Seniors and Retirees, Consider Using a Reverse Mortgage

Presented by Tracy Wayne Mitchell

 

For many seniors and retirees, the hard-earned equity in their home is their single largest asset, yet it is unavailable to use unless they take out a home-equity loan.  Conventional loans, like the home-equity, do not truly free up the equity to create a legitimate supplemental income because the money has to be paid back to the lender, with interest.

A reverse mortgage is a better way to tap into home equity without creating monthly payments and without requiring the loan to be paid back while the borrower lives in the home.  Instead of making payments, the cash flow is reversed and the senior receives payments from the lender.

 

Why do seniors use Reverse Mortgages?

Over the last several years the number of reverse mortgages nationwide has increased dramatically. Many seniors and retirees are finding they can use a reverse mortgage to pay off an existing conventional mortgage or other debt, repair and update their home, or to simply free up cash to pay for long term care, medical expenses, and/or general living. Often, a reverse mortgage allows the aging to remain in their home much longer.

The most common type of reverse mortgage is a Home Equity Conversion Mortgage (HECM). It is insured by the Federal Housing Administration (FHA). So far, in 2017, over 36,000 HECM loans were made nationwide. Around 48,000 HECMs were made in 2016.

 

What is a Reverse Mortgage?

A reverse mortgage is a loan against the equity in the home which provides supplemental income advances and requires no mandatory monthly re-payments during the life of the loan.  The proceeds from a reverse mortgage are generally tax-free and available as a line of credit, lump sum, or fixed monthly payments. The lender will recover the loan amount, plus interest once the owner(s) choose to sell their home or pass away. The remaining equity balance is passed onto heirs.

Those who utilize a reverse mortgage must continue to pay their homeowner’s insurance and property taxes during the loan period. It is also mandatory to keep up with home’s needed repairs and maintenance. The owners will retain title until they decide to sell as long as these requirements are met.

Social Security and Medicare benefits are not impacted by reverse mortgage proceeds.

 

Who qualifies?

To qualify for a reverse mortgage, one of the home owners must be at least 62 years of age, have significant equity in the home, and live in, as a primary residence, a multi-family home, a condominium, or a Planned Unit Development (PUD).  Permanent mobile or manufactured homes are sometimes eligible. There are no income or credit score requirements to qualify for the loan because there are no monthly repayments to be made.

The amount of reverse mortgage benefit for which an individual may qualify, will depend on

• the age of the youngest person on the title,
• the market value of the home and the equity in the home,
• current interest rates, and
• in some cases, where you live.

As a general rule, the older one is and the greater the equity, the larger the reverse mortgage benefit will be (up to certain limits, in some cases).  The reverse mortgage must pay off any outstanding liens before additional funds can be withdrawn. Since there are costs associated with setting up a reverse mortgage it is not recommended for owners who do not intend to live in their home for a reasonable amount of years to realize the benefits.

 

What are the closing costs?

The costs associated with getting a reverse mortgage are similar to those with a conventional mortgage, such as the origination fee, appraisal and inspection fees, mortgage insurance and other servicing costs.  With a reverse mortgage, all of these costs can be financed as part of the mortgage.

Under the HECM program, the maximum origination fee allowed is 2% of the initial $200,000 of the home’s value and 1% of the remaining value, with a cap of $6,000.

Generally, reverse mortgage closing costs will be somewhere between $5,000 and $10,000.

 

Final thoughts

This financial product is something to seriously consider.

Hopefully, this article has given you a better understanding of how much a reverse mortgage might cost and how it can benefit you. Using a reverse mortgage is a big decision, we recommend getting quotes and information from multiple licensed lenders if you think using a reverse mortgage might be a good move.

A wonderful set of free information can be obtained from the Department of Housing and Urban Development’s site.

 

What Is An IRA?

by Tracy Wayne Mitchell

 

An Individual Retirement Arrangement also known as an IRA is a tax qualified account. This means that the values inside the account grow tax-deferred. As long as the money stays in the account the owner will not have a tax liability. When distributions are taken, the amount is added to the owner’s income in the year they receive it. It is taxed at ordinary income tax rates. In most cases a distribution cannot be made prior to 59-1/2 without incurring a 10% pre-mature distribution penalty. The year following the year the owner turns age 70-1/2 they will be subject to RMD (required minimum distribution). The RMD is due to be taken by December 31st every year thereafter.
Many IRAs are established by individuals who transfer the value of an employer sponsored plan such as a 401k, 403b, TSP or 457b. There are many advantages to holding the funds in an IRA instead of leaving them in the employer plan.
An IRA is not an investment! it is a “type” of money, tax qualified money. This is why IRAs are categorized as “qualified” funds. The IRA must be invested somewhere. This is the most common misunderstanding I run into when counseling with someone concerning these types of accounts. Many times when I ask them where their IRA is invested they get a puzzled look on their face and say something like: What do you mean? It’s an IRA, that’s all I know. Not a good answer! You need to know where your IRA is invested. Is it safe? Is it at risk? Are you paying fees?
There are three primary categories of investments that IRAs can be invested in:

Bank CD/MMA, Stocks/Bonds/Mutual Funds and Insurance products.

