Financial Solutions for Cash Poor But Real Estate Rich Seniors

Real Estate Rich Seniors

Suppose you are a senior struggling to pay the montly bills but have been wise enough to have paid off your house entirely.  Your monthly income is limited to Social Security and you have, in addition to the obvious regular bills such as groceries, utilities, the various insurances, and routine home maintenance, the larger issues such as property taxes which comes up when selling a house as is, unexpected medical bills, and more serious home repair problems. You may take the help of a leading real estate broker like the Jax Nurses Buy Houses if you want to sell your house quickly and at good rates.. Your health is good.

You need solutions for a cash poor and home equity rich situation.  Here are some ideas. You can also check out We buy houses for cash atlanta  if you need information on real estate services.

Sell the house and downsize.  The move could be to an apartment or to a smaller house.  If you are renting you need to remember that you no longer have the equity in the house to fall back on.  Also you need to budget for the long term since the likelihood is that you would be using at least some of the proceeds of the sale of your residence toward rental and related expense.  On the upside, you will likely not have to pay for repairs.

If you move to a smaller house, you continue to have equity but maintenance and tax issues can remain.  It may be disorienting to move but it works for some.

You could take out a commercial reverse mortgage.  Reverse mortgage rules have tightened in the past year since some consumers signed on without realizing the effect.  Reverse mortgages can provide cash for needed expenses while you still stay in the home but should never be taken out lightly.  You still pay real estate taxes and other expenses on the house.  If you move, such as to assisted living or a nursing home and remain out of the house for a year, the mortgage can go into default.  Your estate pays back the company if you die.  Reverse mortgages are for those who intend to stay in their homes indefinitely.  You need to be 62 or older but the older you are the more the company will make available.  These are best for people who are older, maybe 75-80 or above, in good health, and need some help to pay household expenses, repairs or medical bills.

Private Reverse Mortgages.  If you have an adult child who has enough in assets and is willing to help if the loan could be secured, a private reverse mortgage that can be prepared at a knowledgeable elder law attorney’s office can secure the child’s loan against almost any creditor (except a prior mortgage) including the government under Medicaid.  The Private Reverse Mortgage would typically be executed along with a Note and, ideally, along with a Family Agreement.  It is recorded with the Recorder of Deeds as would be any real estate document.  They are usually written so that you do not pay back until the property is sold and then your child is repaid in full.  Done properly, there are no Medicaid “gifting” penalties and the child’s interest is preserved.

Here are other ways in which children can help.

Joint Tenant With Right of Survivorship.  An adult child could buy fifty percent of the value of his parent’s residence and actually pay for it.  This gives cash to the parent. On the parent’s death, the child would become the sole owner of the property.  Since it is possible although unlikely that the child could die first, this probably should be coupled with life insurance on the adult child.

Rental and Contribution to Household Expenses.  A parent could sell her or his home and move in with son or daughter and pay either reasonable rental or contribution to household expenses under a written Family Agreement.   In some cases, modifications or additions are made to the child’s home.  If the parent pays for these, there definitely should be a Family Agreement in writing.

Life Estate.  Mother could sell her home and move in with son or daughter.  She can, without losing her right to Medicaid benefits later, buy a life estate in son or daughter’s home and pay them for it provided she lives there for at least one year after the purchase.

In our experience, these are only a few common ideas.  Each family has its own “thumb print” and suggests different answers.

About the Author Janet Colliton

Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.

follow me on:

Leave a Comment: