01/10/2023
With the divorce pending, your soon-to-be ex-wife is moving to another state. You, meanwhile, are remaining in the home, buying her out of her share. With both of you retired from full time careers, (you’re 72, she 69), you continue to work as a contractor on engineering projects. Your home is fully paid for, and maintaining it poses no financial problem for you. However, you would need to liquidate a substantial portion of your retirement investments in order to buy out her share, and that would create a substantial tax liability. The divorce settlement itself is still being mediated, with several sessions still to come later this month, and you want to have a viable plan to propose.
Using the built-up equity in the home itself (in the form of a reverse mortgage) might prove to be the best source of funds for a substantial portion of your “buyout” of her interest in the property, allowing you to avoid cashing in retirement assets. Your divorce attorney’s can help you through the mechanics of the legal process. Once your wife has received her share and the ownership of the property has been transferred to you, you would have no obligation to make monthly mortgage payments, only to cover real estate taxes, insurance, and maintenance costs. (Once all the formalities have been settled, you may find you wish to make some reverse mortgage loan repayments, after all. Not only would those serve to reduce the mortgage balance and minimize interest costs, but every dollar paid would go into your Line Of Credit, which would grow at the same rate as that being charged on the mortgage balance.)
A reverse mortgage can serve as a mechanism for “splitting up” your biggest asset while keeping your retirement accounts largely intact.