According to the US Centers for Disease Control and Prevention, a person born in the US in 2012 is expected to live for 78.8 years. That age is a significant increase since the early 1900s when life expectancy was around 50 years, depending on gender, race, and economic factors. It is encouraging that people are living longer, but you likely have concerns about your future as you get older. After you retire and are potentially living on a fixed income, you still have the same expenses as before, including food, healthcare, housing, and other necessities. Some Americans resort to a reverse mortgage to fund their lifestyles, so it is important to work with a skilled California estate planning attorney regarding your options. You may also find it useful to review some basics about the ups and downs of these financial structures

Overview of Reverse Mortgages

As an option to take advantage of the equity in your home, you can use a reverse mortgage to take out a loan on your home. The proceeds may be applied to the costs of long-term care, in-home medical care, and other qualifying expenses. It is important to note that, like any mortgage:

• You must repay the bank eventually; and,
• There are implications for the equity in your home.

Upon your death, the bank would typically sell the home and apply the proceeds to the amount of your loan. Any remaining equity is distributed to your heirs or beneficiaries under your estate plan.

Estate Planning Factors

Because it affects your estate plan, it is critical to understand the benefits and drawbacks of a reverse mortgage.

Pros

• You can live in your home during the term of the mortgage;
• The funds from the loan are not subject to tax;
• The federal government insures any reverse mortgage through an FHA approved lender; and,
• You cannot borrow more than the value of your home.

Cons

• A reverse mortgage may thwart your intent to have the home stay in the family;
• The loan becomes due when you vacate your home, such as if you need to move to an assisted living center; and,
• If you leave your home and someone else lives there, that individual may be evicted.

Contact a Knowledgeable California Estate Planning Lawyer

A reverse mortgage is not the right fit for everyone, so you should talk to an experienced estate planning attorney as you weigh the pros and cons. Please contact the Santa Rosa, CA Law Office of Charles D. Stark with questions or to set up a consultation.