Real Estate
Don't Force Mom Into a Reverse Mortgage
Putting undue pressure on a loved one is unethical, regardless of the merits of the case.
By Knight Kiplinger, Editor in Chief
From Kiplinger's Personal Finance magazine, February 2009
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My brother is pressuring our mom to put a reverse mortgage on her paid-up home, to provide her with a monthly income to help with drug and home nursing costs. I think -- and I believe that Mom agrees -- that he and I can and should cover these expenses ourselves and keep her home equity intact. Mom's beneficiaries are my brother and me, our grandchildren, and a few charities. What do you think?
Putting undue pressure on Mom is unethical, regardless of the merits of the case, especially if your brother can afford to pay his share of her expenses. But maybe he feels he can't afford this. Is he willing to forgo his future share of Mom's home equity (and perhaps his children's share, too) in exchange for not contributing to her support now?
The three of you should meet with a lawyer and accountant and calmly examine your family resources and the pros and cons of various approaches to meeting Mom's needs.
Travel reimbursement
I am a consultant who recently landed a client in a city a day's drive from my own. The firm expects me to spend a few days there every week and has offered to pay me a flat $2,000 a month for travel and hotel expenses. I'm thinking that, instead of staying in a hotel, I'll buy a condo in that city and apply the travel reimbursement to my monthly mortgage. Does that sound okay to you?
Yes, but be sure to tell your client of your plan. You would not need lodging except for your relationship with the client, and your client shouldn't care how you spend a legitimate travel allowance. But the accounting for your condo costs and travel allowance -- what's considered a business expense and what's personal -- might be tricky, so be sure to consult a CPA.
To read more ethics advice from Knight Kiplinger, click here.
Have a money-and-ethics question you'd like answered in this column? Write to editor in chief Knight Kiplinger at ethics@kiplinger.com.
Reader Comments (6)
Posted by: Ted B at 01/10/2009 08:22:34 PM
If Mom's nursing home expences are for her, and she is not living in her home, then a reverse mortgage will only be an option if there is reasonalbe expectation that her stay is short term. Both FHA and proprietary reverse mortgages require the borrower be living in the home.
Posted by: john canning at 01/12/2009 12:10:16 PM
Consult a good tax attorney, but if mom agrees and brother wishes to opt out of sharing expences consider writing the reverse mortgage yourself. Reverse mortgages are very profitable for the lender and that profit could be put to better use in the family.
Posted by: Beth at 01/12/2009 03:20:44 PM
Reverse mortgages can compound quickly and you lost a LOT if you stay in the deal for more than a couple of years. However, it might be enough to carry you until you can sell the home in a better market.
Posted by: Ray at 01/12/2009 03:32:53 PM
First off, I work for a company that does RM's. I do not believe it is anyone else responsibility to cover another persons expenses. If some one wants pay, it's up to that person. My mother's-in-law other children did not want her to get a RM 5 years ago, because they wanted thier future money! Now they want my wife and i to come up with money to repair her home. Getting an RM is mainly up to the borrower who owe(s on) the house....So many senior homeowners are in financial hardship, but are afraid of RMs because of all the bad info....
Posted by: James T at 01/12/2009 07:08:34 PM
A reverse mortgage does require the property to be the person's principal residence, however the requirement is for only one day a year. Also if the client is insurable, life insurance could be purchased, & when the client dies the money can be passed on tax free! If the client reaches 100 years of age the note is forgiven.
Posted by: Sandi at 01/14/2009 11:45:34 AM
My parents are afraid of a reverse mortgage. They are having trouble with the mortgage and rely on a small business that has been declining due to the economy for income. Is the RM something to pursue until they can recoup before defaulting on there mortgage payments?