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Can estate plans accommodate a reverse mortgage?

Readers may be aware that there are options for borrowing against the equity in their homes. One such option is called a reverse mortgage. 

A reverse mortgage is a loan insured by the Federal Housing Administration. It comes with several restrictions. Generally, it is available only to homeowners who are 62 years of age or older. Their repayment approach is also unique: borrowers do not make monthly payments. Instead, the loan is repaid when the home is sold or if the borrower moves or passes away. The amount of home equity that can be converted to cash can be quite substantial. For example, according to one research study, a 65-year-old borrower with a $250,000 home might have access to up to $127,000 in cash under a reverse mortgage.

Do reverse mortgages have a place in estate planning? Unfortunately, there is no single answer. Factors like estimated earning capacity, life expectancy, and inheritance goals can make the answer different for every individual.

For individuals with retirement accounts or life insurance policies, the distribution from those accounts might be enough to repay a reverse mortgage account. Similarly, if an individual does not plan on transferring his or her home to heirs, the proceeds from the home sale might also be applied to a reverse mortgage. 

Fortunately, a law firm that focuses on estate planning, like ours, has the tools to help design a custom approach. We can help you plan for your future while taking all factors into consideration. Check out our firm’s website to learn more about some of the estate planning devices we can help you create.

Source: Forbes, “It Just Got Tougher To Get A Reverse Mortgage,” Richard Eisenberg, April 29, 2015

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