You can invest in one or any combinations of these options. To determine which one or combination is best for you usually starts with an adviser. You will need to assess your risk tolerance, time horizon and long-term goals to make the best decision.

The Value of Geriatric Care Management Services

presented by Tracy Wayne Mitchell

 

by the National Care Planning Council

Also known as Care Management or Aging Care Management, a Geriatric Care Manager represents a growing service offering support to adult children who need outside assistance with care and personal management for their aging parents who live close by or far away. These adult children are are often employed and engaged with raising their own families. Looking after their parents has become difficult to do on their own.

Care managers are particularly useful in helping aging seniors find their way through the maze of long-term care services and issues. Here is a list of what a care manager might do:

• Assess the level and type of care needed and develop a care plan
• Take steps to start the care plan and keep it functioning
• Make sure care is received in a safe and disability friendly environment
• Resolve family conflicts and other family issues relating to long term care
• Become an advocate for the care recipient and the family caregiver
• Manage care for a loved one for out-of-town families
• Conduct ongoing assessments to monitor and implement changes in care
• Oversee and direct care provided at home
• Coordinate the efforts of key support systems
• Provide personal counseling
• Help with Medicaid qualification and application
• Arrange for services of legal and financial advisors
• Manage a conservatorship for a care recipient
• Provide assistance with placement in assisted living facilities or nursing homes
• Monitor the care of a family member in a nursing home or in assisted living
• Assist with the monitoring of medications
• Find appropriate solutions to avoid a crisis
• Coordinate medical appointments and medical information
• Provide transportation to medical appointments
• Assist families in positive decision making
• Develop long range plans for older loved ones not now needing care

 

The National Care Planning Council provides a listing service for families looking for care managers. The listing service is free. You can contact a care manager in your area for help and information.

Let’s look at a hypothetical example to see how valuable care managers can be.

Mary is caring for her husband at home. Because of diabetes, her husband has severe neuropathy in his legs and feet and it is difficult for him to walk. He also has diabetic retinopathy and cannot see very well. Mary has difficulty getting her husband out of bed, bathed and dressed. She relies on her son who lives nearby to help her manage her husband’s care.

On the advice of a friend Mary is told about a care manager, Susan, who helped the friend’s family cope with the care of a loved one. The cost of an initial assessment and care plan from the care manager is $300.00. Mary thinks she has the situation under control and $300.00 for someone from the outside to come in and tell her how to deal with her situation seems ridiculous.

One day Mary is trying to lift her husband and injures her back severely. She is bedridden and cannot care for her husband. Her son, who works full-time, now has two parents to care for. On the advice of the same friend he decides to bring in Susan and pay her fee himself.

Susan does a thorough assessment of the family’s needs. She arranges for Mary’s doctor to order Medicare home care during Mary’s recovery. Therapists come in and help Mary with exercises and advice on lifting. Susan advertises for and finds a private individual who is willing to live in the home for a period of time to help Mary with her recovery and watch over her husband. Susan makes sure the new caregiver is reliable and honest and that taxes are paid for the employment.

Susan enlists the support of the local area agency on aging and makes sure all services available are provided for the family. Susan also calls a meeting with Mary’s family and explains to them the care needs and how they need to commit to help with those needs. Susan makes arrangements to purchase medical equipment for lifting, moving and easier use of the bathroom facilities. Medicare will pay much of this cost.

Susan suggests using a geriatric care Physician she works closely with to help Mary in the care of her husband. The geriatrician meets with Mary and her husband and spends a great deal of time explaining the proper treatment and care of elderly with diabetes. He rearranges medications and puts Mary’s husband on a new insulin regimen to better control his blood sugar. The geriatric Physician feels that Mary’s husband has a chance of improving his health with proper treatment. If her husband adheres to the care plan, he may end up having a better quality of life for his remaining years.

With the help of the care manager, Mary’s life and future has been significantly improved.

