Payments from a reverse mortgage are not counted as income for Medicaid eligibility purposes. For married couples planning for Medicaid eligibility, a reverse mortgage on the couple’s principal residence could provide the means to pay privately for the institutionalized spouse’s care during the penalty period or look-back period resulting from gift transfers. If the couple’s equity in their principal residence is greater than $525,000, a reverse mortgage could also be used to reduce the value of that equity to allow the principal residence to qualify as an exempt resource.
To qualify for a reverse mortgage, both spouses must be over age 62 and own their home. At least one of them will be required to continue living in the home, even after the institutionalized spouse goes into a nursing home. Individuals should look for a reverse mortgage that will provide the community spouse with a line of credit which he or she can draw upon each month to pay for the institutionalized spouse’s nursing home or other long-term care expenses during the penalty period or the look-back period. Reverse mortgages can also provide a convenient source to pay for long-term care insurance premiums without having to worry about making any payments out of current income to either the long-term care insurance company or the reverse-mortgage lender.
Neither spouse will be required to pay back the mortgage so long as at least one of them continues to reside in the home. However, once both spouses have moved out of the home, the reverse mortgage will become due in full. This may require that the home be sold and that any proceeds remaining after repayment of the mortgage be paid to the spouses surviving at the time.
These remaining proceeds would be considered available resources and could result in one or both spouses becoming ineligible for Medicaid. However, if repayment of the reverse mortgage was due to the death of the community spouse or the community spouse entering a nursing home, the community spouse’s CSRA of $113,640 (for year 2012) would also become an available resource. Be aware that spousal impoverishment protections will no longer apply when the community spouse dies or when both spouses are receiving long term care.