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

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.

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.

I think I also read somewhere that if there are any proceeds from the sale of the house & the beneficiary is given the remaining $ less what’s owed to the rm, then Medicaid will not go after the heir if doing so will create a financial hardship.
In this case it would because I’m also living @ poverty level @ am relying on some kind of inheritance, even enough to bury my mom (her wish is to be interred in a Mausoleum my sister is buried in) & the cost for that is close to $4000 which sadly I don’t have.
Just hoping that’s true.

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, I think igloo572 made several good points, e.g. that the RM lender will require that your mom's house be sold if your mom moves into long-term care (i.e. nursing home, not rehab.) -- a POA you won't give you a choice in the matter (and neither would guardianship/conservatorship). As stated, you are not an heir at this point, so assuming that your being the beneficiary of the trust is as an heir (rather than before mom's death), then that has no bearing right now.

Regarding future burial expenses, if your mom still has any equity from selling her house, as POA, you could use some of that equity to prepay her burial expenses. I believe most state's Medicaid rules exempt prepaid burial expenses from a Medicaid applicant's assets.

Also regarding Medicaid, at least some states allow Medicaid recipients to gift their homes to some relatives (e.g. children) who have been providing the recipients' "necessary" care in their homes for a certain amount of time (e.g. two years) -- the reasoning for this is that such an allowance often saves Medicaid a lot of money. I don't know your situation or your state's Medicaid rules, so I don't know if that's feasible for you. You could call your state's Legal Aid office to get more specific advice and perhaps even some free legal representation if you're financially-qualified for it.

My mom still has about $40,000 left to draw on the RM.
Would she still be able to draw on that, give the $ to me in say $1,000 - $1500 at a time & not set off any red flags to anyone? Then when we notify the RM that she won’t be returning home, they can have the house because my mom or I won’t be able to pay what’s owed & will just walk away from it.??

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.

Please get the advise of an attorney familiar with RM and Medicaid - do NOT try to sneak any money - Medicaid will find out and there will be penalties for your mom. Do not try to get around the rules.

Yes but the rm money is still my mom’s to do with w/she wants I believe.
So she should still be able to make withdrawals until she’s ready to sell her house.
The money is her equity she’s entitled to.
she’s not taking money from a bank & not paying it back.
How is that fraud?

I think you would be on shaky ground. If your mother is on Medicaid the equity in her house is an asset. Her assets are to be used to pay for her nursing home or other healthcare. If anyone gets the equity out of her house it should be Medicaid. There may also be something in the reverse mortgage that would not permit her to access that line of credit. If she is going to continue on Medicaid I doubt that you are going to inherit anything. At the time of sale reverse mortgage will get their balance first and then Medicaid.

I believe Becky is correct. Consult with an Elder Care attorney who is an expert on the Medicaid laws in your state. Some attorney firms offer a free - one time only - consultation.

If your mom takes the money and hands it to you, that is gifting. Now, you may say "but how would Medicaid find out if I don't tell them honestly on the application?" Worked in internal investigations for hospital security and I can tell you from what I saw - stuff just has a way of coming out in the end. With very bad consequences for those who thought they could take a shortcut.

Medicaid is a federal program. They want to recover as much money as possible from the assets of recipients. They regularly run recipient social security numbers against bank accounts, investment accounts, mortgage companies and other Financial records. They will know if your mother withdraws that money on the reverse mortgage and they will ask where the money was used. If given to you, as Rovana stated it will be considered gifting. If she didn't have the reverse mortgage, she would be expected to sell the house and pay that money toward her own care until the funds are spent down to $2000.00. You need to consult an eldercare lawyer to get the most up-to-date and accurate information.

Becky you said that if my mom DID NOT have the reverse mortgage she’s be expected to sell her house & the money made from that sale would to Medicaid but my mom DOES have a RM & she’s had it most of the time she’s been on Medicaid.
She’s been drawing from her line of credit (from RM) for years, some of the money goes to pay her bills like the property taxes, groceries, lawn service, & occasional car payments (for me) so it has never been an issue with respect to Medicaid.
I’m sure if they’ve been running her social security # all these years they would see that she’s had deposits in her checking account in large amounts (some $1500 - $4000 at a time) but we were told a reverse mortgage is NOT count as income or “assets” when a person has Medicaid.
They go by the person’s income & my mom’s only income is a measly $700 a month from S.S. & SSI.
So why would the latest withdrawals be a problem (legally) for her to incur penalties or fines?

Hanging, I think the confusion here is that mom will soon be applying for Nursing Home Medicaid. Can you use some of mom's RM monies to talk to a certified Elder Care attorney?

BarbBrooklyn you are correct.
My mom is NOT applying for Medicaid now.
She’s had it for years.
She can’t live alone anymore & she is having to go live in a nursing home because she’s been diagnosed w/another illness on top of her cancer & needs 24 hr skilled care.

