My partner needs Medicaid. What about our house with a reverse mortgage?


Q. My partner and I are not married and we have a reverse mortgage that we’ve had for about 10 years. We received no money from the reverse mortgage but he now has dementia and Parkinson’s and may need to go on Medicaid and go into a home. While speaking to a state, I was told that because his name is on the deed as well as mine, even though we have a reverse mortgage, Medicaid would take preference over that. I would have to buy out his half of the house but I do not have the financial means. That’s why we got the reverse mortgage to start with. I am also disabled and have life rights with the reverse mortgage contract. Can the state force me out of my home?
— Worried

A. We’re sorry to hear about your partner’s health troubles.

This is a complicated situation.

Under the New Jersey Medicaid estate recovery rules, while there are five exceptions, correctly paid benefits can be recovered by Medicaid from an estate of an individual who was 65 or older when the individual received medical assistance, said Jason Marx, chair of the Tax & Estate Planning and Elder Law & Special Needs Planning groups at Curcio Mirzaian Sirot in Roseland.

In order for Medicaid to recover, your partner would first have to qualify for Medicaid benefits, Marx said.

Under the scenario you present, your partner’s interest in the real property owned jointly with you would be considered a countable resource and Medicaid would expect the value of that resource to be spent down in order for him to even qualify for benefits, Marx said.

In other words, your partner’s interest in the real property could make him currently ineligible for Medicaid benefits.

As partner and joint owner of the property, you could purchase your partner’s interest in the property, Marx said.

If you don’t have the means to make a cash purchase of the full value, as you noted, you could issue a promissory note to your partner, he said.

“That note would still be a countable resource and would have to be spent down for him to qualify for Medicaid,” he said. “However, as owner of the real property, you would not be at risk of having Medicaid seek to recover against that asset.”

Another option is to get married, Marx said. There are additional Medicaid planning options for married couples that could help you to manage this situation. In addition, assets that pass to a surviving spouse would fall within one of the exceptions to the Medicaid estate recovery rules, he said.

“This is a complicated situation and there are timing issues involved,” he said. “I strongly encourage you to seek assistance from an attorney who specializes in elder law and Medicaid planning issues.”

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This story was originally published on Dec. 7, 2021. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.