Will A Reverse Mortgage Affect Medicaid Benefits?
What is a reverse mortgage?
A reverse mortgage is the opposite of, or the reverse of, a traditional mortgage. Reverse mortgages, also known as reverse equity mortgages, are home loans that provide tax-free income either in one lump sum or in monthly payments.
Reverse mortgages are relatively easy to qualify for because there is no credit requirement or minimum income requirement. The loan provides a steady flow of cash and is popular among seniors in the United States. Many people use reverse mortgages to offset health care costs, pay for home improvements, or to pay off debts. The maximum loan amount varies according to a number of factors including the borrower’s age, home appraisal value, home equity and interest rates.
How does a reverse mortgage affect Medicaid benefits?
There are certain circumstances in which Medicaid benefits might be affected by a reverse mortgage. The key to retaining unaffected Medicaid benefits is to spend the full amount of the money received from a reverse mortgage in the same month as they are provided. This means that money received from a reverse mortgage cannot be allowed to “roll over” to the next month and accumulate; otherwise Medicaid will count it as a liquid asset and this could affect your Medicaid benefits.
Medicaid benefits take into account liquid assets. Liquid assets are generally considered any asset, cash or otherwise, that can be easily converted into cash in twenty days. For example, currency, coin, savings accounts, and checking accounts are considered liquid assets (sometimes called liquid resources).
Thus, money from a reverse mortgage is considered a loan as long as the money is spent within the same month that the money was received. If any unspent portion of the reverse mortgage money is, for example, transferred to a checking or savings account, then that money would no longer be considered a loan but a liquid asset.
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