National Care Planning Council

I am a member of the National Care Planning Council. For more information about this organization, please click on the following link: http://www.longtermcarelink.net/ .

Long-term Care and Reverse Mortgages

According to recent statistics, 40% of the population over 65 will require some form of long-term healthcare services during their remaining lifetimes. A senior’s average stay in a professional care facility averages 2.5 years and the costs can easily exceed $90,000 annually (Similar illnesses treated in the home, supported by home-healthcare providers, can also average approximately $80,000 annually).

Most Americans recognize the need for a long-term care insurance program to both protect their assets and relieve any potential burden on their families. One major obstacle often voiced by seniors is, “How do I pay for this insurance?” Many seniors no longer have the income necessary to pay the premiums for long-term care coverage and most are not comfortable utilizing their savings for this purpose. While an individual can always ignore the issue and simply rely on the state government to provide such future care, this option may not always be the best one since seniors may be required to spend down their assets to the “poverty level” before qualifying for these government programs.

Traditionally, seniors have had three choices for funding their potential against chronic illness and professional care; self-funding these expenses with personal savings, ultimately utilizing the government programs, or purchasing insurance with existing income. Now there is a fourth choice available – taking advantage of the opportunities offered by reverse mortgage programs.

Reverse mortgages are loan programs specifically designed for senior homeowners - 62+years old. Monies from a reverse mortgage can be withdrawn, tax-free, in three different ways: as a lump-sum, as a line of credit or as a monthly distribution. While all three options will generate a mortgage lien equal to the total available funds, the latter two options provide the homeowner with the benefits of a monetary resource without the liabilities that can be associated with a liquid asset. These loan proceeds can be used to pay the premiums for Long-term Care Insurance – if the borrower qualifies for it. But for others, a reverse mortgage loan may be the only means by which a senior can help protect a significant portion of the equity in his or her home from creditors. The use of trusts, gifts LLC’s, etc., are all worth their weight in gold if established timely, but the funding of these can be an issue.

A reverse mortgage is nothing more than a lien against a primary residence. It does not require the senior homeowner to relinquish title to the property. A reverse mortgage can even be established within revocable trusts and Life Estates. A reverse mortgage loan requires no monthly repayment of interest or principal, although there are no penalties for doing so. If a senior homeowner chooses to repay any portion of the interest accruing against their borrowed funds, the payment of this interest may be deductible (just as any mortgage interest may be). A reverse mortgage loan will be available to a senior homeowner to draw upon for as long as they live in their home. And, in some cases, the lender increases the total amount of the line of credit over time (unlike a traditional Home Equity Line whose credit limit is established at origination). If a senior homeowner stays in the property until they pass away, his or her estate valuation will be reduced by the amount of the debt.

Long-term care insurance is purchased on the basis of the value of total benefits to be provided. Through the Connecticut Long-term Care Partnership program, the amount of Medicaid asset protection is equal to the value of total benefits utilized (i.e., If all of the owner’s $250,000 CT Partnership LTC Policy benefits had been exhausted and then the policy owner filed for continued care under Medicaid, $250,000 of their assets would be exempted from Medicaid claims) . The American Homeownership and Economic Opportunity Act of 2000 (H.R.5640) signed into law on December 27, 2000, supports the use of reverse mortgage proceeds for both long term care and long-term care insurance.

When a reverse mortgage is used fund Long-term Care Insurance, the senior homeowner is using some of the equity in their house to protect the value of their home (and perhaps other assets), so they can feel more confident that their heirs will receive the legacy these seniors worked so long and hard to build.

If you feel you would benefit from a closer look at how a reverse mortgage program can be utilized, please contact me, Stephen Lamoreaux, Reverse Mortgage Specialist – call (203) 595-9610 or (800) 562-6365 x376 or email steve@dmlmortgage.com

Help Protect Your Home with a Reverse Mortgage

For many senior homeowners the prospect of living an ever longer life only gets better with each new advancement in the science of medicine. But, these medical “miracles” don’t come cheap and the rising costs of institutional healthcare exceed even the most aggressive estimates of inflation. The average daily costs associated with a professional nursing-care facility are well over $200 and will quickly deplete the savings of even the most frugal. Long-term care insurance is one way an individual can provide varying levels of asset protection, but this scenario has two distinct problems – one must be healthy enough to qualify for the insurance and if so, then be capable of paying for it.

