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#129:  Incorporating a reverse mortgage as part of an overall estate plan


In advance of your daughters’ and grandkids’ upcoming Easter visit to Indiana from the West Coast, your oldest has mailed you a copy of the book Having the Talk, by Jack Tatar. The two of you, both retired and now in your late 70s, have experienced various health challenges, and the three girls are apparently concerned that you may not have done proper estate planning. Truth is, you have.  You’ve recently reviewed and updated your estate planning documents, even going so far as to pre-pay funeral and burial costs. However, you have not been in the practice of discussing your plans with your daughters or their partners. You will be glad to reassure them that you’ve assigned them secondary powers of attorney (concerning both healthcare and financial decisions). However, given that there are two of you, you’ve assumed that in the event one of you unable to function fully, the other would take over.

Together you’ve made one very recent and important financial decision, which is to apply for a reverse mortgage on your home, with the idea of not only financing some improvements to the house and grounds, but also to have a source of emergency cash if and when needed as you “age in place”. Frankly, it had not occurred to you to share this decision with your daughters at this time. While you are unified in your resolve never to be a burden on your children, you value your autonomy and privacy.

In the course of arranging for the mortgage loan, you were happy to learn that after the second of you has died, or when you’ve been forced by illness to move), the girls as your heirs would have no responsibility for the deficit should the value of the home be less than the amount owing on the mortgage. On the other hand, should they decide to sell and the proceeds exceed the amount owed on the mortgage debt, they’d inherit the excess funds.

In a review of the book The Talk, the publisher mentions that, in addition to helping parents create a safe retirement, the content is meant to “provide adult children with the understanding they’ll need when considering their own retirement.”  Your daughters have shown bravery and love for you in broaching the sensitive subject, and actually, explaining your decision to tap your housing wealth would be a great way to kick off your family’s very own version of “the talk.”