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Do reverse mortgages give Nevada residents end-of-life options?

Nevada residents of any income level or situation should consider future financial status. For elderly residents, financial considerations may be divided between handling current needs and assuring legacies are secured for heirs through estate administration. Decisions today could impact heirs in the long term, and for a growing number of baby boomers struggling with later-life finances, a reverse mortgage seems like a good answer to needs.

According to statistics and surveys, 77 million baby boomers will retire soon. Only around 18 percent of those individuals report being confident in their financial ability to retire. The lure of easy access to cash through a reverse mortgage is converting more and more individuals over the age of 62 into borrowers. In 2013, $15.3 billion was borrowed based on reverse mortgages, which represents more than a 20 percent year-over-year increase.

Many financial experts advise against reverse mortgages as a way to fund retirement. First, the process is expensive. Even the least expensive process can carry thousands of dollars in fees.

Creating additional debt during retirement is also against the wisdom provided by most financial experts. The new mortgage obligates a person to pay insurance, property tax, and maintenance costs; failure to keep up with such things results in a default and possible foreclosure.

A reverse mortgage also reduces the value of an estate and puts a financial burden on heirs. The full balance on a reverse mortgage becomes due if the home owner moves out, dies, or sells the home. The death of the borrower could result in the sell of the house, which forces family members living in the home -- include a surviving spouse -- to move.

Heirs who want to keep homes must pay the full balance of the reverse mortgage immediately. If a borrower moves out of the home and into a nursing home, the full balance becomes due or the home is forfeited. A reverse mortgage removes the ability to leverage or sell a home to pay for end-of-life care.

Estate planning is a complex legal matter, just as end-of-life financials can be a complex financial matter. It's important to understand your options and all the benefits and consequences they hold before moving forward with any action.

Source: US Finance Post, "Baby Boomers Using Reverse Mortgages Instead of Retirement Plans" Christine Layton, Mar. 31, 2014

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