Most people who need medical care and services pay for at least some of them with their own money — perhaps selling some assets or tapping into savings accounts, stock portfolios, or pensions. Several additional potential resources, based on personal assets or available from state and federal programs, may be less obvious or less familiar.
Home Equity Conversion Mortgages
A home-equity conversion mortgage (HECM), or “reverse mortgage,” is a loan against the value of a home that must be repaid when the last surviving owner moves out or sells it. The arrangement allows homeowners who are at least age 62 to convert equity in their homes into one-time or monthly cash payments or a line of credit. The loan advances are not taxable and generally do not affect Social Security or Medicare benefits.
The amount a homeowner can get this way varies by borrower and depends on the:
- Age of the youngest borrower
- Current interest rate
- Lesser of appraised value or the HECM FHA mortgage limit of $625,500 or the sales price
- Initial mortgage insurance premium
A quick estimate is available through the National Reverse Mortgage Lenders Association’s online calculator.
These mortgages are rarely a good option if a homeowner is likely to enter a nursing facility within three years. Some potential drawbacks include:
- Hidden costs. HECMs are expensive to secure, usually involving substantial costs for processing, insurance, interest, and ongoing services added to the overall loan costs.
- Estate planning complications. If the borrower leaves the home to family members or other beneficiaries, it will be encumbered with the new mortgage debt if it’s not paid off before death.
- Jeopardizing benefits. Equity borrowed as a lump sum or line of credit may jeopardize eligibility for some need-based benefits, such as Medi-Cal, SSI, and CalFresh — the state’s food stamp program, especially if the payments cause the homeowner to exceed the allowed amount of cash on hand.
- Repayment requirements. Repayment obligations often catch people unaware. If the borrower moves into a nursing facility permanently, the loan from anHECM must be repaid within a short time — usually a year. And if the home is sold, the loan must be repaid out of the proceeds of the sale.
California law provides safeguards, requiring consumers seeking this type of mortgage to first receive advice on costs, implications, and alternatives from a housing counselor approved by the US Department of Housing and Urban Development (HUD).
For more information or to report potential problems with HECMs, contact the nearest HUD office.
Help from Family Members
Family members, particularly adult children, may be able to help cover the costs of care. But beware that if such financial support is paid regularly, it may be counted as income when determining an individual’s eligibility limits for Medi-Cal coverage. If Medi-Cal coverage is a concern, then family members should make payments directly to a care provider instead of to the resident.
If there are relatives or others who are willing and able to contribute to care costs, it may also be wise to get those commitments in writing to help avoid misunderstandings and to emphasize their importance.
A trust is a legal arrangement in which one person transfers assets to another person who then manages and controls them. A particular type of trust, a charitable remainder trust, allows people to use their own assets to help pay for care while contributing to a charity and receiving tax deductions. Property is placed in the charitable remainder trust, then a person is named as an income beneficiary to get periodic payments during life and a charity is named as final beneficiary to get the remainder of the property when the income beneficiary dies.
Since the amount of money available to be paid for care is tied to the amount in the trust, such trusts are only feasible for those with a substantial amount of money. And because charitable remainder trusts may affect tax obligations and eligibility for Medi-Cal and other benefits, it is best to consult an experienced estate planning attorney or tax professional for advice and help.
The US Department of Veterans Affairs (VA) may provide or help pay for:
- Skilled or primary care in a private home if health care needs are complex
- Homemaker and home health aides
- Adult day health care
- Some extra services for residents in assisted living
- Nursing home care units owned and operated by the VA, when care is required for short periods
- State veterans facilities specializing in longer term care
- Community-based facilities focusing on long term care approved by the VA
- Hospice care
Eligibility is based on financial need and length or type of military service. Coverage is more likely when a veteran has suffered a service-related disability; those who are not disabled may need to provide a copay. Dependents and survivors may also qualify for some benefits.
The type of care available depends on the particulars of each facility.
To find a VA nursing facility near you, contact the local Department of Veterans Affairs Health Benefits Center.
For more information on veterans benefits, see the guide published by the US Department of Veterans Affairs, Federal Benefits for Veterans, Dependents, and Survivors.
Individuals who meet the criteria for the focused programs below may qualify for benefits instead of, or in addition to, other sources.
- Supplemental Security Income/State Supplementary Payment. Some Californians who have limited income and few resources ($2,000 for an individual and $3,000 for a couple) might be able to get help paying for care from the Supplemental Security Income or State Supplementary Payment program. Both are funded by the state and federal governments to guarantee a minimum monthly income to people who are 65 and over, blind, or disabled. For more on SSI/SSP requirements for nursing care, contact the nearest Social Security Administration Office.
- State Public Assistance Programs. For information about state public programs available for medical, food, and cash assistance, including an eligibility calculator, visitMyBenefitsCalWIN.