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My mother is on a medicaid ward in a nursing home and her home is about to be sold after being foreclosed. Will she lose her benefits for payment to the nursing home?
If the mortgage payments on a loan against a house fall behind, the bank will eventually foreclose on the house, i.e., sell the house to repay the debt owed to the bank. If the amount owed to the bank is less than the net proceeds from the sale, then there will be money left over, which would belong to your mother. As such, it indeed could affect your mother's Medicaid eligibility.
For example, if the house sells for $100,000, but the bank is only owed $75,000, then the extra $25,000 left over after paying off the balance of the mortgage will be a countable resource for Medicaid eligibility purposes. When it was invested in the house, it was an exempt resource, but now it's just cash in the bank, which is countable. That would cause your mother to have too much money to qualify for Medicaid, unless it is spent down or converted to a non-countable asset in the same month it became available to your mother.
If Medicaid is paying for the nursing home rather than Medicare (which I am assuming, since Medicare typically does not pay for long term nursing home), some states allow the house to go to Medicaid once no one is living in it any more to help get reimbursed for some of the nursing home costs, so I'm wondering if it is legal to have a bank foreclose rather than turning the property over to Medicaid. But, every state is different. It's best to ask a lawyer who specializes in Medicaid to know for sure in your state. Or, ask the Medicaid office (anonymously if you prefer) and they should be able to tell you.
My understanding is that if the house your mother owns has been foreclosed, usually the Lender is the one that purchases, she would not be realizing any gain for the sale. That being said, there would be no effort on her benefits. However, not being a 'legal beagle', you would be well advised to consult w/one.
She shouldn't lose her Medicaid. I would heavily suggest speaking with a financial worker at your local state Medicaid office, as they know your state's rules and have been through this before- probably a lot. I am not a legal expert either, but I *think* what happens is that the bank gets it. Usually, if the home is being sold by by the family, Medicaid will take their portion from the sale and the rest will go to the beneficiaries of the individual's will. But with a foreclosure, I think the bank gets the house, as the foreclosure reverts the home back to the posession of the bank, which then sells it. I think the state loses out in foreclosures, but check with your Medicaid office to make sure.
My broker friends tell me that when a foreclosed property comes on the market, owned by the bank, it behooves the purchaser to seek out information from the bank or the listing broker as to how much is owed on the property. No informed purchaser would pay $100,000. on a property that the bank owns with a only $75,000. note due. Even with fees and commissions ( liens are extra), unless there is a bidding war, the price of a foreclosed property is usually close to what the bank wants, or less!
I bought two foreclosures during the great recession, one in FL and one in MI....both great properties, still unsold but that doesn't bother me ( yet).
2 things to look for: 1. Your mom should get a settlement statement from the mortgage company. If there is no overage on the foreclosure sale then mom gets no real $ so no income to be an issue for Medicaid right now. But if she get's any $ (proceeds) from the sale, there is income so then an issue for Medicaid. Just like Heiser said.
2. Mom may get a 1099-C from the mortgage holder for the amount owned on the defaulted mortgage plus fees & expenses. 1099-C is a Cancellation of Debt and is viewed by the IRS as income. The fact that is is totally "phantom income" doesn't matter, it is income and she will have to pay taxes on the amount OR file taxes to do an impoverishment so that the "income" does not pose a problem for Medicaid. 1099-C's are kinda wacky to figure out and I think you need a tax professional to do it for you. Not all banks or debtors issue 1099-C's but the # has increased. The 1099-C will be mailed sometime between Jan & Feb for the preceding tax year.
Attorney Heiser knows what he is talking about.....listen to him. You will need to let Medicaid know what is going on anyway as they thought the house would be there for them to take when your Mom passed. When things like this happen aren't we suppose to let them know within 30 days?
The thing is they should be able to help answer your questions, although that is not always the case, in my experience I have known more than the case worker at times. It seems to me that if there was and extra $25,000 after the sale they would simply have you spend it down by paying her nursing home costs for the next several months. This is strictly a guess on my part however.
When you do find out for sure, it would be great if you could let us know what they say in case we wind up in the same position.
By proceeding, I agree that I understand the following disclosures:
I. How We Work in Washington.
Based on your preferences, we provide you with information about one or more of our contracted senior living providers ("Participating Communities") and provide your Senior Living Care Information to Participating Communities. The Participating Communities may contact you directly regarding their services.
