As elder law attorneys, we frequently get questions regarding a variety of financial products available to seniors. One such product we are asked about on almost a daily basis is the reverse mortgage. With 70% of individuals over the age of 65 going into long-term care at some point in their lives, it becomes a primary concern for seniors to determine how they will pay for their cost of care—especially when you consider the astronomical costs associated with long-term care (from $5,000 to $10,000 per month). One of the ways available to attempt to pay for long-term care is using a reverse mortgage. But, is this the best option?
Let’s start by defining it. A reverse mortgage is a loan whereby you transfer the equity in your home into monthly payments. This results in a reduction of some or all of your equity and an increase in your monthly income based on the agreed payment schedule. Based on the definition, you may already start seeing how this arrangement can be risky.
First of all, you will lose the equity in your home. This means that your main asset—the one you have worked tirelessly for yours to pay for—will once again be encumbered by a loan. This also means that if you want to pass your home along to your children, they may be receiving a burden rather than an asset.
Second, the payments are limited to the equity you have in the home. Thus, if you still owe a substantial amount or your home is not worth much money, you’re depleting the equity for a very small pay out.
Third, it won’t pay for your entire cost of care. Unless you have a home worth millions of dollars, a reverse mortgage will likely not pay enough money to cover the entire cost of your long-term care. Equity in the home tends to pale in comparison to the costs of a facility over the span of a few years. Therefore, you may be risking your home to cover only a fraction of your costs.
Fourth and finally, there are better options. Planning early on can allow you to utilize long-term care insurance in a tactical way to cover your cost of care. But, even if you do not qualify for long-term care insurance, you may still have the option of having Medicaid or VA Benefits pay out for you. These are viable options that will help you cover future costs while also preserving your assets.
At McIntyre Elder Law, we take an asset preservation approach. This means that we create a strategic plan for you whereby we seek to help you cover your cost of long-term care and keep what you own so that you can pass your legacy to your loved ones. You do not have to give, sell, or otherwise liquidate your assets to ensure your future. Whether it is planning for Medicaid, VA Pension Benefits or planning with long-term care insurance, we can find the plan that fits your needs, goals, and financial situation. Call us today (704) 259-7040.
Brenton S. Begley
Elder Law Attorney
McIntyre Elder Law
“We help seniors maintain their lifestyle and preserve their legacies.”
PO Box 165
Shelby, NC 28151-0165