 

The Value of Geriatric Care Management Services

presented by Tracy Wayne Mitchell

 

by the National Care Planning Council

Also known as Care Management or Aging Care Management, a Geriatric Care Manager represents a growing service offering support to adult children who need outside assistance with care and personal management for their aging parents who live close by or far away. These adult children are are often employed and engaged with raising their own families. Looking after their parents has become difficult to do on their own.

Care managers are particularly useful in helping aging seniors find their way through the maze of long-term care services and issues. Here is a list of what a care manager might do:

• Assess the level and type of care needed and develop a care plan
• Take steps to start the care plan and keep it functioning
• Make sure care is received in a safe and disability friendly environment
• Resolve family conflicts and other family issues relating to long term care
• Become an advocate for the care recipient and the family caregiver
• Manage care for a loved one for out-of-town families
• Conduct ongoing assessments to monitor and implement changes in care
• Oversee and direct care provided at home
• Coordinate the efforts of key support systems
• Provide personal counseling
• Help with Medicaid qualification and application
• Arrange for services of legal and financial advisors
• Manage a conservatorship for a care recipient
• Provide assistance with placement in assisted living facilities or nursing homes
• Monitor the care of a family member in a nursing home or in assisted living
• Assist with the monitoring of medications
• Find appropriate solutions to avoid a crisis
• Coordinate medical appointments and medical information
• Provide transportation to medical appointments
• Assist families in positive decision making
• Develop long range plans for older loved ones not now needing care

 

The National Care Planning Council provides a listing service for families looking for care managers. The listing service is free. You can contact a care manager in your area for help and information.

Let’s look at a hypothetical example to see how valuable care managers can be.

Mary is caring for her husband at home. Because of diabetes, her husband has severe neuropathy in his legs and feet and it is difficult for him to walk. He also has diabetic retinopathy and cannot see very well. Mary has difficulty getting her husband out of bed, bathed and dressed. She relies on her son who lives nearby to help her manage her husband’s care.

On the advice of a friend Mary is told about a care manager, Susan, who helped the friend’s family cope with the care of a loved one. The cost of an initial assessment and care plan from the care manager is $300.00. Mary thinks she has the situation under control and $300.00 for someone from the outside to come in and tell her how to deal with her situation seems ridiculous.

One day Mary is trying to lift her husband and injures her back severely. She is bedridden and cannot care for her husband. Her son, who works full-time, now has two parents to care for. On the advice of the same friend he decides to bring in Susan and pay her fee himself.

Susan does a thorough assessment of the family’s needs. She arranges for Mary’s doctor to order Medicare home care during Mary’s recovery. Therapists come in and help Mary with exercises and advice on lifting. Susan advertises for and finds a private individual who is willing to live in the home for a period of time to help Mary with her recovery and watch over her husband. Susan makes sure the new caregiver is reliable and honest and that taxes are paid for the employment.

Susan enlists the support of the local area agency on aging and makes sure all services available are provided for the family. Susan also calls a meeting with Mary’s family and explains to them the care needs and how they need to commit to help with those needs. Susan makes arrangements to purchase medical equipment for lifting, moving and easier use of the bathroom facilities. Medicare will pay much of this cost.

Susan suggests using a geriatric care Physician she works closely with to help Mary in the care of her husband. The geriatrician meets with Mary and her husband and spends a great deal of time explaining the proper treatment and care of elderly with diabetes. He rearranges medications and puts Mary’s husband on a new insulin regimen to better control his blood sugar. The geriatric Physician feels that Mary’s husband has a chance of improving his health with proper treatment. If her husband adheres to the care plan, he may end up having a better quality of life for his remaining years.

With the help of the care manager, Mary’s life and future has been significantly improved.

 

How the Funeral Rule Helps Consumers

presented by Tracy Wayne Mitchell

 

In 1984, the Federal Trade Commission (FTC) established the Funeral Rule to give consumers of funeral services certain protections. The rule’s main objective was to ensure consumers receive adequate information concerning all of the goods and services they may purchase from a funeral provider. All funeral providers are required to comply.

Prior to the 1970s, the National Funeral Directors Association prohibited its members from advertising their prices in newspapers and other media. These practices made it easy for the association and funeral providers to take advantage of families seeking services. For example, this prohibition allowed providers to include unexpected fees as part of a funeral bill. Survivors paying these bills were often unaware of these fees and had no choice but to pay them. In 1968, the US Department of Justice sued the association over this issue. The suits and other encounters led to the FTC create the Funeral Rule.

The Funeral Rule offset many unfair practices and gave transparency to families who were dealing with the loss of a loved one and who were in a particular moment of weakness and vulnerability. As you know, after death, survivors do not have a lot of time to survey the market for the most affordable and honest funeral service.

 

Regarding General Laws

• Disclosure of state and/or local laws which require a consumer to purchase particular items must be provided
• Written acknowledgment stating consumers do not have to purchase a packaged funeral arrangement

Regarding the Funeral

• Itemized details of a formal funeral service, included all associated expenses
• A General Price List must be given to all persons who inquire in person about funeral arrangements. A fee cannot be charged for providing this list. This General Price List must be offered when any discussion begins regarding funeral arrangements, goods or services or the prices of such, regardless of the location of the discussion.

Regarding Caskets

• Written description and price list of all caskets must be provided before viewing any caskets for sale must be provided
• A funeral home may not claim any state or local law requires a casket for direct cremation
• A funeral home may not refuse or charge a fee to handle a casket purchased outside of that funeral home

Regarding Cremation

• Funeral homes who offer cremation must also offer an inexpensive, unfinished wood box or alternative container that is cremated with the body and written disclosure of the consumer’s rights to purchase this unfinished wood box or alternative container

Regarding the Deceased

• Written details regarding viewing or visitation of the deceased, included any associated expenses must be provided
• Regarding Transportation
• Written details regarding transportation to the cemetery, included any associated expenses must be provided Regarding General Billing
• Receive a written statement after you decide what you want, and before you pay must be provided

To get an idea of common pricing for many of the goods and services above, consider reading our article, What Should I Expect to Pay for Funeral and Burial Expenses?

 

Common Misrepresentations

Embalming

The Funeral Rule prohibits funeral homes from telling consumers state or local law require embalming. If state law does require embalming, the funeral home may tell the family embalming is required under specific circumstances. Funeral homes must disclose this in writing on the General Price List. Funerals with a viewing, however, may be one of the specific circumstances. If a family member wants to briefly view the deceased by lifting the lid of the casket prior to burial, the Funeral Rule prohibits the funeral home from charging the family for preparation of the body if embalming is declined since the request to see the deceased does not constitute a formal viewing.

Casket for Direct Cremation

The rule prohibits funeral homes from telling consumers state or local law requires the purchase of a casket for direct cremation. This must be disclosed in writing on the General Price List. If cremation is not offered, this disclosure may be omitted.

Outer Burial Container

The rule prohibits funeral homes from telling consumers state or local law requires them to buy an outer burial container, if that is not true. Funeral homes must disclose that state law does not require them to purchase an outer burial container. Funeral home must disclose this in writing on the General Price List.

However, some cemeteries require a container so the grave will not sink in. A grave liner or burial vault can often satisfy these requirements. If an outer burial container is needed, the General Price List must state the range of prices for the outer burial containers sold by the funeral home.

Cemetery Requirements

Per the Funeral Rule, funeral homes cannot tell consumers any federal, state or local law or any cemetery or crematory can require them to buy a particular good or service, if that is not true.

Preservative and Protective Value Claims

The rule prohibits any representations to consumers that funeral goods or services will delay the natural decomposition of human remains for a long term or an indefinite time. This also includes the use of certain caskets or burial containers. All warranty information must be provided to the family and clarified by the funeral home.

Cash Advance Items

The rule prohibits a funeral home from claiming the price of cash advanced items are the same as actual costs if the funeral home charges a mark-up, receives a commission, discount or rebate on cash advanced items that is not passed along to the consumer.

The rule does not prevent charging a mark-up nor does it require the funeral home to disclose the amount of the charge, rebate, commission or discount.

 

National Cemetery Administration – Veterans

Within the United States, all veterans (with a discharge other than dishonorable) are entitled to a grave marker and free burial in a national cemetery. This benefit is also extended the veteran’s spouse, dependent children and to some civilians who provided certain military related services or public health services. You may visit cem.va.gov/cem/burial_benefits/index.asp or veteransaidbenefit.org/va_burial_benefits.htm for more information.

Special deals for veterans are often available at funeral homes and cemeteries which can offer huge savings for veterans. Beware, inflated fees for services or adjoining spouses can make up for the cost savings.

 

Pre-Need Contracts

The Funeral Rule requires all guidelines and rules set forth must be complied with at the time pre-need funeral arrangements are discussed, at the time of contract purchase and at the time of the actual funeral. The rule does not cover the language and parameters of the actual pre-need contract, nor the guidelines on items such as payment options, costs or ability to modify, transfer or cancel the contract, or any administrative fees. If the contract holders inquire about funeral goods or services, alter the pre-need funeral arrangements or are required to pay additional sums of money, all price lists and disclosures must be provided in writing by the funeral home.

Any party who sells these contacts must comply with the Funeral Rule.

