I found a specialist who can handle the processes getting my father some assistance and into a facility but every option requires the elimination of his assets and house. I know a house is frequently exempt however it is in a reverse mortgage and the transition phase between residing in home and moving to a facility will involve floating household expenses until it is sold. Some people say find a lawyer. Does anyone have experience with what a lawyer can do for us? I do not want to pay for something I don't know is needed. Every expense makes a difference. Thank you in advance
So while the home may be exempt for Medicaid, usually there is no other way to pay off the borrowed and spent reverse mortgage balance short of selling the house. Any cash balance after the sale must be spent down or converted to a form of asset that is non-countable for Medicaid purposes. Depending on the amount, it may be possible to spend it all down on pre-paid funeral/burial, car, personal items. If the balance is too large to eliminate that way, then consider a Medicaid annuity (see my articles about that topic on this website).
Deed in lieu, like Foreclosures & short sales, mean less that the full amount is accepted by the mortgage holder. Deed in lieu may require a "deficiency balance" to be paid (Foreclosures & short sales don't seem to do this). The amount of the mortgage written off will usually mean the mortgage holder will issue a 1099-C /Cancellation of debt for this $ to your parent. The 1099-C is reported to IRS and is fully taxable income. For those deceased, dealing with taxes owed after death in probate is straightforward & they get in line with all the other creditors in the order set by probate laws.
BUT dealing with this for those still alive & needing to apply for or on medicaid, it's going to be way more complex. If they are on Medicaid or "Medicaid pending", all their income must be paid to the facility as the required SOC (share of cost). They won't have the $ to pay a deficiency balance, no $ to pay the many many costs of maintaining & selling the property, so family will have to pay property costs.
AND if a 1099-C is issued (maybe for that tax year or could be later) taxes are due to the IRS on the amount written off plus interst & fees, as its fully taxable income. If taxes are not paid, the IRS as a supercreditor can attach a portion of monthly SS & retirement check..... which then poses problems with medicaud as their monthly income must be paid to the NH as the SOC under Medicaid rules. Family will need to make up the difference to the NH till this is paid off or worked out with IRS or they become ineligible for Medicaid. Also if your state does an IRS income match, the "income" will take them over income limits set by Medicaid. The DPOA will have to deal with either filing taxes with a 982 to offset the income.
A lot of what needs to happen to deal with these issues requires legal expertise and for those dealing with medicaid, it needs to be an elder law atty.
? Michael ? - this "specialist" what exactly is their expertise?.....if one is well versed in medicaid & is getting paid to help, they should know the other pros for tax issues, real estate, drawing up a will or it's codicil, etc.
Dealing with parents property is just going to have costs that unless parents have a good bit of extra $ not needed for care or died with a big enough estate to pay executor & fees, family is going to just have to front the costs & time to get things done, filed, resolved correctly & with legal help.
I work with consumers all the time in your situation. If you want to call me for more detail I am happy to help.
Sandy, I am going to do some homework and would like to talk after I have gathered some specific details. Thank you.