Medicaid and a Reverse Mortgage Oh My!

[Erik Drentlaw]

Fellow BP'ers I need your infinite knowledge to help me with a possible deal!

By word of mouth I heard of an opportunity. My wife and I met with the potential sellers and discovered they were the children of the owners. Their father had passed away recently and the mother was sent to a permanent nursing home. The mother is on Medicaid and had taken out a reverse mortgage on the property. There still seems to be plenty of equity in the property. It is my understanding that the kids are working on putting the house into a trust but that would mean the bank would call the reverse mortgage due.

Do I...

A. Let them transfer title or put house into a trust and then notify the bank. Have the kids then notify the bank of us and our offer, and try and work a deal out with the bank before they foreclose?

B. Try to figure out a way that the kids avoid giving the home to the bank and sell to us prior to the bank being notified?

I know Medicaid has strict rules about assets and does not count the house as an asset as long as it is a primary residence however as soon as it is know that the owner will not be returning Medicaid can stop paying and count the house as an asset.

All help is appreciated!