Posted by Carol_SoCal on 5/13/05 1:01pm
Msg #37525

Reverse Mortgages

Reading the newspaper this morning I saw three ads for reverse mortgages. Have any of you done any of these signings, and if so are they much different then let's say a HELOC; and is it a program that you would be interested in for yourself or for your senior family members?

Reply by SamIam_CA on 5/13/05 1:12pm
Msg #37531

My parents are in their 70s and looked into it. They would only get a small % of what the fair market value of the house. They when they do 'cross over' my sister's and I would inherit nothing. Personally if you have kids, I think it is not the best choice. However, if the seniors have no one to pass the property down to, I think it is a great way to insure you keep your home your whole life.

Reply by Melody on 5/13/05 1:20pm
Msg #37540

Not a good choice for family

SamIAm has the right info.

What I have seen and like better:
Elderly people get a HELOC on their homes with a pretty high limit. They get a fixed rate. There is usually a nominal fee, like $50 annually, to keep it open.

In the event of a medical emergency, they can tap into their home's equity to get cash quickly.

If they need to move into a retirement facility, they would still have some equity left after the sale of the house. This equity would help them with nursing home / assisted living / Continuing Care Retirment Community fees.

A CCRC is especially good because the surviving spouse will not be out in the street if the residual equity's money runs out.


Lenders and loan officers love reverse mortgages: they make a killing.

Reply by Mike/NJ on 5/13/05 1:29pm
Msg #37547

I have done a few of them. The lenders are a pain, you must explain everything to the people signing it takes about 2 hours per signing if things go well.

You never know what kind of shape you maybe in at that age. The thing I don't like is Healthcare reps who are POA's and sign them for the clients who owe them thousands of dollars.

Legal stealing IMHO.

Reply by Sonja on 5/13/05 2:03pm
Msg #37552

In my opinion, an irrevocable trust and a lease for $1.00 a year (to the trustee's) til death or having to go into a Nursing home, would save assests.
I've seen where some people have had revocable trusts, and they have gotten sick and had to go into the hospital. The doctors have made the person, revoc the trust and pay them. So an irrevocable trust would protect assests.
However, you had better trust whomever you make "trustee (s)" - because they could throw your butt out of your own house if it isn't done correctly.
Also, if you go into a Nursing Home or Assisted Living type situation, Medicare and Medicaid would pay, instead of coming out of your assests.

Reply by Melody on 5/13/05 4:22pm
Msg #37598

Correct re Trustee/Estate. Not quite correct re Medicare.

Nursing home and assisted living payments by Medicare and other government agencies is very, very tricky.

If you are really interested and want to look at how this works in California, read this article. The attorney author is one of the few in California who knows the in's and out's of protecting the family estate so the surviving spouse does not wind up out in the street. I have worked with him personally.

VERY tricky stuff! If do not handle everything precisely right, the surviving spouse (usually the wife) winds up penniless.

Reply by Sonja on 5/13/05 5:34pm
Msg #37609

Re: Correct re Trustee/Estate. Not quite correct re Medicare.

Melody -- Each State seems to have different criteria on this. So it is best to seek "good" legal advice (an attorney who specializes in Trusts / Estates) regarding this issue.

You are quite right that this is kind of "Tricky". That is why an expert in the field is required.

Horrible to see old folks lose all their assests due to an illness or nursing home care.

Reply by BrendaTX on 5/13/05 6:28pm
Msg #37624

Re: Correct re Trustee/Estate. Not quite correct re Medicare.

**Horrible to see old folks lose all their assests due to an illness or nursing home care.**

What are their assets for if not to take care of them when they need care?

Reply by Sonja on 5/13/05 7:00pm
Msg #37628

Re: Correct re Trustee/Estate. Not quite correct re Medicare.

And what happens to them when, and if they get better and could go home from the Nursing Home or Hospital? Just let them live in the streets, after they had to sell or use up their life savings?
That's dang sick!

Reply by BrendaTX on 5/13/05 7:11pm
Msg #37631

Re: Correct re Trustee/Estate. Not quite correct re Medicare.

*That's dang sick!*

There is more to it than this, Sonja. You did not say lose their home, you said lose all their their assets. There is a difference between losing assets to protect them for their offspring's inheritance and for using their estates for taking care of themselves.

