Kansas and Missouri Estate Planning

How Expensive is Long-Term Care?

Long-term care costs are daunting.

No one likes medical bills.

Even with a job and steady income, they are intimidating.

As you age, your need for health care services will likely increase.

That is a cold, hard fact.

According to a recent MarketWatch article titled “This is how much long-term care could cost you, and don’t expect Medicare to help,” most people over age 65 will eventually need assistance with activities of daily living.

These services are considered long-term care costs and include help with eating, bathing, and dressing.

Most men will require these services for about 2.2 years.

Most women will need them for an average of 3.7 years.

How much can these services cost?

The media yearly cost of a private room in a nursing home is more than $100,000.

About one third of seniors will spend some time in one of these facilities.

About 40 percent of seniors will utilize at-home care.

The median yearly cost of a home health aide is more than $50,000.

About 15 percent of those over age 65 will incur long-term care costs exceeding $250,000.

Yikes!

How does one pay such a bill?

Medicare will be of no help.

Private health insurance also does not typically cover custodial care.

Some may be able to take advantage of free care from family members, but those who are single or have been widowed may find this impossible.

How can you prepare for such costly care?

Long-term care insurance.

Long-term care insurance will help you pay for part of your long-term care costs for a defined time period.

Do not wait too long to apply.

Premiums will rise with age.

The average yearly premium for a couple who are both age 55 averages $3,050 in 2019.

If you are healthy, this is a wise option.

If you have chronic conditions, you may be ineligible and should explore other options.

Hybrid long-term care insurance.

Some life insurance policies or annuities can carry long-term care benefits with them.

Any long-term care benefits remaining unused when you die will pass to your heirs as life insurance death benefit proceeds.

You may be able to have a lifetime payment option, but most are paid in five to 10 year installments.

Home equity.

If you move into a nursing home and will not return to your house, you could sell your home to fund your care.

If you have a spouse, a reverse mortgage could be a good idea.

Reverse mortgages allow you to get a loan on your home equity while still living in the house.

When does the loan come due?

You will be required to pay in full when you move, sell the home, or die.

Contingency reserve.

Saving early and often can help with long-term care costs.

If you have successful investments, the income can be used to make payments.

Medicaid spend-down.

If none of these options is possible, you may need to spend down to be eligible for Medicaid.

Medicaid has specific guidelines so it would be wise to work with an experienced elder law attorney.

Long-term care is costly, but early and careful preparation can weaken the bite.

Reference: MarketWatch (July 19, 2019) “This is how much long-term care could cost you, and don’t expect Medicare to help”

What Are Some Reverse Mortgages Gotchas?

Reverse mortgages are not a risk-free endeavor.

Many people in retirement find themselves in need of more cash.

Cash can be hard to come by after you have finished working.

Many people turn to reverse mortgages.

According to a recent Arizona Central article titled “Reverse mortgages can cause problems when spouses, heirs aren’t on board,” you should measure whether the risk is greater than the reward.

How can you do this?

First, start by understanding the how reverse mortgages work.

They essentially allow a homeowner to tap into their home equity.

This loan does not need to be paid back until one of two events occurs.

What are they?

The first is the death of the homeowner.

The second is when the homeowner moves from the home permanently.

The borrowed amount must then be paid in full.

How can this be done?

You or a family member may pay the bill.

The property may also be sold within a time window in order to satisfy the debt.

This can put your spouse and your heirs in a tough spot.

If your spouse or heirs were expecting to live in the home and are unable to pay, they may be evicted or face other legal challenges.

Yikes!

This can be made worse if family members were unaware of the reverse mortgage and were not informed moving may be required.

How do you avoid this?

Be honest.

Tell your loved ones about the reverse mortgage and explain its implications.

Your spouse may assume he or she may continue to live in the home.

This is not to be assumed.

The federal Department of Housing and Urban Development may provide insurance for reverse mortgages and allow your spouse to remain even if not listed as a co-borrower, but this is not the outcome in all situations.

Can your heirs simply pay off the bill?

Yes, but this can leave them in trouble financially.

Should the home be in bad shape, it may require costly fixes before it can be sold.

Does this mean a reverse mortgage is never a good idea?

No.

They can protect retirement accounts and large unrealized gains on the property.

Reverse mortgages should not entered into lightly.

