The Wartime Pension is paid to veterans or widows of veterans who served in the military during a wartime period, are 65 years or older or disabled, and who meet certain income and net worth limitations.
The claimant’s house is considered “exempt” toward the net worth allowance. But, how does the VA treat reverse mortgages? Is it income? Does it add to net worth?
The reverse mortgage program is intended to keep seniors in their homes, by using the equity in their homes, who otherwise would not be able to afford to do so (Home Equity Conversion Mortgage by the FHA). Often, the residence is the largest asset a senior has. Many seniors take a line of credit against their house in order to pay for medicine, home health care, and regular daily living expenses. The consequence of a line of credit is that the person still has to pay it back each month, which has exacerbated their cash flow problem. One advantage of the reverse mortgage is that recipients do not have to pay back the loan until they either move out of the property or they die.
There are four ways to receive payment from a reverse mortgage.
- Monthly annuity payments for a time certain.
- Monthly annuity payments for life.
- Line of credit – pull as you go.
- Lump sum payment.
With regard to income, the first two options provide an income stream. However, this is not taxable income. Thus, it follows that it is not considered income for VA Improved Pension (with Aid and Attendance) either. All four options are considered by the VA as a conversion of a resource, not “income” for eligibility purposes for the pension.
VA, similar to Medicaid, will treat the proceeds received as a countable resource. Thus, pulling out large amounts in the line of credit option or the lump sum payment will count against the permissible net worth limitations. Moreover, monthly payments under either annuity option, if not spent, can accumulate and negative affect net worth calculations.
Therefore, when deciding whether a client would benefit from a reverse mortgage, it is important to consider which payout method makes the most sense and then strategically plan for the situation. For more information about reverse mortgages, go to: http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hecm/rmtopten
To learn more about VA Benefits and Medicaid, if you are not a member of Lawyers with Purpose, LLC, join us at the Asset Protection, Medicaid and VA Summit September 12-13 in Phoenix, AZ. Seats are filling fast and we have limited space so register now if you’re even considering this opportunity!
Victoria L. Collier, Certified Elder Law Attorney, Fellow of the National Academy of Elder Law Attorneys, Co-Founder, Lawyers with Purpose, LLC, and author of 47 Secret Veterans’ Benefits for Seniors…Benefits You Have Earned but Don’t Know About.
We appreciate your sharing. This is a very state specific issue and the lump sum is countable in some states under the Medicaid program. It is important to know your own state laws.
Be sure to read the fine print on a reverse mortgage. The former mayor of Kansas City, MO took out a reverse mortgage and apparently didn’t. When he was unable to make the payments he was in immediate peril of being dispossessed of the home in which he and his now seriously ill wife had lived for 40+ years.