APFM does not endorse or recommend any provider. It is your sole responsibility to select the appropriate care for yourself or your loved one. We work with both you and the Participating Communities in your search. We do not permit our Advisors to have an ownership interest in Participating Communities.
II. How We Are Paid.
We do not charge you any fee – we are paid by the Participating Communities. Some Participating Communities pay us a percentage of the first month's standard rate for the rent and care services you select. We invoice these fees after the senior moves in.
III. When We Tour.
APFM tours certain Participating Communities in Washington (typically more in metropolitan areas than in rural areas.) During the 12 month period prior to December 31, 2017, we toured 86.2% of Participating Communities with capacity for 20 or more residents.
IV. No Obligation or Commitment.
You have no obligation to use or to continue to use our services. Because you pay no fee to us, you will never need to ask for a refund.
V. Complaints.
Please contact our Family Feedback Line at (866) 584-7340 or ConsumerFeedback@aplaceformom.com to report any complaint. Consumers have many avenues to address a dispute with any referral service company, including the right to file a complaint with the Attorney General's office at: Consumer Protection Division, 800 5th Avenue, Ste. 2000, Seattle, 98104 or 800-551-4636.
VI. No Waiver of Your Rights.
APFM does not (and may not) require or even ask consumers seeking senior housing or care services in Washington State to sign waivers of liability for losses of personal property or injury or to sign waivers of any rights established under law.
I agree that:
A.
I authorize A Place For Mom ("APFM") to collect certain personal and contact detail information, as well as relevant health care information about me or from me about the senior family member or relative I am assisting ("Senior Living Care Information").
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APFM may provide information to me electronically. My electronic signature on agreements and documents has the same effect as if I signed them in ink.
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APFM may send all communications to me electronically via e-mail or by access to an APFM web site.
D.
If I want a paper copy, I can print a copy of the Disclosures or download the Disclosures for my records.
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This E-Sign Acknowledgement and Authorization applies to these Disclosures and all future Disclosures related to APFM's services, unless I revoke my authorization. You may revoke this authorization in writing at any time (except where we have already disclosed information before receiving your revocation.) This authorization will expire after one year.
F.
You consent to APFM's reaching out to you using a phone system than can auto-dial numbers (we miss rotary phones, too!), but this consent is not required to use our service.
For example, if the house sells for $100,000, but the bank is only owed $75,000, then the extra $25,000 left over after paying off the balance of the mortgage will be a countable resource for Medicaid eligibility purposes. When it was invested in the house, it was an exempt resource, but now it's just cash in the bank, which is countable. That would cause your mother to have too much money to qualify for Medicaid, unless it is spent down or converted to a non-countable asset in the same month it became available to your mother.
However, not being a 'legal beagle', you would be well advised to consult w/one.
unless there is a bidding war, the price of a foreclosed property is usually close to what the bank wants, or less!
I bought two foreclosures during the great recession, one in FL and one in MI....both great properties, still unsold but that doesn't bother me ( yet).
1. Your mom should get a settlement statement from the mortgage company. If there is no overage on the foreclosure sale then mom gets no real $ so no income to be an issue for Medicaid right now. But if she get's any $ (proceeds) from the sale, there is income so then an issue for Medicaid. Just like Heiser said.
2. Mom may get a 1099-C from the mortgage holder for the amount owned on the defaulted mortgage plus fees & expenses. 1099-C is a Cancellation of Debt and is viewed by the IRS as income. The fact that is is totally "phantom income" doesn't matter, it is income and she will have to pay taxes on the amount OR file taxes to do an impoverishment so that the "income" does not pose a problem for Medicaid. 1099-C's are kinda wacky to figure out and I think you need a tax professional to do it for you. Not all banks or debtors issue 1099-C's but the # has increased. The 1099-C will be mailed sometime between Jan & Feb for the preceding tax year.
The thing is they should be able to help answer your questions, although that is not always the case, in my experience I have known more than the case worker at times. It seems to me that if there was and extra $25,000 after the sale they would simply have you spend it down by paying her nursing home costs for the next several months. This is strictly a guess on my part however.
When you do find out for sure, it would be great if you could let us know what they say in case we wind up in the same position.