Reverse mortgages make sense for some seniors. When there is only limited income available, or when there are financial hardships, a reverse mortgage allows those over a certain age to tap into their home equity by receiving a check each month based on the equity of their home. If you are an older couple and are receiving a reverse mortgage, there are some additional estate planning steps that you will need to go through. Here are some steps to take for estate planning when you have a reverse mortgage.
Use the money to create additional investments
A reverse mortgage means that the company offering the mortgage will become the owner of the home upon the death of the owners. This means that seniors with a reverse mortgage will not be able to leave the home to their children. If you wish to leave assets to your children and you were planning on the house being one, you will need to set up new assets. Take the money that you receive each month to set up a pension that you can leave behind, or purchase additional assets that you can leave to your family.
Deed anything leftover
Once the persons who own the home are deceased, the mortgage company will take over ownership of the home. Any leftover equity in the home will still be distributed to the heirs after a sale. For this reason, it is necessary to name heirs who will still receive leftover proceeds from the sale of the home. Dictate the percentage that is to be left to any heirs or any charities that you have decided upon; it is impossible to dictate an amount, because this can change from year to year. Instead, you will dictate the percentage, or that all heirs must split the money equally.
Let your children know
Transparency can make the transition of assets much easier. Have a meeting with your children, and anyone else you will be leaving money to, about the state of your home. This way no children will attempt to move into the home or take over ownership after your death. Let them know that the things inside the home do belong to you, and that you will be dividing your belongings in your will so that no stones are left unturned. It is imperative that you leave the contact information of the reverse mortgage company to the executor of your will so that they will be able to switch over ownership immediately, rather than drawing out the process.Share