Working with an experienced financial planner can help you make the best decisions for your family.

Reference: Arizona Central (June 12, 2019) “Reverse mortgages can cause problems when spouses, heirs aren’t on board”

Are Reverse Mortgages a Good Idea in Retirement?

Sometimes borrowing money is necessary.

You need money.

You are at least age 62.

Your home is not heavily mortgaged.

Someone mentioned a reverse mortgage may be a good option for you.

Perhaps it was Tom Sellack.

What is a reverse mortgage?

According to a recent Fed Week article titled “Considerations for Borrowing in Retirement,” reverse mortgages allow seniors to receive tax-free cash with no payments due until you move or die.

The funds can be used for a variety of things.

You can use them to pay off your regular mortgage on the home, make repairs, pay health care bills, or take care of daily expenses.

For those who do not plan to pass the house to heirs, it can be quite helpful.

What if you want your children to inherit the home?

You will need to consider the implications.

They can keep the home, but they may need to take out a mortgage to pay off the reverse mortgage.

If you move or sell the home while alive, you will owe the money for the reverse mortgage.

What are things to consider?

Reverse mortgages are expenses.

Although your reverse mortgage is insured by the Federal Housing Administration (FHA), you will need to pay insurance, property taxes, and maintain the home according to FHA guidelines.

There may be other option than taking out a reverse mortgage, including taking loans again your securities portfolio or life insurance.

Before you act, discuss your options and your situation with your experienced estate planning attorney, elder law attorney, or financial advisor.

As with all things financial and legal, look before you leap.

Reference: Fed Week (May 16, 2019) “Considerations for Borrowing in Retirement”

How is New York Addressing Reverse Mortgage Foreclosures?

New York recently made some changes to reverse mortgage laws.

Reverse mortgages.

What are they?

These are loans allowing seniors who are at least 62 years old to use the equity in their home while continuing to live in it.

This financial tool can help seniors who lack sufficient income to cover their living expenses.

According to a recent New York Law Journal article titled “Residential Foreclosures: Reverse Mortgage Foreclosure Protections,” the number of reverse mortgage foreclosures has seen an increase in New York.

This was an issue because reverse mortgages were excluded from mandatory settlement conferences and 90-day pre-foreclosure notices.

This means many issues were unable to be resolved simply because the borrower was unaware.

Yikes!

The new legislation aims to fix some of these issues through creation of a special reverse mortgage pre-foreclosure notice.

These notices provide information regarding how the borrow has defaulted and the possible grounds for such defaults as asserted by the lender.

The lender must provide the homeowner with information about what payments are necessary to cure a default should it have to so with water or sewage charges, homeowner’s insurance, or property tax payments.

What does this mean?

The new law guarantees senior homeowners protections by giving them important information to avoid defaulting.

Knowledge is power.

In this case, it may be the key to keeping your home.

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: New York Law Journal (May 11, 2018) “Residential Foreclosures: Reverse Mortgage Foreclosure Protections”

What Should I Know about Reverse Mortgages?

Reverse mortgages can help pay bills when you may not have the liquid resources.

Reverse mortgages.

Perhaps you have heard of them.

Maybe you understand them fairly well.

Maybe you do not.

What is a reverse mortgage?

It essentially allows you to continue to remain in your home while using it to get tax-free cash equity.

There are no mortgage payments.

The load will not impact your Medicare benefits or Social Security.

Is it the best option for you?

According to a recent The Observer News article titled “Reverse mortgages can be a key component in retirement planning,” this depends on a few facts.

Why do people like reverse mortgages?

These loans allow people age 62 or older to remain in their home and enjoy a comfortable retirement.

As for how you receive the benefits, there are options.

When you close, you could receive cash immediately.

You can also open a line of credit to access the rest on an "as-needed" basis after a year.

You could elect to get payments each month for the rest of your life or for a set period of time.

You could even mix-and-match these options.

You may be able to qualify, even if you have an existing mortgage.

Still, there are some cautions to taking a reverse mortgage.

What are they?

Each time you take a draw on the equity in your home, your loan balance increases.

Fees and interest accumulate.

At the same time, your equity is decreasing.

As a natural consequence, you will be eating into any inheritance for your heirs.

Even if they inherit your home upon your passing, they will need to pay any outstanding balance owed on your reverse mortgage.