Any pre-need funeral arrangement or pre-need contracts purchased prior to April 30, 1984, when the Funeral Rule went into effect does not apply. Any modifications made after April 30, 1984 are governed by the Funeral Rule.

 

The Funeral Rule and Online Advertising

Currently, under the Funeral Rule, there is no language requiring funeral homes to post their pricing online. However, in California, funeral homes must either post their price list online or post a list of their products and tell consumers that a price list is available on request.

 

FTC Complaints

If you were not given a general price list or if a funeral and burial cost was substantially more than you were told, you can file a complaint with the Federal Trade Commission here: ftccomplaintassistant.gov/#&panel1-1

 

References and more information:

en.wikipedia.org/wiki/Funeral_Rule

consumer.ftc.gov/articles/0300-ftc-funeral-rule

consumer.ftc.gov/articles/0301-funeral-costs-and-pricing-checklist

npr.org/2017/02/08/504031472/despite-decades-old-law-funeral-prices-are-still-unclear

 

Presented by Tracy W Mitchell: Dying with Debt

At some point in our lives we may ask ourselves: “If I die and have debt, who or what will be responsible for paying back those I owe?”

The laws regarding debt after death are defined by each state so there isn’t a single answer to the question above for everyone. On most occasions, the only time a family member would be responsible for your debt is if they cosigned a loan with you. People generally do not inherit another person’s debt.

When we die, a new entity emerges, called our estate. An “Estate” represents your assets and your liabilities. Upon death, a legal process called “Probate” (which is the first step of administering the estate of a deceased person), will resolve your debts and distribute your remaining assets to your heir(s).

Creditors may legally seize assets within your estate (money or property) in order to cure a debt owed to them. If you have no assets, your creditors may have to take a loss on your debts. Depending on the state you live in, a creditor has a fixed amount of time to make a claim against your estate for payment.

There is a legal pecking order as to who is allowed first claim to retrieve money from your estate. The higher priority goes to funeral expenses, administrative expenses, and federal taxes. The estate may then pay off expenses from the last illness and state taxes. At the bottom of the barrel are unsecured creditors, like credit card companies.

Generally, all debts must first be paid by the estate before any remaining assets are distributed to an heir. An outstanding credit card balance, for example, must be paid before any money or gifts can be distributed to an heir. If there are not enough assets to pay the debts, then all assets and property will be sold to pay down as much of the debt as possible and the heir will inherit nothing.

In the case of secured debts (e.g. home mortgage or auto loans), property (which is collateral) may be distributed with its debt. For example, you own a car worth $15,000 and the loan on the car is $7,500. If you die and leave that car to someone, it will become that person’s obligation to pay off the loan.

Except for certain situations (which include joint property or joint debt), creditors are unlikely to go after surviving family members when a debt cannot be paid by your estate money. The majority of married couples have joint accounts and joint debt. In these situations, a surviving spouse will be held legally responsible for the debt of their deceased spouse even if they did not generate the debt themselves. This is something that will often cause problems for surviving spouses who financially cannot pay off old debt and meet their everyday needs.

If a creditor contacts a surviving family member about a debt of a relative who has died, the family member should give the creditor the contact information of the decedent’s representative. The representative is responsible for paying any outstanding debts from the estate. If a will exists, the representative is known as the executor; if there is no will, the representative is known as the administrator.

In community property states (where married couples are considered to own their property, assets, and income jointly) credit accounts opened during marriage are automatically considered to be joint accounts. This could affect what your spouse will have to pay, depending on the debt that you incurred. The following states are community property states:

• Arizona
• California
• Idaho
• Louisiana
• Nevada
• New Mexico
• Texas
• Washington
• Wisconsin

To conclude, when you pass away, your estate is responsible for paying off any balances owed by you, not your family. If your estate goes through probate, your administrator (or executor) will look at your debts and assets and, guided by the laws of your state, determine in what order your bills should be paid. The remaining assets will be distributed to your heirs according to your will or state law.

Presented by Tracy W Mitchell: Seniors and Retirees, Consider Using a Reverse Mortgage

For many seniors and retirees, the hard-earned equity in their home is their single largest asset, yet it is unavailable to use unless they take out a home-equity loan.  Conventional loans, like the home-equity, do not truly free up the equity to create a legitimate supplemental income because the money has to be paid back to the lender, with interest.

 

A reverse mortgage is a better way to tap into home equity without creating monthly payments and without requiring the loan to be paid back while the borrower lives in the home.  Instead of making payments, the cash flow is reversed and the senior receives payments from the lender.

 

Why do seniors use Reverse Mortgages?

