After much, much thought and back-and-forth conversations with each other, the two of you decided you definitely want to live out your lives in the home you’ve owned and lovingly cared for during the entire time of your marriage. True, there have been a few health challenges, but basically (you’re now both in your early seventies), you hope to continue to lead active lives. With the help of a contractor you’ve known for years, you have already begun the process of moving the master bedroom to the main floor. While, without cashing in most of your jointly held investment account, you don’t have the cash to finance it all, you’ve made a “wish list” of other remodeling to be accomplished over the coming three to five years.
You have attended two or three presentations about the benefits of reverse mortgages, but have not moved forward as yet, wanting to learn more about how such a step might affect your estate planning and even your taxes. You are not sure what would happen to the house in the event one or both of you were to need to move temporarily into a healthcare facility.
Your general practice has been not to discuss financial matters with your two children; they have each proven to be very fiscally responsible, making choices that make sense for them and their mates; they’ve never asked for your help, nor have you ever needed (once each was out on his own) to offer help to them. Right now, your documents leave everything to the two of them in equal shares, and you’re wondering how a reverse mortgage might affect that.
In answer to your question about how a reverse mortgage loan might affect your taxes – it won’t, because draws on your equity are nontaxable. In terms of estate planning, here are the basics: Upon the death of a reverse mortgage borrower (in your case when the second of the two of you dies), the loan becomes due and payable. Your heirs would have the right to buy the home, sell it, or turn it over to the lender to satisfy the debt. It would make sense to talk to your children now about the options they will have.
Conversations on the key topic of “What will happen with our house?” might include contractors you hire to adapt the home and grounds to make them suitable for ‘aging in place”, your estate planning advisor and – your children!
https://mutualreverse.com/david-garrison
Please consult a tax specialist. 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: www.nmlsconsumeraccess.org
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