Also, the reverse mortgage can only be taken on your primary residence.

What if you move or a title-holder is no longer living in the home?

The reverse mortgage payments will be due immediately.

The problem?

The fees and closing costs on reverse mortgages are higher than on other loans.

Before you make a decision, you should carefully weigh the risks and rewards.

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: The Observer News (February 15, 2018) “Reverse mortgages can be a key component in retirement planning”

What are the Latest Changes in Reverse Mortgage Rules?

New reverse mortgage laws will affect how much you can borrow.

Have you been considering a reverse mortgage for a few years?

If so, you should revisit the rules and evaluate whether a reverse mortgage would benefit you.

Why?

According to a recent Kiplinger article titled “New Rules for Reverse Mortgages,” the rules for reverse mortgages have changed yet again.

What are these changes?

First, upfront mortgage premiums will be a flat two percent for every loan.

What does this mean?

You will pay more if you qualify to take up to 60 percent of the eligible loan amount in the first year with the remainder taken the following year.

In fact, your premium will increase by 1.5 percent.

What about if you qualify to take more than 60 percent in the first year?

Congratulations!

Your premium decreased by 0.5 percent.

Another change involves the ongoing insurance costs.

These costs will decrease for all borrowers from 1.25 percent to 0.5 percent over time.

These savings could offset costs upfront.

Maximum loan proceeds calculations will also be adjusted.

How?

The percentage of the home value available to borrow at most interest rates and ages will drop.

It is expected to cut proceeds by 10 percent to 12 percent.

Most individuals will qualify less than they would have before the rule change.

When will the changes be effective?

They actually are already in effect as of October 2.

What is the purpose of the changes?

The changes were an effort to help the federal Home Equity Conversion Mortgage program—specifically its insurance fund.

Overall, the new rules could make reverse mortgages unavailable to many seniors and at higher costs for the rest.

 

If you do not know whether a reverse mortgage is a viable option for you, work with an experienced elder law attorney.

He or she will be able to walk you through what these changes mean for you.

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: Kiplinger (September 11, 2017) “New Rules for Reverse Mortgages”

Who Should I Consult About Reverse Mortgages?

Knowing the pros and cons is important to making decisions.

Are you finding yourself in financial trouble?

Are you looking for a way to make medical payments as you age?

Are you needing someone to provide advice for your situation?

According to a recent Reverse Mortgage Daily article titled “How Elder Law Attorneys Can Become Key Reverse Mortgage Partners,” an elder law attorney may be able to help.

Why?

Part of their work is helping their clients figure out how to pay for care associate with aging.

Sometimes this involves helping a senior keep his or her home.

Although a reverse mortgage is not right for everyone, an elder law attorney can help you determine if it is a good option for you.

Obviously the final decision belongs to you, but it never hurts to have someone available to answer your questions so you can make an educated decision.

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: Reverse Mortgage Daily (September 18, 2017) “How Elder Law Attorneys Can Become Key Reverse Mortgage Partners”

Will I be Able to Afford Assisted Living?

Assisted living is expensive, but most people will need it at some point.

Aging is a part of life.

As you age, your body will not work the way it once did.

You will need assistance with one or more of the "activities of daily living," or  the things most folks do when they get up in the morning and start their day.

These activities commonly include getting out of bed, going to the toilet, bathing/showering, dressing, grooming, and self-feeding.

Having assistance with these basic activities can be costly.

In fact, your Social Security and savings probably will not cover the expense.

How can you pay for this care?

According to a recent Consumer Reports article titled“11 Ways to Afford the Assisted Living Care You Need,” there are ways to help make these payments.

What can you do?

Use life insurance.

Have you been paying premiums on whole or universal life insurance for 10 or more years?

If yes, you can access the built-up cash value for the policy.

You will not owe taxes if you withdrawal your cost basis or borrow from the policy.

You may owe income tax if you cash in the policy entirely.

Is income tax owed on the whole amount?

No. Cost basis is excluded.

Apply for Veterans Benefits.

Did you serve in the military?

If so, you could be eligible for a Veterans Affairs pension.

This would provide you with an enhanced or special monthly pension.

This benefit is not automatic.

You will need to meet net worth and income limit requirements.

Still, this is not guaranteed.

It often depends on who is reviewing the application.

