What To Do When Mom And Dad Want To Sign A Reverse Mortgage

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Adult children have reason to be wary when their parents start talking about reverse mortgages. The loans make sense only for those who plan to stay in their homes for the rest of their lives and can afford to pay property taxes and insurance for that long. But elder law and reverse mortgage experts say they frequently encounter resistance from children less concerned about the terms of the loan than about losing their presumed inheritance.

A reverse mortgage, which is federally insured and issued under the Home Equity Conversion Mortgage program, is a strategy that helps homeowners age 62+ to borrow money against their home equity. Interest and insurance are charged throughout the life of the loan, and the total becomes due when a borrower dies.

Reverse mortgages can be costly, but are (in some cases) the only option for older homeowners without cash and who have mounting health care expenses. A recent article in The New York Times, titled "Reverse Mortgage Realities," cites experts who believe the use of these loans will increase as baby boomers continue to retire. In 2013, half of all Medicare beneficiaries had savings below $61,400, according to a recent Kaiser Family Foundation report quoted in the article.

The best course of action is to get the entire family involved in the discussion about whether to take a reverse mortgage; at times the children understand the financial straits of their parents and, at other times, they can be vehemently against it.

Seniors should consult with an estate planning attorney or an elder law attorney to determine if this strategy is a good fit. The duty of the attorney representing the parents is to advise them regarding what’s in their best interests, rather than the interest of their children. Communication is the key, along with sound legal advice.

Reference: New York Times (April 10, 2014) "Reverse Mortgage Realities"

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