DEAR BOB: I am retired, age 72, and in relatively good health. But I am “house rich and cash poor,” as you often mention. I’ve been looking into a reverse mortgage to improve my income. Also, my house needs a new roof and other repairs. When my daughter visited recently, I discussed a reverse mortgage with her. She was very opposed, saying the bank would wind up owning my house. I want to leave her a nice inheritance. But I’m worried that if I live too long, there won’t be anything left for her. What do you advise? –Helen H.
DEAR HELEN: Many selfish adult children try to talk their parents out of obtaining a reverse mortgage. The obvious reason is a reverse mortgage will reduce the amount of your daughter’s inherited equity in the house.
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However, you have no moral or legal obligation to leave your selfish daughter anything. She is clearly wrong. The bank will not wind up owning your house.
When you decide to sell, move out for longer than 12 months or die, the reverse mortgage must be paid off from the house’s sales proceeds. The remaining equity goes to your heirs, presumably including your daughter.
The Bible does not say, “Thou shalt leave thy ungrateful heirs a big equity in thy house.” You have no obligation to leave your daughter anything, especially if she doesn’t want you to enjoy your home and keep it in good repair by obtaining a reverse mortgage.
NO TAX DEDUCTION IF YOU DON’T PAY THE MORTGAGE
DEAR BOB: I am planning on selling my home and buying another. My daughter is willing to move in with me. I would like to add her name to the deed so she can deduct half of the home’s mortgage interest and property taxes on her income tax each year. Can this be done if I add her to the deed but not to the mortgage? –Shirley McW.
DEAR SHIRLEY: For your daughter to deduct any mortgage interest and/or property taxes, she must be on the title and actually have proof she made the payments, such as cancelled checks. However, she does not need her name on the mortgage obligation itself.
Just being on the title alone doesn’t entitle a person to the itemized tax deductions unless that person actually paid the payments. Please consult your tax adviser for details.
WHAT IS BEST PROOF OF HOME OWNERSHIP?
DEAR BOB: Last March my husband and I moved into our new home for which we paid all cash. Do we need a legal document proving this home is paid and is ours? If either of us dies, will the surviving spouse or our children have any legal difficulties? –Irma F.
DEAR IRMA: I hope you obtained an owner’s title insurance policy at the time of purchase. It will show you and your husband own the house with no liens or encumbrances, except property taxes payable when they come due.
The title policy should also specify how you hold title. If it is as joint tenants with right of survivorship (or as tenants by the entireties in states allowing that method), when one of you dies, the survivor automatically receives full title without probate court proceedings. However, you both need written wills just in case you die at the same time, such as in a plane crash.
Better yet, holding title in your revocable living trust both avoids probate and provides for the successor trustee to manage or even sell the property if one of you becomes incapacitated, such as by Alzheimer’s disease or a severe stroke. For details, please consult a local real estate attorney.
The Robert Bruss special report, “24 Key Questions Answered: Living Trust Secrets Reveal How to Avoid Probate Costs and Delays,” is available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this column are welcome at either address.
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