A recent case brought before a district court by AARP may have made a lot of people here in Oklahoma rethink how decisions made with their homes can affect their estate plans. That’s because the case brought up an interesting problem in some states when it comes to reverse mortgages and surviving spouses.
The case involved a Maryland resident who was suddenly faced with the prospect of losing his home because of foreclosure. Recently widowed, he discovered that only his wife’s name appeared on the loan. State laws stated that the debt would default to him and if he didn’t pay it off then he would lose his home. But as the district court later ruled, this type of action actually went against federal mortgage laws.
For those of our readers who may be unfamiliar with reverse mortgages, instead of you paying the bank, the bank pays you based on the equity of your home. Only available to persons 62 and older, these types of loans can be attractive for aging people who may want to beef up the assets in their estate plan. But as this situation points out, an ill-prepared reverse mortgage can spell trouble down the road.
As with any good estate plan, double checking legal documents to make sure that the appropriate names are on the right documents can mean the difference between ease and frustration for your surviving family members. Having a loan such as this default to your beneficiaries can reduce their inheritance and create headaches for those involved. While a death in the family can never be planned, seeking advice from a legal representative before you hit your later years can ensure that your estate plan is as sound as it can be.
Source: The New York Times, "Surviving Spouses With Reverse Mortgages Win Case," Ann Carrns, Oct. 1, 2013