If you are considering an Arizona reverse mortgage, be sure that you ask your loan officer about something called “Loss of Medicaid Eligibility”.
If he doesn’t know what you are talking about, you might want to consider finding another loan officer. It is that important.
Loss of Medicaid Eligibility: What Is It?
With a reverse mortgage there are multiple ways to get your money. You can choose to get a lump sum, monthly disbursements or a line of credit. Some of the types of payouts increase the risk of you losing your Medicaid Eligibility, and some do not.
The essence of a LOME risk is that a reverse mortgage borrower could pile up cash in an account and deny themselves the significant health benefits that medicaid could provide. Medicaid is a federal-state healthcare program for the poor. To qualify for Medicaid, a senior must show monetary evidence of poverty. Although the program varies from state to state, a federal “means test” says that you can have no more than a few thousand (the number changes regularly) dollars in liquid assets.
Which means if you took out a reverse mortgage, chose the wrong payout program and later become ill and needed long term care, you may be denied Medicaid coverage based on your liquid assets.
Loss of Medicaid Eligibility: A Rule of Thumb
The general rule of thumb regarding LOME risks is this: all reverse mortgage payout options except for the line of credit option carry significant LOME risks because they could lead to risky accunulation of countable assets.
Does this mean that you should always choose the line of credit payout option when getting a reverse mortgage? I was taught long ago to try to avoid using always and never, but I can say this…
Be sure to do your homework about your options – and what possible implications your payout choices may have.