Reverse mortgages are loan programs specifically designed for senior homeowners - 62+years old. Monies from a reverse mortgage can be withdrawn, tax-free, in three different ways: as a lump-sum, as a line of credit or as a monthly distribution. While all three options will generate a mortgage lien equal to the total available funds, the latter two options provide the homeowner with the benefits of a monetary resource without the liabilities that can be associated with a liquid asset. These loan proceeds can be used to pay the premiums for Long-term Care Insurance and/or Life Insurance Policies – if the borrower qualifies for them. But for others, a reverse mortgage loan may be the only means by which a senior can help protect a significant portion of the equity in his or her home from creditors. The use of trusts, gifts and LLC’s (to name a few) are all worth their weight in gold if established timely, but the funding of these can be an issue.

Long-term care insurance is purchased on the basis of the value of total benefits to be provided. Through the Connecticut Long-term Care Partnership program, the amount of Medicaid asset protection is equal to the value of total benefits purchased. Unless an individual purchases Lifetime Long-term Care insurance policy, once the benefits are exhausted, the healthcare provider/servicer is going to look to other assets for their remuneration. When a creditor assesses the net worth of an individual, liquidity is not an issue (except to ascertain an order of potential asset liquidation). Investments, savings, and homes are all within the creditors’ reach, unless the “legal protection” of these assets has been addressed well in advance.

A reverse mortgage loan requires no monthly repayment of interest or principal, although there are no penalties for doing so. If a senior homeowner chooses to repay any portion of the interest accruing against their borrowed funds, the payment of this interest may be deductible just as any mortgage interest may be. In effect, a reverse mortgage can be considered an interest-only loan for its entire term (unlike a typical Home Equity Loan which has a limited interest-only period [9 years, 10 months in CT], followed by mandatory amortization [typically 20 years] to maturity). A reverse mortgage loan will be available to a senior homeowner to draw upon for as long as they live in their home. And, in most cases, the lender increases the total amount of the line of credit over time (unlike a traditional Home Equity Line whose credit limit is established at origination). If a senior homeowner stays in the property until they pass away, his or her estate valuation will be reduced by the amount of the debt.

A reverse mortgage is simply a lien against a primary residence. It does not require the senior homeowner to relinquish title to the property. Reverse mortgages can be established within revocable trusts and Life Estates. When utilized effectively, a reverse mortgage can help a senior homeowner meet their current needs and strengthen their financial future.

If you feel you would benefit from a closer look at how a reverse mortgage could work for you, please contact Stephen V. Lamoreaux, Reverse Mortgage Specialist -
(203) 595-9610 or (800) 562-6365x376 or via email – steve@dmlmortgage.com

Reverse Mortgage - Financial/Estate Planning Tool

Senior homeowners looking for additional liquid assets should consider utilizing the benefits of a Reverse Mortgage. These loans were created for all senior homeowners 62+ years old, and are not just for the fiscally desperate. Reverse mortgages are proving to be a very effective tool in the funding of both financial and estate plans for individuals of wealth.

While a home may hold a great deal of emotional value for a family, the reality is that, in most cases, the property is sold after the owner’s death and the assets are liquidated. The heirs are often forced to sell the property under “less than ideal” conditions. After the sale, which may drag on due to the then current conditions of the real estate market, heirs may be faced with inheritance and/or capital gains taxes on the proceeds. In the end, the net proceeds are often far less than the perceived value of the home. Through the use of proceeds from a reverse mortgage to purchase investments or insurance, one can greatly alleviate many of these issues.