I am sorry you feel my opinions are "sick." I feel that people are responsible for themselves to the degree, earning capability, and abilities that they are blessed with. This is my opinion whether or not you believe it is sick.

Reply by SamIam_CA on 5/13/05 7:21pm
Msg #37635

Re: Correct re Trustee/Estate. Not quite correct re Medicare.

***There is a difference between losing assets to protect them for their offspring's inheritance and for using their estates for taking care of themselves. ***

I totally agree. Isn't that (taking care of ourselves) what we are all saving for? It is not right to leave an inheritance for your kids while leaving your medical bills to the government.

Reply by BrendaTX on 5/13/05 7:38pm
Msg #37642

Thanks, Sam...I should have said:

There is a difference between protecting assets to avoid losing an offspring's inheritance and using estate assets to take care of the owner of the assets. I have been wrangling with a stomach virus for three days and my focus is not what it should be.

My mother and my dad/step-mother hope to leave something to their children. However, I know they both would want me to use their assets to care for them and would never look to shelter their accumulated assets to save for me so they could draw medicaid assistance.

In fact, I don't think the government takes this lightly either.

Reply by BrendaTX on 5/13/05 7:54pm
Msg #37651

Being blunt:

Maybe I can say what I mean this time.

IMHO:

(1) If you do certain things to transfer/protect assets so you can get Medicaid before you really are at the Medicaid income/ownership level to receive it -- that's dishonest.

(2) Transferring assets just to shelter them so you can get medicaid while keeping them available so your kids can later use the assets to take a cruise, (or to funnel back to you so you can draw medicaid and keep all your money, too) is dishonest.

Remember: I said IMHO...because that's what it is. My views...my way of seeing things.

Reply by SamIam_CA on 5/14/05 11:40am
Msg #37768

Re: Being blunt: I think you said it just right n/m

Reply by Sonja on 5/13/05 8:00pm
Msg #37654

Re: Correct re Trustee/Estate. Not quite correct re Medicare.

Have you ever heard the old saying.... "If you have your health, you have everything"?
You obviously don't know how much it costs to be in an intensive care unit -- you could go through $250,000.00 in two weeks easily. Nursing Home Care is also enormously expensive.

I'm glad you are in good health -- hope you don't get really sick.

Most people want to be able to leave something to their offspring. However, not everyone has offspring either --- so each persons situation will be different.

Trusts can be an option for some people -- depends on their situations.
In my opinion they can be useful. And if a person really wants to leave the old homestead (which is an asset) to the offspring --- why not let them, they worked for it all their life.

I don't know about you but, I've paid my share of Fed Taxes and Medicare taxes through out the years.

I'm glad that you are a very wealthy person, and can provide for yourself no matter what may happen.

Reply by Ernest_CT on 5/13/05 9:44pm
Msg #37684

What started out as questions and exchanges of ...

... opinion has turned into a vicious personal attack. Brenda does not deserve the abuse. Stop it.

Reply by Sonja on 5/14/05 11:40am
Msg #37769

Re: What started out as questions and exchanges of ...

Brenda obviously does not know what a Trust really does or how it has to be set up.
Not everyone knows all aspects of things. Many Trusts have to be in place for many years
before they are finalized.

Brenda was being "Blunt" (her term) -- I've seen her be blunt with others also. However, she is entitled to her opinion, just like others. And I was just giving some information that may enlighten some people that may not know about other avenues.

If she does not like what others are saying, she doesn't have to contribute her two cents.

Reply by Sonja on 5/14/05 12:21pm
Msg #37779

Last....

Just so there isn't any confusion. Trusts are perfectly legal.
They are not "dishonest" in anyway. If they were "dishonest" or illegal they wouldn't be
allowed.

Reply by BrendaTX on 5/14/05 12:32pm
Msg #37785

Re: Last....

Sonja,
No one said trusts were illegal. IMHO, you have taken things way out of context because you don't like what I think. That's okay, but let's just keep the record straight.

Again, I am stating my opinion here so don't take it so personally.

**If they were "dishonest" or illegal they wouldn't be
allowed.**

Moral crimes and legal dishonesty goes on all the time.

You cannot legislate morality. Unfortunately, some folks just don't have a moral compass.

Reply by SamIam_CA on 5/14/05 12:36pm
Msg #37787

Re: Last....