Nursing Medicaid is a whole different animal, Hanging. Are you talking to the business office at the and about this?

When you are applying for nursing home Medicaid it's a different set of rules. Regular Medicaid like your mother is on now looks at income. They currently do not do recovery of assets. When she applies for nursing home Medicaid there will be a five year look back period. They will require 5 years of bank statements and other financial materials. And if she has assets they will expect her to use those assets for her care. When she gets Medicaid a lien will be placed on her house, so that after she passes and it is sold the mortgage company will get loan paid off and Medicaid will receive the balance of funds. If the Medicaid lien is paid and there is still money left it would go to her estate.

You need to speak to an eldercare attorney to get the exact regulations for your state.

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. 

Hanging61

You wrote: [[[[[ "My mom still has about $40,000 left to draw on the RM.

Would she still be able to draw on that, give the $ to me in say $1,000 - $1500 at a time & not set off any red flags to anyone?" ]]]]]]]

This could cause a problem.

Please talk to a qualified elder care attorney. They know the best way for you to keep some of your mother's money, if it is possible.

Sometimes it is not possible, but only and attorney would know the proper way to proceed.

Hi Hangingon, I'd recommend talking to an attorney too  for your own peace of mind and to see how to handle the house in order to get your mom the best care. (It would be nice if you could just disenroll from community Medicaid and use the equity from her house to pay for her care, especially if she was declining quickly, but it would depend on whether community Medicaid falls under the recovery program, which it sounds like it might.)

You have done nothing wrong. When Medicaid reviews people's finances, they are looking for patterns of fraud and abuse of the system - that is NOT what is happening in your mom's case.

Re car, that was probably not an "allowable expense" per Medicaid. On the other hand, that car was used to transport you to her house as her family caregiver. You used it to run errands for her, etc. If they were to question that, it may fall under the hardship waiver. I would not worry about that until you talk to someone familiar with Illinois's rules and figure out for sure what might be an issue or not.

To put things in perspective, your mom has been on Medicaid for years. Aside from a few ER trips and diagnostic tests, she has not seen a doctor. She refused any sort of cancer treatment, and she could have been in a nursing home a long ago. Up until a few months ago, she even refused home care help which she was entitled to as part of the Medicaid program. She has in no way milked the system, and you have been the one to bear a lot of the stress and burden of helping her stay in her own home (again, at her and your own expense.)

If I were you, I'd start with the business office at your current rehab facility and see if they can recommend an elder law attorney, or someone familiar with Illinois's Medicaid policies. There must be plenty of residents who run out of cash and have to apply for Medicaid when they transfer to other facilities.

Try not to internalize everything if you can help it (I know it's so hard) and don't panic. Try to get information from someone who is familiar with the MERP policies, reverse mortgages, etc. in your state. Have you had any luck finding your mom's mortgage paperwork or anything?

I am so sorry to hear your mom isn't doing well.  

Lindylu yes, your are correct thank you.
I am going to contact an elder law attorney in our town.
Any money my mom has given to me or bills she’s paid on my behalf we’re due to hardship (I couldn’t pay) so there was/is NO FRAUD committed here.

What of my mom sells her house, pays back the RM, anything left over goes to me.
Then applies to go to a nursing home w/Medicaid?
Then because her house was already sold & proceeds were given away, they (Medicaid) can’t claim anything against my mom.

If she gives money to you, then it is G I F T I N G, and Medicaid will be denied for the nursing home. Talk to a lawyer with mom to make plans that are legal and Medicaid compliant. It’s a 5 year look back from date of application.

Medicaid has a 5 year look back period so they probably won't cover the cost of a nursing home if she sells the house, pays off the RM and gifts you the rest.

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?

Unfortunately she can't do that (gift you the proceeds) because if she reapplies to Medicaid, the 5 year look back will definitely apply. Your mom would have to do a spend down on the sale of the home; Medicaid has certain things that are allowable and you can google "Medicaid asset transfer" and "Medicaid spend down" to get an idea about what is ok. It's good that you are going to talk to a lawyer. Your mom's situation is a little complex, and they should be able to make recommendations about how to handle the house, and hopefully explain the differences between rules for community Medicaid vs nursing home Medicaid.

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..

Hanging, when are you seeing the certified eldercare attorney? THIS is an appropriate use of mom's RM money.

No one is saying that you are trying to commit fraud. The thing is, mom's money is hers to do with as she pleases, except-- if she ( and you) expect the State to fund her care, she has to be out of funds. Not out of funds except what I gave my child.

I understand that this is stressful. Are you seeing your doctor? (((((Hugs)))))). Mom is in care now, and I assume she's no longer nagging you to come over all the time, so that you can work in peace.