Will Surrender of House to Reverse Mortgage Company Cause Problem with Medicaid?

 In Long-Term Care Planning

Question:

My mother, who is 93, is in long term dementia care. She has a reverse mortgage but due to her never receiving monthly payments, she qualified for Medicaid. It is now time to sell the house and pay the reverse mortgage. The house was appraised at $240,000 in 2006 but would probably sell for no more than $170,000 now. She owes approximately $140,000. We realize Medicaid would get the remainder and that’s fine. The reverse mortgage company has given us two options, sell the house using a realtor or surrender the house to them. If we did surrender it, it is my understanding that they would get it all and we don’t have to deal with repairs, realtor, etc. However, would there be a problem for us with Medicaid? I’m concerned with any repairs that may have to be made to sell with realtor which I cannot afford.

reverse-mortgage-Medicaid-eligibility-Wellesley-MA-02481

Response:

The issue is whether Medicaid would deem the surrender of the property to the reverse mortgage company to be a transfer of the remaining equity of approximately $30,000, causing your mother to be ineligible for benefits for a period of time as a result. However, it sounds like you have a good argument that there would be no equity left after payment for repairs and realtor fees. I would suggest approaching the Medicaid agency with the information about the mortgage, the fair market value of the house, and the cost of necessary repairs for its sale and seek its advance approval of surrendering the house to the mortgage company.

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