Many individuals wonder if they can obtain a mortgage on real property that is owned by a Medicaid trust. Unfortunately, a bank will not likely offer a mortgage or home equity line of credit for property that is in an irrevocable trust. However, in New York State, a Medicaid trust that is irrevocable can be revoked. This means that an individual has the ability to remove the real property from the trust in order to receive a mortgage or home equity line of credit on the property. However, consent must be obtained from the beneficiaries of the trust. Obtain consent from those who are beneficially interested must comply with strict requirements. For this reason, it is important to have an experienced attorney provide assistance.
It is worth noting that by removing real property from an irrevocable trust, and then later transferring it back into the trust, will trigger the 5-year look-back period for Medicaid eligibility. This means that a person will lose the duration of time that the property was in the trust for purposes of qualifying for Medicaid because the transfer will have re-started the clock. This could potentially invoke a penalty period for a Medicaid applicant.
Recently, there have been some banks that will provide a reverse mortgage on real property that is in an irrevocable Medicaid trust. However, the trust must meet certain guidelines set forth by the bank for underwriting purposes. In this instance, a trust can be amended so long as all beneficiaries consent. If the beneficiaries consent, then the terms of the trust may be revised in order to comply with the bank’s guidelines.
Under certain instances, a property that is subject to a reverse mortgage may require that a homeowner pay the mortgage balance in full prior to being transferred into a trust. For this reason, it is important to obtain the bank’s permission before a transfer takes place. Once a property is already in an irrevocable trust, it is a complex process to determine whether or not a mortgage should be taken out. It is important to seek guidance from an experienced attorney prior to making a decision.
If you are in the process of planning for your future needs or the needs of a loved one, an experienced New York estate planning attorney can give you the legal guidance necessary to help plan for their future. From the simple to complex, the attorneys at Blodnick, Fazio & Associates are skilled in all aspects of estate planning and dedicated to representing their clients with diligence and compassion. For more information or to schedule a consultation, contact our Garden City estate planning law firm, at (516) 280-7105.