My wife and I are considering a reverse mortgage, since we have a lot of equity in our home and very little cash flow. She is in the early stages of dementia. Would the reverse mortgage affect Medicaid eligibility, and what happens if we are considering establishing a Living Trust Plus(TM) income only trust? Thanks for your help.
Dear Mr. Gagtrom,
If your wife should need nursing home care in the future, as a general rule, a reverse mortgage does not affect Medicaid eligibility. Keeping money in a reverse mortgage line of credit in Virginia, and in most other states, does NOT count as a resource for Medicaid eligibility purposes so long as the house itself is an exempt resource, which it would be for your mother as long as she is living in the home and receiving home-based Medicaid services.
However, transferring money from the reverse mortgage line of credit to a bank account and leaving it there past the end of the month would convert the exempt home equity into a countable resource and that could make her lose her Medicaid eligibility. The important distinction between countable resources and exempt assets is quite complicated.
Reverse Mortgages and your Living Trust Plus(TM)
If you are one of our Living Trust Plus(TM) clients, or considering establishing a Living Trust Plus(TM) income only trust, it will come as very good news to you that you can obtain a reverse mortgage even though your house is titled inside of your Living Trust Plus(TM) income only trust. There are very complex rules for this, and there is only one lender in the country that Mr. Farr is aware of that offers this service, but they have a location in Virginia and he works with them regularly to help many of his clients establish reverse mortgages inside their Living Trust Plus(TM) income only trusts.
Since your wife is facing the possible need for long-term care in the future and you are thinking about getting a reverse mortgage, you should get an opinion from an experienced elder law attorney such as Mr. Farr before proceeding.
Hop this is helpful,