Will a trust protect a house if there is a reverse mortgage?
My mom is 93 years old and owns her own home which is in a trust for my brother and I. Right now she has a caretaker part-time. However, she is running out of money and I would like to know what you think of a reverse mortgage. Also,if I did this and she had to go into a nursing home later, can they take her house?
You would have to have the trust reviewed to see if it qualifies for a reverse mortgage, not all of them do.
If the trust does qualify for a reverse, and you and she decide to go that route, choose your lender carefully.
A reverse mortgage would become due and payable upon her moving out of the home for more than 12 months due to medical reasons. The lender cannot take the home, but you would have to pay off the balance owed on the reverse.
One of the options on a reverse mortgage is taking the loan proceeds in a Line of Credit. That way she can tap into the money as she needs it, instead of borrowing it all at once. That will help to preserve equity for you and your brother.
If the trust in irrevocable you cannot get a reverse mortgage. If the trust is revocable the lender will remove the property from the trust for the purpose of recording the reverse mortgage and placing the lender in first beneficiary position before putting the property back into the trust.
There is one reason to get a reverse mortgage: Use as a tool in your financial strategy, meets your financial goals, and provides financial security through retirement. A reverse mortgage is a complex financial instrument with lifelong consequences for seniors. You need financial and legal advice to understand those consequences and if they are acceptable to you because once you sign on the dotted line it is very difficult to recover from the financial damage. I welcome calls from consumers, consumer advocacy agencies, legal and financial professionals. Sandy Jolley, Reverse Mortgage Suitability and Abuse Expert.