San Antonio Express-News
April 27, 2004

How does Reverse Mortgage
affect Public Benefits?

copyright 2004, Paul Premack

Reverse mortgages are only available to people age 62-plus, or whose spouse is 62-plus. Under a reverse mortgage, the homeowner is borrowing against equity to receive money from the lender. The money can be received either all at once (a lump sum) or in monthly installments. The borrower can then spend the money for any purpose.

If your mother takes a reverse mortgage, the loan must be repaid with interest. But it is not repaid until either: 1) She has died, 2) She sells or transfers the homestead property, 3) She stops occupying the homestead property as her principal residence for more than 12 consecutive months without prior written approval of the lender; or 4) She defaults on the loan by failing to pay property taxes or by failing to keep the property insured.

Your mother is worried that the monthly check she receives from the lender would disqualify her from getting Medicare, Medicaid or food stamps. Let’s look at each program to see if a reverse mortgage would interfere.

Medicare is an entitlement program, available to everyone who qualifies for social security benefits. Enrollees get benefits no matter what their income, no matter how large their assets are. A reverse mortgage will not interfere with Medicare.

In contrast, Medicaid is needs-based welfare. Seniors most often deal with the nursing home program, which pays part of the cost of long-term care. But it sounds like your mother still lives in her own home, so she might be on the Supplemental Security Income (SSI) program that includes Medicaid benefits.

The rules for SSI treat payments received under a loan as exempt income in the month of receipt. Thus they don’t disqualify her from the program. However, any funds she saves into the next month count as a resource, and if her resources build up too high, she can be disqualified. So a reverse mortgage won’t disqualify her from SSI so long as she spends the proceeds in the month she gets them.

The Food Stamp program is used by many low-income families and elderly persons with budget problems, but welfare is not a prerequisite. Your mother, if over age 60 and living alone, must have income below $749/month to qualify. If she’s getting monthly payments from her reverse mortgage, it will count as income against that limit, and could disqualify her.

Dear Mr. Premack: I read an article you wrote long ago about inheritances not being joint property. I’ve lost the clipping. Can you run it again, or tell me how that law works? – VDG

I maintain an archive my columns on the Internet at www.Premack.com. The column you are asking about ran on March 22, 1996. Under Texas law, spousal property might be either community property or separate property, depending on the circumstances. In the case of an inheritance received by only one spouse, it is the separate property of that spouse. If you don’t have internet access at home, ask a friend or visit the public library.