|Posted by Ricky Rash, CRMS on March 25, 2010 at 9:29 AM|
Generally speaking, a Reverse Mortgage can be used in almost any way you choose. It is up to you to determine the best way to the use money you access by tapping your home equity.
Most seniors use a Reverse Mortgage to help close a gap between their retirement expenses and their retirement income. However, Reverse Mortgages offer particular financial advantages when used by seniors as an estate planning tool in a retirement plan.
Consider the following uses of a Reverse Mortgage:
Funding for Healthcare or Medical Treatment
Long term care is a big risk to most seniors' financial planning for retirement.
While 42 percent of people over the age of 65 require or will require long term health care, neither Medicare nor Medicare supplemental insurance cover the costs of these services - either in your own home or in a nursing facility. Moreover, most seniors don't have long term care insurance.
Many financial retirement planners recommend that their clients secure a Reverse Mortgage to help fund a long term care insurance cost or other medical costs.
Using a Reverse Mortgage to pay for medical costs and/or insurance can be an important part of asset protection planning for the benefit of you and your heirs.
Other Asset Protection Strategies – Leave Something to Your Heirs
You might consider using the proceeds from a Reverse Mortgage to fund a life insurance product. This is particularly useful if you have built up significant home equity.
Funding a life insurance policy with a Reverse Mortgage gives you control over your estate and assures the legacy you leave retains its value by:
Lowering the total estate value subject to taxes: The full value of your home is subject to estate tax, but a Reverse Mortgage against the property reduces its value - lowering applicable estate taxes. Your heirs will not owe as much estate tax upon the sale of your home. Furthermore, when the life insurance policy pays the benefit to heirs, they receive the benefit in tax-free dollars.
Leaving your heirs a guaranteed sum: By purchasing a life insurance policy for your heirs with funds from a Reverse Mortgage, you know exactly what you are leaving behind.
When your property is sold, any equity over the loan amount would be subject to taxes, but the remainder would still revert to your heirs. However, the unknown nature of future real estate markets makes this a potentially risky scenario. Purchasing a life insurance policy with Reverse Mortgage funds provides for greater control of your estate and legacy.
Furthermore, if you use the money from a Reverse Mortgage to buy additional life insurance for your heirs, that insurance purchase would have been made with tax-free dollars. The larger premium paid for life insurance coverage would translate into a larger death benefit.
If you have equity in your home, you may want to explore how a Reverse Mortgage could be an important component of your estate plan.
To discuss estate planning and other benefits of a reverse mortgage, contact us at 1-800-966-8390 today.