Estate planning at its core is all about preparing assets for distribution to your loved ones after you pass away. But when you are contemplating your legacy, you have to consider what may happen while you are still alive.
With this in mind you should be apprised of all of your options. You never know what the future holds, and though you may have a reasonable expectation that you will have sufficient liquidity, it is possible that circumstances outside your control could throw a fly in the ointment.
We all found this out when the economic meltdown of 2008 took hold. A lot of individuals who thought that they were thoroughly prepared for retirement received a heavy blow. But when things like this happen, you simply have to improvise and take advantage of whatever solutions may be available to you. One of these is the home equity conversion mortgage or HECM.
These are reverse mortgages that are federally insured, so you know that they are legitimate. Of course this does not mean that they do not come with costs, which is something you have to consider.
The lender gains equity in your home, and in return it provides you with an influx of cash. To qualify you must be at least 62 years of age and have significant equity in your home. You must also live in the home; if you move voluntarily, the loan becomes due. The mortgage is also due and payable on your death.
Many people will sell the home to pay off the debt when it does in fact become due and then pocket the remainder. However, you are not required to sell the home if you or your heirs can pay off the debt in some other way.
This solution is not for everyone, but in appropriate cases, it is an option that is available to senior homeowners and it is something to you might consider, after consultation with a financial advisor, should you find yourself in need of liquidity at some point in time.
John’s practice focuses on the use of Wills and Living Trusts in Estate Planning to help individuals protect their families and preserve their legacies after their deaths, but his practice also focuses on the critical issues of protecting individuals with dementia or other diminished capacity, assisting individuals in qualifying for Medicaid and other government benefits to offset the costs of long-term care, and providing special needs planning.
John is admitted to practice law in North Carolina, South Carolina, Kentucky, and Ohio, and he is accredited by the Department of Veterans Affairs.
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