While reverse mortgages do not affect Medicare or social security income, they can affect local programs such as Medicaid. In Ohio, the proceeds from a reverse mortgage that is received in a lump sum will count toward eligibility. If you are someone that needs to be on Medicaid, “gifting” and additional cash flow may ruin your chances for eligibility. You can consider leaving the lump sum payout in the line of credit to ensure it doesn’t mix with other funds, but even then you will need to keep all receipts for services and goods to prove that the money was not given away. If you need to increase your cash flow from month to month, you should make sure that you actually need the money from the reverse mortgage payout to pay bills.

Key questions aging adults should answer regarding their plans for a cash flow or lump sum received from a reverse mortgage are:

  • Am I already in poor health?
  • Do I plan on “gifting” the money to a relative?
  • Am I using the money to pay for in-home care?
  • Do I have long-term care insurance already?
  • Am I planning on applying to Medicaid soon?

If you can answer yes to any of the above questions, you should contact a local elder law attorney before applying for a reverse mortgage. It is also advisable that you bring a family member with you with consulting with an attorney to be assured that you understand all the information presented to you as the rules for Medicaid are very complex and change often.