Can My Son Buy My Mother’s House Despite Reverse Mortgage and Medicaid Lien?

 In Long-Term Care Planning
Medicaid estate recovery

Photo by Tierra Mallorca on Unsplashc


My mother had a reverse mortgage and she went into a nursing home and received Medicaid for no more than 7 months before she passed away. Now, I have received a letter from the state of New Jersey regarding the Medicaid she received, asking about her assets. All of the information regarding bank accounts and reverse mortgage was given to them when she applied for Medicaid. The reverse mortgage company has been contacted and we have an appointment with an appraiser (the reverse mortgage amount is over $480,000.00 and the house is not worth that much more than that). My son wants to purchase the home. Can Medicaid put a lien on the home on top of what’s owed to the reverse mortgage company? My mother has no other assets for Medicaid to recoup their funds from, only the home she lived in.


Yes. This is known as “estate recovery.” State Medicaid programs have the right, in fact an obligation under federal law, to seek recovery of from the estates of beneficiaries for  the value of benefits paid on their behalf, either after age 55 or for nursing home care at any age. However, they can only recover what’s there. If there’s no equity left after paying off the reverse mortgage, and you can prove this to the Medicaid agency, your son may be able to purchase the house for the amount due on the reverse mortgage.

However, this is a matter of what proof the Medicaid agency will require. They may accept a real estate tax assessment or a valuation by a real estate agent, but they may also require a formal appraisal. You’ll have to contact the appropriate Medicaid office to discuss the situation and learn what will satisfy them.

To get on my high horse, Medicaid estate recovery is a very unfair program and reflects the reluctance of the United States to support people in need. Medicaid will only pay for people who qualify by showing that they’re poor. Essentially, they must spend everything down except for their home. Then, Medicaid seeks to recover its costs from the remaining equity in the home. Yet, only those few estates holding more than $13 million are subject to federal estate tax. So it’s the estates of people who have run through all their liquid assets and had the bad luck to need Medicaid-covered care who must pay to support the Medicaid program. Further, often those without $13 million, but some resources, hire elder law attorneys like myself to do planning to avoid estate recovery. The result is estate recovery usually hits those least able to pay it.

Finally, in your case, it appears that your mother borrowed on the equity in the house to pay her living expenses. You don’t say whether this was the case for your mother, but many people take out reverse mortgages to pay for their care, ultimately saving the Medicaid program money. The result may be that your son can’t have your mother’s house. What’s fair about that system?

Showing 3 comments
  • Laura Elliott

    I appreciate your concern with how unfair the system is. Thank you for stating your argument in your response.

  • Chris

    Question; A relative lives in my Mom and Dads home after both parents have passed away. The house is on a reverse mortgage and there is a lien on the home from Medicaid also. Is there any way that the relative can stay in the home and just pay these entities back by just paying rent?

    • Harry Margolis

      That’s very unlikely. Most reverse mortgages must be paid off within a year of the death of the borrower. States are generally not set up to take payment over time. The best bet would be for the relative to refinance the house to pay off the mortgage and Medicaid lien. Of course, that’s much more difficult today than it was a few years ago with the increase in mortgage rates. If the relative is low income, they should see if they might qualify for a waiver of the Medicaid lien. But, depending on the state rules regarding such a waiver, they may be in a Catch 22, since they may be required to continue living in the house which they may not be able to do due to the reverse mortgage.

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