Sonja said ***I've paid my share of Fed Taxes and Medicare taxes through out the years.***

Just because something is legal does not make it 'right'. Maybe if less people abused the trusts then you wouldn't have had to pay so much in taxes.

Reply by Sonja on 5/14/05 1:02pm
Msg #37791

Would you kindly...

I would like to see you change the Federal Trust Laws then.
I don't make the Laws. I just have abide by them.

Reply by BrendaTX on 5/14/05 1:47pm
Msg #37804

Sam...

Thanks for your comments as I was beginning to doubt my original pretense. To be clear:

Fact: It's been a few years since I read through an trust created by the probate lawyer I worked for.

Fact: The only experience I have had with creating irrevokable trusts was observing the attorney setting them up for the purpose of avoiding probate. In this context, they were not created for people to avoid having too much money/assets so they could snag government assistance. These people had created retirement accounts, etc. to take care of themselves, of course, and were avoiding public disclosure of their assets through probate, plus doing wise estate tax planning.

Opinion: Government assistance is a very good thing for the unfortunate; anyone can become unfortunate by a tragic change in circumstance. I hope it would be there for me if I encountered tragic circumstances. But, abuse of the system will/is break/breaking the system.

Opinion: Government assistance not for the purpose of abuse through trusts or fraudulent transfers so that assistance will be there for the truly unfortunate. To take advantage of it when it is not necessary burdens the current working taxpayers and would be moral dishonesty for me.

Reply by SamIam_CA on 5/14/05 2:13pm
Msg #37810

You make perfect sense to me - now go enjoy the weekend! n/m

Reply by BrendaTX on 5/14/05 2:48pm
Msg #37821

Re: You make perfect sense to me - now go enjoy the weekend! n/m

Good advice and I'll take it as I am impatiently waiting for friends to get into town from "back home" ... we have a "hoedown" to kick off across town.

Reply by BrendaTX on 5/14/05 12:27pm
Msg #37783

As the poster knows...

**Brenda obviously does not know what a Trust really does or how it has to be set up. **

As the poster knows, my ignorance, or lack thereof, regarding trusts was not what my comments were about. Apparently, it disturbed her to hear an opinion differing from hers. I say this because she responded that my statements were "dang sick."

If differing opinions disturb her, perhaps she needs to follow her own advice: *If she does not like what others are saying, she doesn't have to contribute her two cents.* However, I think that opinions and differences are what make people and life interesting...and, I welcome hers...even if she thinks as she obviously does.

BTW - "Being blunt" was not directed at anyone--I was trying to recover my poor attempts at stating my opinion.

Reply by Sonja on 5/14/05 1:03pm
Msg #37792

Think what you want n/m

Reply by HisHughness on 5/14/05 5:43pm
Msg #37837

Re: Correct re Trustee/Estate. Not quite correct re Medicare.

I am reminded of the fellow whom my firm represented in Atlanta, about 25 years ago. He owned the biggest shopping center in the Atlanta suburb where I practiced. When he turned 65, he transferred ownership of the shopping center to his daughter so he could qualify for Medicare. I don't think that was the kind of situation the program was designed to cover.

Reverse mortgages are just one arrow in the quiver of financial arrows. Sometimes they fit, sometimes they don't. If they don't fit, they are awfully expensive money. When they do fit, they are quite useful.

They are also, as one other member has pointed out, normally more trouble than the typical refi or HELOC. It is because of that that I recently increased my standard fee 20 percent on all reverses.

Reply by Bobbi in CT on 5/13/05 2:28pm
Msg #37554

Good estate planning tool...

Not an attorney. Not giving legal advice or recommending this loan product.

In the hands of the right attorney, this can be an excellent estate planning tool. Not like the early 1990s version - no balloon (150 year term for age of youngest borrower) and not always treated as an annuity. For estate planning and tax purposes, the cash out is not treated as "income". Upside, no income requirements, $$ can be taken in multiple ways (including paying off existing mortgage plus line of credit for remaining funds) can be a good tool for quality of life and Medicaid planning (done correctly) plus if the house isn't worth the unpaid debt at termination then lender does not go after estate. Also, heirs have ability to keep house and refinance to pay off loan or sell - depending on value of home at death of surviving borrower, may be little or no equity left. Heirs may not get as Big a Buck as they want from dead parents.