A reverse mortgage must be repaid when the borrower permanently leaves the property. At death, the full value of the property would be reduced, for estate valuation for tax purposes, because the accumulated debt of the reverse mortgage would not yet have been repaid, thereby reducing the property value, which should lower any applicable estate taxation.

In addition, accrued interest in the reverse mortgage may be available as a tax deduction upon repayment of the loan (just as mortgage interest is deductible against income when repaid monthly). [NOTE – it is recommended the borrower consult a tax advisor]

When tax-free monies from a reverse mortgage are used for the purpose of funding investment products, it gives homeowners, particularly those with substantial equity built up in their homes, the comfort of having more control over their estate and assuring the legacy they leave retains its value.

If the senior homeowner uses some of the tax-free equity released from a reverse mortgage to purchase additional life insurance for their heirs, the net result would be larger death benefits for the beneficiaries without affecting the current (and many times, limited) income stream of the borrower. When the insurance policy pays the benefits to the heirs, they receive tax-free dollars. Upon the sale of the property, any equity over the reverse mortgage loan amount will be subject to estate taxes, but ultimately, still revert to the heirs. With the unknown nature of the future real estate markets, the use of a reverse mortgage provides for greater control of the legacy assets by the senior homeowner.

A reverse mortgage can offer senior homeowners the ability to strengthen their financial future by utilizing their primary residence as it continues to appreciate.

When a senior homeowner use reverse mortgage funds to purchase investments and insurance that protect their health and well being, and enhance the total worth of their estate, the value of a reverse mortgage is truly realized.

Proceeds from a reverse mortgage can be used to:

- Fund gifts and/or trusts
- Purchase Life Insurance
- Buy Long-term Care Insurance
- Reduce future estate taxes
- Purchase a vacation home or investment property
- strengthen the financial future of a senior homeowner

House Rich, but Short Cash?

Many senior homeowners today are living in highly valued, debt-free homes and yet, are finding it harder each year to remain confident in their financial security. Costs for food, taxes, utility bills, medical services, treatments and prescriptions always seem to be rising, and many seniors, like yourselves, are struggling more and more each year to make ends meet. This is certainly not the retirement life you had hoped for … and it need not stay that way.

You made an investment that has increased in value far beyond anyone’s expectations – your home. Typically, your goal is to leave this asset to your children, and there are some seniors who are compromising their own lifestyle and well being in an attempt to do so. The reality is that you can regain your financial freedom and still leave a substantial legacy, if you understand your options.

There are special lending programs available exclusively to homeowners, age 62 years and older, called reverse mortgages. These programs allow you to tap into a portion of your home value so that you can:

- afford to stay in your community
- maintain your quality of life
- provide for your families’ needs and obligations
- have the ability to strengthen your financial future
- simply rest easier knowing that you have access to a monetary resource if necessary

A reverse mortgage can only be made on a primary residence. You retain full ownership of the property. There are no mandatory monthly repayments for as long as you live in your home (although you can re-pay any portion of the interest or principal at any time with no penalty). If and when you decide to sell, any value in excess of the loan payoff amount belongs to you (In the case of an estate sale, the same is true, with the balance credited to the estate).

The proceeds from a reverse mortgage are tax-free and are not considered income by the IRS (therefore they do not interfere with any entitlement benefits you may be receiving). The funds are available as a lump sum, fixed monthly payments, a line-of-credit, or as any combination of these three options.

The funds can be utilized for - daily living expenses, home improvements and repairs, property taxes and home-owner’s insurance, prescriptions and medical bills, credit cards payoffs, financial and/or estate plans, long-term care Insurance, funding gifts and trusts, vacations, or anything else you desire.

Additionally, a reverse mortgage is the easiest loan for which to apply because, unlike traditional mortgages or home equity loans, there are no income, asset or credit requirements to qualify.

Reverse mortgage programs enable you, as a senior homeowner who may find themselves house rich, but short cash, to utilize some of the excessive appreciation that has accumulated in your home and still leave plenty of assets to your beneficiaries in the future.




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