 

Over the last several years the number of reverse mortgages nationwide has increased dramatically. Many seniors and retirees are finding they can use a reverse mortgage to pay off an existing conventional mortgage or other debt, repair and update their home, or to simply free up cash to pay for long term care, medical expenses, and/or general living. Often, a reverse mortgage allows the aging to remain in their home much longer.

 

The most common type of reverse mortgage is a Home Equity Conversion Mortgage (HECM). It is insured by the Federal Housing Administration (FHA). So far, in 2017, over 36,000 HECM loans were made nationwide. Around 48,000 HECMs were made in 2016.

 

What is a Reverse Mortgage?

 

A reverse mortgage is a loan against the equity in the home which provides supplemental income advances and requires no mandatory monthly re-payments during the life of the loan.  The proceeds from a reverse mortgage are generally tax-free and available as a line of credit, lump sum, or fixed monthly payments. The lender will recover the loan amount, plus interest once the owner(s) choose to sell their home or pass away. The remaining equity balance is passed onto heirs.

 

Those who utilize a reverse mortgage must continue to pay their homeowner’s insurance and property taxes during the loan period. It is also mandatory to keep up with home’s needed repairs and maintenance. The owners will retain title until they decide to sell as long as these requirements are met.

 

Social Security and Medicare benefits are not impacted by reverse mortgage proceeds.

 

Who qualifies?

 

To qualify for a reverse mortgage, one of the home owners must be at least 62 years of age, have significant equity in the home, and live in, as a primary residence, a multi-family home, a condominium, or a Planned Unit Development (PUD).  Permanent mobile or manufactured homes are sometimes eligible. There are no income or credit score requirements to qualify for the loan because there are no monthly repayments to be made.

 

The amount of reverse mortgage benefit for which an individual may qualify, will depend on

 

• the age of the youngest person on the title,
• the market value of the home and the equity in the home,
• current interest rates, and
• in some cases, where you live. As a general rule, the older one is and the greater the equity, the larger the reverse mortgage benefit will be (up to certain limits, in some cases).  The reverse mortgage must pay off any outstanding liens before additional funds can be withdrawn. Since there are costs associated with setting up a reverse mortgage it is not recommended for owners who do not intend to live in their home for a reasonable amount of years to realize the benefits.What are the closing costs?The costs associated with getting a reverse mortgage are similar to those with a conventional mortgage, such as the origination fee, appraisal and inspection fees, mortgage insurance and other servicing costs.  With a reverse mortgage, all of these costs can be financed as part of the mortgage. Under the HECM program, the maximum origination fee allowed is 2% of the initial $200,000 of the home’s value and 1% of the remaining value, with a cap of $6,000.Generally, reverse mortgage closing costs will be somewhere between $5,000 and $10,000.Final thoughtsThis financial product is something to seriously consider.Hopefully, this article has given you a better understanding of how much a reverse mortgage might cost and how it can benefit you. Using a reverse mortgage is a big decision, we recommend getting quotes and information from multiple licensed lenders if you think using a reverse mortgage might be a good move.A wonderful set of free information can be obtained from the Department of Housing and Urban Development’s site.

Presented by Tracy W Mitchell: Using a Reverse Mortgage

For many seniors the equity in their home is their largest single asset, yet it is unavailable to use unless they take out a home-equity loan. However, a conventional loan really doesn’t free up the equity because the money has to be paid back with interest. A reverse mortgage is a risk-free way of tapping into home equity without creating monthly payments and without requiring the money to be paid back during a person’s lifetime. The home must be free of any liens or mortgages but reverse mortgage funds can be used to clear these debts. Instead of making payments, the cash flow is reversed and the senior receives payments from the bank. Thus the title “reverse mortgage”.

 

Many seniors are finding they can use a reverse mortgage to pay off an existing conventional mortgage, to create money for a down payment for a second home or to pay off debt. Popularity of this product is skyrocketing! Over the last few years the number of reverse mortgages nationwide has mushroomed. The uses of this untapped wealth are only limited by a person’s imagination.

 

For those seniors who are “equity-rich but cash-flow poor,” a reverse mortgage can allow them to remain in the home by creating extra income. It can also allow for remodeling or repairs and when the time comes to sell, the investment in the home can make it more valuable.

 

A reverse mortgage is a loan against the equity in your home that provides you cash advances, but requires no mandatory monthly re-payments during the life of the loan. If the interest is unpaid, it is allowed to accrue against the value of your home. If you do choose to pay any portion of the interest, it may be deductible against income, as would any mortgage interest.

 

You or you and your spouse must be at least 62, own and live in, as a primary residence, a home [1-4 family residence, condominium, co-op, permanent mobile home, or manufactured home on a foundation] in order to qualify for a reverse mortgage.