Get a Home Equity Loan.

If you need to keep your home, you may want to apply for a home equity loan or home equity line of credit.

This may or may not be the best choice for you.

Remember, there will be fees for loan processing, underwriting, origination, appraisals, and document preparation.

There are also usually setup costs.

Take Out a Reverse Mortgage.

Are you age 62 or older?

Is your spouse entering assisted living?

You could use a reverse mortgage to get some cash for your home equity.

Find Assisted Living with Flexible Pricing.

Not all assisted living is the same.

You may not need all services.

Instead, you could get a model to meet your specific needs while paying less.

Go to an Older Facility.

Yes.

A new or larger assisted living community may seem nicer.

But they also cost much more.

Set your sights a little lower when it comes to bells and whistles.

Plan for Coverage Gaps.

If your parents have long-term care insurance, they may be required to wait up to six months for payments to start.

What happens then?

You could cash in a CD early.

This may draw a penalty, but it will be small.

Take Tax Write Offs.

You may be able to deduct the remainder of your medical expenses from your federal income taxes, if your total medical expenses exceed 10 percent.

An elder law attorney can help you wade through your options.

I am a strong advocate for long-term care insurance.

Gretchen and I obtained our policies nine years ago now.

Although we do not enjoy paying the premiums, we do appreciate the peace of mind this insurance affords.

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: Consumer Reports (August 31, 2017) “11 Ways to Afford the Assisted Living Care You Need”

How Could New Reverse Mortgage Legislation Affect Me?

Legislation proposals could determine whether you can keep your house.

Do you have a reverse mortgage?

Did you or your spouse sign the documents without the other as a co-signer?

If yes to both questions, then two senators think there may be cause for concern.

According to a recent New York Times article titled “2 Senators Question Effects of a Reverse Mortgage Proposal,” Senator Marco Rubio (R-FL) and Senator Catherine Cortez Masto (D-NV) sent a letter to the Department of Housing and Urban Development and the Office of Management and the Budget regarding some specific wording in proposed legislation regarding reverse mortgages.

Why?

They were concerned the new wording sought to reverse protections for spouses provided in previous legislation.

The senators are seeking clarity about whether these changes are intended to require widows and widowers to pay the loan or be evicted.

Although this intent has not yet been confirmed, the answer could affect thousands of elderly Americans who are left after the death of a spouse.

By the way, Carolina Gerard with the National Council for Aging Care contacted me yesterday regarding some new content on the Council's website about Elder Abuse, Aging in Place and other important subjects of interest.

I highly recommend you check out this resource by clicking here. 

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: The New York Times (August 8, 2017) “2 Senators Question Effects of a Reverse Mortgage Proposal”

What are Potential Pitfalls with Reverse Mortgages?

Reverse mortgages could carry long-term problems.

Look before you leap.

Are you at least 62 years of age?

If yes, you could take out a reverse mortgage.

Should you?

Maybe.

What is a reverse mortgage?

A reverse mortgage lets you have cash now for your home equity without selling your home now.

Sounds appealing, right?

According to a wfmz.com article titled “Life Lessons: Reverse mortgages: When are they dangerous,” it may have less than appealing consequences.

Like what?

Children named in foreclosure

If your adult child inherits your home, he or she may be named in the foreclosure.

Even if it was your reverse mortgage?

Yes.

Costs of upkeep

While you live in the home, you are still responsible for the upkeep of the home.

These expenses may add up fast.

Oh, by the way, I thought you were wanting to downsize and get out of home maintenance responsibilities.

Names on the mortgage

Are you married?

If so, you may want to include the name of your spouse on the mortgage to protect his or her living situation when you pass.

Rules regarding residency

If you do not live in the home for a year, the bank can foreclose.

Not enough cash

Even with a reverse mortgage, you may not be able to pay for at-home care.

Why?

The cost of this care can reach $12,000 a month.

Yikes.

Can reverse mortgages ever be a good idea?

Yes.

If you have a family caregiver, they can be beneficial.

Depending on your qualifications, programs like Medicaid may also be an option.

Whatever you do, evaluate your situation and goals before making a decision.

What may be a blessings for one person, may be a curse for you.

Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: wfmz.com (January 24, 2017) “Life Lessons: Reverse mortgages: When are they dangerous”