Reverse mortgages can be a great way to supplement your income in retirement, but the short answer is yes, your Medicaid benefits could potentially be affected if you take out a reverse mortgage.
Key Takeaway
Reverse mortgages can provide additional financial security in retirement. However, they could also affect your eligibility for Medicaid and other government programs if you receive too much income from the loan. It is important to speak with a financial advisor before committing to taking out a reverse mortgage so that you can understand any potential implications it may have on your existing benefits. Additionally, be sure to read all of the terms of the loan carefully before signing on the dotted line. With this information in mind, you can be sure that taking out a reverse mortgage is a sound financial decision for your future.
What Is a Reverse Mortgage?
A reverse mortgage is a loan that allows seniors (age 62 and up) to tap into the equity they have built in their home. This type of loan requires no monthly payments and instead pays out in one lump sum. It can be used for anything from covering medical expenses to making home improvements, but it does need to be repaid once the borrower passes away or permanently moves out of the home.
How Does a Reverse Mortgage Work?
Reverse mortgages work by allowing seniors to borrow a certain amount of money from their home’s equity. The loan can be taken out as either a lump sum or in monthly payments for however long the borrower chooses. And since it is a loan, there are interest rates and other fees that need to be paid back with the loan.
Medicaid Eligibility and Reverse Mortgages
When it comes to Medicaid eligibility, taking out a reverse mortgage can also have an impact. In most cases, the lump sum of money received from a reverse mortgage is considered income for the borrower and this could potentially affect their Medicaid eligibility. If the borrower uses the money for other purposes than what was intended when they took out the loan, then it can also lead to a reduction in Medicaid benefits.
It’s important to note here that an outright gift of the reverse mortgage money is not considered income for Medicaid eligibility purposes. So if you are considering taking out a reverse mortgage and have concerns about how it will affect your Medicaid eligibility, it might be best to consult with a financial planner first. This way, you can make sure that you are taking the best course of action for your particular situation.
Can A Reverse Mortgage Affect Home Care Benefits?
In addition to Medicaid eligibility, a reverse mortgage can also have an effect on home care benefits. Depending on the specific state you live in, taking out a reverse mortgage could disqualify you for certain types of home care assistance such as homemaker or chore services and respite care. Again, it’s important to consult with a financial planner before taking out a reverse mortgage in order to make sure that you understand exactly how it could affect your home care benefits.
Things to Consider Before Making the Big Decision
When considering a reverse mortgage, there are several key factors that you should keep in mind:
The amount of money you borrow through a reverse mortgage will count toward your Medicaid eligibility.
However, in some cases, the proceeds of a reverse mortgage may be excluded from your assets for Medicaid eligibility purposes. Please check with your local state agency about the specific rules and regulations that apply to your situation.
If you have a spouse who is not on the loan, the proceeds of the loan may not be considered when determining Medicaid eligibility.
If you don’t spend all of the money you get from a reverse mortgage, it may eventually count towards your assets and affect your Medicaid eligibility.
The interest on a reverse mortgage will also be added to your taxable income each year, so you should be aware of the potential tax implications.
Final Thoughts: Is A Reverse Mortgage Right For You?
Reverse mortgages can be a great option for many people, but it’s important to understand how they could affect your Medicaid eligibility and other types of home care benefits. Before making the final decision, make sure you consult with a financial planner or other expert who can help you weigh the pros and cons of taking out a reverse mortgage. Ultimately the decision is up to you, but most importantly, you should make sure that it works for your unique situation.