 

There are no income, asset or credit requirements. It is the easiest loan to qualify for. On the other hand, a reverse mortgage is very much the same as a conventional mortgage. As an example:

 

• The bank does not own the home but owns a lien on the property just as with any other mortgage
• You continue to hold title to the property as with any other mortgage
• The bank has no recourse to demand payment from any family member if there is not enough equity to cover paying off the loan
• There is no penalty to pay off the mortgage earlyThe proceeds from a reverse mortgage are tax-free and available as a lump sum or as fixed monthly payments for as long as you live in the property, or available as a line of credit; or a combination of all three of these options.These proceeds can be used for any legal purpose you wish:

• daily living expenses
• home repairs and improvements
• medical bills and prescription drugs
• pay-off of existing debts
• education, travel
• long-term care and/or long-term care insurance
• financial and estate tax plans
• gifts and trusts
• to purchase life insurance
• or any other needs you may have.The amount of reverse mortgage benefit for which you may qualify, will depend on

• the age of the youngest person on the title,
• the reverse mortgage program you choose,
• the value of your home,
• current interest rates, and
• for some products, where you live.As a general rule, the older you are and the greater your equity, the larger the reverse mortgage benefit will be (up to certain limits, in some cases). The reverse mortgage must pay off any outstanding liens before you can withdraw additional funds.The loan is not due and payable until the borrower no longer occupies the home as a principal residence (i.e. the borrower sells, moves out permanently or passes away). At that time, the balance of borrowed funds is due and payable. All additional equity in the property belongs to the owners or beneficiaries.There are three reverse mortgage loan products available — the FHA – HECM (Home Equity Conversion Mortgage), Fannie Mae – HomeKeeper®, and the Cash Account programs. There are also certain private loans available. Over 90% of all reverse mortgages are HECM contracts.The costs associated with getting a reverse mortgage are similar to those with a conventional mortgage, such as the origination fee, appraisal and inspection fees, title policy, mortgage insurance and other normal closing costs. With a reverse mortgage, all of these costs will be financed as part of the mortgage prior to your withdrawal of additional funds. A reverse mortgage does not require any out-of-pocket costs for the aforementioned fees. In contrast these fees are typically not covered by funds from a conventional mortgage.You must participate in an independent Credit Counseling session with a FHA-approved counselor. The counselor’s job is to educate you about all of your mortgage options. This counseling session is at no cost to the borrower and can be done in person or over the telephone. After completing this counseling, you will receive a Counseling Certificate either at the session or in the mail. This certificate must be included as part of the reverse mortgage application.Keeping money in a reverse mortgage line of credit will not count as an asset for Medicaid eligibility as this would be considered a loan and not a resource for Medicaid spend down. However transferring the money to an investment or to a bank account would represent an asset and could trigger an asset spend down requirement before you can receive Medicaid.If a senior homeowner chooses to repay any portion of the interest accruing against his borrowed funds, the payment of this interest may be deductible (just as any mortgage interest may be). It should be noted however, the lender is not anticipating any payments during the life of the loan.A reverse mortgage loan will be available to a senior homeowner to draw upon for as long as that person lives in the home. And, in some cases, the lender increases the total amount of the line of credit over time. If a senior homeowner stays in the property until he or she dies, his or her estate valuation will be reduced by the amount of the debt. The children will receive the balance of the equity.Reverse Mortgage Life Insurance Strategy
• The reverse mortgage produces $150,000 in available funds. After buying the insurance, there is $100,000 in funds still available. But when the couple dies the family inherits $150,000 tax-free to replace the loss in equity to the reverse mortgage.
• A useful strategy that typically appeals to these people is to take part of the reverse mortgage proceeds and buy a life insurance policy that has a death benefit equal to the amount of equity taken out by the reverse mortgage. A couple in their 70s could possibly buy an insurance policy for $50,000 that would pay $150,000 at the last death. This strategy actually allows the borrower to replace more than reverse mortgage amount and give to the heirs.
• Some older people don’t like the idea of doing a reverse mortgage because they feel they are robbing their heirs of an inheritance or there is something inherently wrong in using up the equity in the home.

Presented by Tracy W Mitchell: Choosing Home Care Services That Meet Your Needs

Making the decision to hire a home care service to provide care for your loved one is an important decision and can, at the same time, be very difficult. If an illness or recovery from surgery requires nursing care or physical therapy, a physician may order skilled home care services that provide both skilled providers and personal aides. Your decision is then based on the obvious medical determinations made by the doctor. But what if you as the family caregiver must determine the extent of care needed without the help of a doctor?