There are multiple products. The high-value ones have no "cap". The products through HUD have a maximum loan cap based on state and county the home is in. One of the HUD products does have high up-front fees. Also, feds have a cap on total amount HUD will loan nationwide - cap just recently increased. Anyone applying for these must go through a 20-30 minute "education", which can include children, PoA, social service worker, and anyone else borrowers want with them during "education".

LONG time at the table. Only ones I have seen in CT have been handled through attorneys.

Reply by Carol_SoCal on 5/13/05 2:37pm
Msg #37556

Re: Good estate planning tool...

Invaluable information received, as usual. Thanks Carol ;o)

Reply by Kevin Ahern on 5/13/05 4:32pm
Msg #37600

Re: Good estate planning tool...

Bobbi

Have you seen any limit on the equity that can be cashed out in a reverse mortgage.
If the cash out is decent, it can be invested in a FDIC insured money market/savings/CD plan, and generate income for the elderly throught the interst. What has your experience been so far?

Reply by Bobbi in CT on 5/13/05 7:17pm
Msg #37633

No one recommends Reverse Mtg as investment tool ...

The most recent seminar (attorneys, bank VPs, loan officers, financial planners) do NOT recommend using a reverse mortgage as an investment tool. The variable interest rate starts high and can get higher as time goes on. If HUD backed (average person's home), the up front frees are "Really High" as quoted by loan originators. According to them, "do the math" negative return on investment because the mortgage rate will always be higher than anything you can earn on the investment. I don't remember the examples, but they mathmatically proved this with two real-life loan scenarios. It's not the purpose of the cash-out/no payment loan product; spend the money on yourself and day-to-day needs to improve "quality of life".

Most practical and best uses have been quality of life (repairing home, vacations, new(er) car, breakfast at McDonald with the girls after church on Sunday [LO did one for an elderly woman who could no longer afford the $3 because fixed income and rising cost of living, gave her a little extra each month for breakfast out, senior citizen trips, furnace repair and paint the house]. Another example was a couple who purchased a new second home in Florida mortgage free (which goes to the kids ) because the principal residence wasn't going to be kept by family after death anyway - also gave family a "vacation home" to enjoy now. Purchasing long term care insurance and using extra $$ per month was another option.

One example give from a loan officer (who has a masters in gerontology and specializes in only these type of loans), was a $312,000 (based on HUD cap with $34,000+ closing fees) reverse mortgage: $75,000 paid off existing morgage with monthly payments, there's a reserve amount for monthly $30 fee and a few other costs, remaining $$ is in a HELOC that Earns a variable rate of interest on balance in account. Elderly borrower then took dream-of-a-lifetime cruise with adult child (paid for both of them) and draws $200 per month from HELOC to meet "comfortable" cost of increased living expenses plus no longer has to worry about how to make mortgage payments.

It's a specialized product and doesn't work for all, but under the right circumstances can good for "quality of life" or tax and estate planning. Key is the money isn't "income" so it is not taxed as income - just have the "extra" you need automatically moved from HELOC to your checking account each month. Except for the Weathly High-End homeowner product, the HUD-backed products have a cap based on the county and state the home is in. No requirements on what you can do with the cash if you get the loan - could blow it all at the casino if you wanted.

Reply by PeterL_CA on 5/13/05 7:51pm
Msg #37647

Carol-

I've done a few of these. It actually is a rather good tool for people in their "golden years" to get equity out of their home, tax free, and painlessly.

The signings are a PIA. The last one I did was the pkg I kvetched about elsewhere in this forum, that took a toal of 5 hours. That's because people doing revers mortgages are invariably elderly and usually quite infirm. For some of them, just picking up a pen is physically difficult. Actually using the pen, to sign their name a hundred or more times taxes them to the limits of their endurance.

That said, I'll keep doing them, but I now know that there are ways that escrow can draw the docs to minimize the writing for POAs, and I'm insisting on that. If anyone wants to know more about the right way to do this, e-mail me, and I'll put you in touch with one of my favourite escrow officers

Reply by ERNA_CA on 5/14/05 2:19pm
Msg #37813

Work all your life to own a home. Pay SS and medicare throughout all of your years of employment, then you have to reverce your mortgage just to survive, or perhaps loose all you worked for if you loose your health. There is something very wrong about this piture.