
My mom has no teeth, doesn’t wear dentures so she wouldn’t spend it on any dental work.
She doesn’t wear eye glasses anymore.
Her walker, wheelchair are all rented from the village senior center in the town my mom lives.
So the only other thing my mom would do w/her money would be to give it to me.
However would that be considered a “gift”, and what would my legal (tax) obligations be (depending on the amount I suppose, but I really know nothing about this).
Also all this would occur while my mom is alive.
If she were to pass away, I know the RM would come due once I notified them of my moms death, but again, since I am named in the trust as inheriting the house, I would need to put the house up for sale because I don’t have the amount to pay back that’s moms balance right now ($156,000).
Hopefully house will sell for more then that, how much more, I’m not sure, then there’s the realtors commission I suppose that will be deducted from the proceeds, whatever’s left would go to me.
I’m wondering if Medicaid will want to take that (from me).??
But whatever $ is, mom CANNOT give you ANY $. It would be considered gifting and would incur a transfer penalty by Medicaid. Real property info is recorded locally at the courthouse and dovetails into the states database. What house sold for is there to the penny for Medicaid to find. Just keystrokes to do. It’s my belief that caseworker when reviewing applications place applicants (&spouse even if deceased) name & SS# into a Program that interfaces with state databases. So any real property will surface. It will be there to the penny and if 10k, 20k seems to be unaccounted for Or clearly spent for moms care or moms needs, a transfer penalty inquiry can & likely will happen. You as dpoa get stuck in Medicaid application hell as facility might not take mom as “Medicaid Pending” resident (so someone -you- has to private pay each mo. till mom clears eligibility) and moms app might be pulled to get a detailed line by line review.
Your not a heir until after she dies; what the living trust reads as to house doesn’t matter till after she dies; right now it’s her asset and if she sells house and $ left after RM paid off in full, the $ is her income the month received and then an asset afterwards, not an inheritance. If moms income exceeds whatever her state has for NH LTC Medicaid, not eligible. For my mom it was $2,064. If moms assets exceed 2k, not eligible. $ has to get spent so she starts the mo & ends the mo totally within state limits.
If it ends up that it’s actually a good bit of $$$ after RM, mom could move it into a Medicaid compliant special needs trust. Not a diy, needs to be done by elder law atty and done within the month of sale. Again another reason why to get act of sale right at the start of the month.
Ah so much what if’s! To me first step is to get a bead on what RM payoff is and then what house could sell for, then base your options on that figure.
Another aside, any & all property costs to get house “listing ready” your mom needs to pay for directly. So hiring guys for yard clear out, mom writes a check for and to the name of a business and gets a receipt. Do not pay for anything moms house yourself as you really can’t be easily reimbursed as my understanding is Medicaid will tend to look at it as gifting. App gets stuck in Medicaid hell.
You might need an atty to write a terse letter as to this IF mom gets a recovery letter or there is a glitch at closing (like title co finds a Medicaid cloud on the title). I’d bet there isn’t one as RM should has found it when RM did the loan. But you never know.
If you would, let us know what happens. We all learn from each other!
So if my mom decides now to go to Medicaid approved assisted living, shed be leaving her home, but wouldn’t have to sell until until 1 year (RM states if the owner leaves & is not living in the house for 12 months) the loan would be called in.
But I’m sure my mom would still have to make the property tax payments during that year am I correct?
But even though Medicaid would require my moms Social Security & SSI payments, less a $30-$50 stipend she would get while living in the facility, would she still be able to access $ from her reverse mortgage to pay the bills on the house??
I would think so because that money would not be considered “income” because it’s going to toward the maintanence of the house??