 

Each home care situation is unique. In the beginning, family or friends step in to help with simple tasks and support for aging seniors who want to stay in their homes. As long term care needs progress, more time is required to manage those needs. Physical and mental conditions change with aging making usually routine hygiene and daily living activities difficult for an aging individual. Even with the healthiest of seniors, the ability to drive a car, shop for groceries or do general housekeeping eventually needs to be relinquished to the responsibility of another person.

 

In one example, Karen, would stop by her parents’ home on her way to work every morning and again on her way home from work in the evening. She checked in the morning to see that they were up and ready for the day and Karen would take a shopping list for things they needed. In the evening she delivered the needed items she had purchased during her lunch break and sometimes she fixed a meal when one was not prepared by her mother. This worked well until Karen began to notice her father did not shave or dress during the day and both parents were forgetting their medications. Karen felt more time and supervision was needed in their care but with her own family and job, she could not do it. Non-medical or personal home care services would be a good option for Karen to consider.

 

Before starting your search for a non-medical or personal home care company, determine what the care needs are and how much time each week will be required for assistance from the company. You may want to consult with the family physician and other family members as well as experienced social workers or care managers to determine needs. Most home care companies, as well, will help you do an assessment at no charge. With your care needs in hand, you are ready to begin your search.

 

The National Association for Home Care & Hospice gives the following guidelines and checklist in searching for a home care company.

 

• How long has this provider been serving the community?
• Does this provider supply literature explaining its services, eligibility requirements, fees, and funding sources? Many providers furnish their home care clients with a detailed “Patient Bill of Rights” that outlines the rights and responsibilities of the providers, clients, and family caregivers alike.
• How does this provider select and train its employees? Does it protect its workers with written personnel policies and malpractice insurance? Does it protect clients from theft or abuse by bonding its employees?
• Does this provider assign supervisors to oversee the quality of care clients are receiving in their homes? If so, how often do these individuals make visits? Who can the client and his or her family members call with questions or complaints? How does the company follow up on and resolve problems?
• What are the financial procedures of this provider? Does the provider furnish written statements explaining all of the costs and payment plan options associated with home care?
• What procedures does this provider have in place to handle emergencies? Are its caregivers available on notice?
• How does this provider ensure client confidentiality?

 

If a home care company has not previously been recommended to you, ask for a list of previous clients and call for their experience with this provider.

 

Following up on these guidelines can help you determine the quality of personal care that is given. Many states license non-medical home care companies and require both legal and health standards to be maintained.

 

Read about individual home care companies in your area on the National Care Planning Council’s website http://www.longtermcarelink.net/.

Presented by Tracy W Mitchell: Plan for Eldercare Now Before the Choice Is No Longer Yours

We spend our lives making plans and preparing for future events. From the beginning we plan and work towards education, a career, marriage and a family. We work hard and save, invest and build our assets. We insure to protect our home, automobiles, health and medical needs.

 

Retirement age comes and our plan is finally in place. Finances and time have come together to allow us to enjoy the elder years of life. This is where the planning ends. But life does not end at retirement. There is a portion of life that the majority of us will live through after the retirement years called “eldercare.”

 

Very few of us plan for this part of our life, but yet it is as important if not more important to plan for it. If we don’t, we are leaving our last years in someone else’s hands. As much as children love us and mean to do right by us, they cannot possibly know what we want if they are not told.

 

Ruby, age 80, lost her husband. She had cared for him at home after his stroke. Understandably, she felt lost and depressed after his death. An inner ear infection caused Ruby to lose her balance and fall, breaking her hip. While she was in the hospital recuperating from surgery, Ruby’s children were deciding her future.

 

Concerned for her health and safety they moved some of her belongings to an assisted care facility. Upon Ruby’s release from the hospital she was taken to her new home at the facility. Between pain medication and the unfamiliar surroundings, Ruby never was herself again. She spent her last days asking what had happened to her home and belongings. Though her children had her best interest at heart, they did not know how Ruby wanted to spend her elder days.

 

An article on the AARP website titled, “Talking about Independent Living” states, “Research has shown that, as people age, they prefer to continue living independently, preferably in their own homes. While adult children often worry about their parent’s situation, it can be difficult to know if parents really need, or want, help from their children.”

 

Children and parents should talk about all these things.

 

What do you want your children, or friends to do on your behalf? When it comes time for them to help, you may not be physically or mentally able to execute your wishes. This is where your long term care plan comes into effect. You need to be the responsible person for your own personal care in the future.

 

The time to start planning is now. Don’t wait until the choice is no longer yours!