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#172: How a reverse mortgage relates to the client’s estate plan


After hearing so much about reverse mortgages, the two of you have become interested in exploring that option as a way of establishing a funding source as major updates become urgent on your seventy-year old home. Your big hesitation in moving forward is that, early in 2023, you spent a lot of time and money on finalizing your estate plan, and you do not want to have to redo all your documents.  As part of that plan, upon the second of your deaths, the home is to go to your daughter (the only one of the three children who lives nearby and who does not own a home), with other assets going to the others to “balance out” the inheritance values. If the home were to have a loan against it, you fear that would upset the balance you were trying to achieve.

Establishing a reverse mortgage line of credit would not necessitate a total reworking of your estate plan, and your documents can continue to state that your daughter will inherit ownership of your home. With reverse mortgage loan in place, upon the second of your deaths, your daughter would need to pay off the loan balance in order to keep possession. Were she to decide to sell the home instead, she’d retain any proceeds in excess of the loan balance. On the other hand, in the unlikely event that the home were to be appraised at less than the outstanding mortgage balance, your daughter would not need to pay back any money, because a reverse mortgage is a non-recourse loan.

 One tactic you might consider is to use a portion of your home equity to fund a survivorship (second-to-die) life insurance policy with your daughter named as beneficiary. That would ensure she’d have enough money to pay off the reverse mortgage balance.

Housing wealth is a very viable source of contingency funding for future remodeling needs, and a reverse mortgage need not mean a total “updating” of your carefully thought out estate plan.

Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here (and scroll down).

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Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees. David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: Equal Housing Lender