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#19 Whole Life Insurance/Reverse Mortgage Combo Serves as Equalizer


David Garrison
Home Equity Retirement Specialist
NMLS # 1595194
Serving the State of Indiana
p (317) 644-2595 c (765) 516-0130
e [email protected]

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

With retirement planned for each of you within the next year or two, you’ve been debating whether to move closer to your son and grandchildren on the East Coast or stay in Indiana, closer to your daughter and her family. Both sets of grandkids will be entering or returning to different colleges, so it’s apparent that you’d be unlikely to see very much of them in between holiday gatherings even if you chose to relocate. With both of you in generally good health, your final mutual decision has been to stay put in your comfortable home in the Hoosier state.

Interestingly, in a family discussion about estate planning, your daughter surprised you by expressing an interest in someday inheriting her childhood home, understanding that you yourselves now hope to live in the home for decades to come. While you own a timeshare that could be bequeathed to your son, its value is far less than that of your home, on which you have less than three years of mortgage payments remaining. All these considerations are being weighed as you plan your financial future. (Basic powers of attorney and other documents have already been in place for awhile, along with long term care insurance.)

You might consider a reverse mortgage, perhaps combined with a survivorship whole life insurance policy. First of all, by replacing your forward mortgage with reverse financing, you would no longer need to make monthly mortgage payments and could divert that cash to paying premiums. Survivorship life insurance would pay a death benefit when the second of you has passed away. The insurance could serve two functions: 1. “Equalizing” the inheritances you leave to your two children, with your son receiving the time share, your daughter the home. 2. Paying back at least part of the reverse mortgage loan.

Meanwhile, the reverse mortgage would ensure that each of you has the right to remain in the home for life. After three years have elapsed (when your original mortgage would have been paid off), you could take a “draw” to help pay the insurance premiums. Your estate planning attorney can discuss with you setting up a life insurance trust to implement the plan.