This truly depends on a lot of factors. You should consult with an attorney to determine what your brother in law's options are regarding this matter. The answer to your question will be based on the unique facts related to your case.
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Him being on Soc. Sec. Disability is not relevant. However, to get Medicaid, your brother-in-law must keep his countable assets below $2,000. In general, a distribution from a reverse mortage is not income in the month received, but rather conversion of an exempt asset (assuming the house is already exempt); however, if the money from the reverse mortgage remains into the next month, it becomes a countable asset. Medicaid is the most complex area of law in existence, so I strongly suggest you confer with an experienced Elder Law Attorney regarding this matter.
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The short answer is if the lender will grant a reverse mortgage and the borrowers meet age and other requirements, they can get a reverse mortgage. If the mortgage causes your brother to exceed resource limits, he loses Medicaid. An elder law attorney probably can advise on options to get the mortgage and keep Medicaid. DIY almost surely will lead to loss of Medicaid because the rules are VERY complex.
Lawrence Friedman, Bridgewater, NJ. Certified as an Elder Law Attorney by the ABA approved National Elder Law Foundation, former Chair NJ State Bar Association Elder and Disabilities Law Section, Member Board of Consultors of NJSBA Real Property, Trusts & Estates Law Section, Vice Chair Special Needs Law Section of National Academy of Elder Law Attorneys, and Master of Laws (LL.M.) in Taxation from N.Y.U. School of Law. Visit SpecialNeedsNJ.com for articles and Q&A on elder law, special needs, wills, trusts, estates, and tax. Visit SpecialNeedsNJ.com/blog and subscribe for free timely updates to be delivered to your inbox. Information on both Avvo and SpecialNeedsNJ.com does not constitute legal advice, as it is general in nature and may not apply to your situation or be subject to important changes. No attorney client relationship exists unless set forth in written engagement terms.