A situation that I encounter all too frequently is elderly homeowners receiving poor advise. Many times this poor advice is from friends or family members who have a financial interest in decisions made about the disposition of the home after death. Frequently they are adult children. Let me tell you a real story.
A fellow Aging Life Care Association (ALCA) member referred me to an 89-year-old woman named Francine who was the primary care giver for her 87-year-old husband. Ronald was incontinent and suffering from Alzheimer’s dementia. He also had been receiving therapy for cancer. Francine was worn out and not thinking all that clearly about money. She needed home health care for her husband and had contacted ALCA for a referral. She figured that if she could just have help five hours a day she would be all right. That would be 30 hours a week not including Sunday.
Francine and I did a budget. She had $2700 coming into the house from pension and Social Security. Her home was worth $600,000 and she had a monthly mortgage payment of $750 per month. If she could get a qualified person for only $40 an hour she would need $4800 a month for home health care. There was no way this was going to work. We had to find more income.
We discussed the facts about reverse mortgages. I suggested to Francine that with a HECM-Tenure-Payment-Program we could pay off her mortgage, eliminate her monthly mortgage payment and create lifetime payments to her of $5100 a month. This would not only give her enough money to take care of Ronald and make him comfortable, it would give her extra income per month so that she would not have to go into credit cards to make ends meet and would replace the Social Security income she would lose after Ronald passed away first.
Francine said no, she would not even consider a reverse mortgage because her daughter Sherry, who was a paralegal, had told her they were bad. I convinced her to let me call Sherry. I got Sherry on the phone later that same day. We made plans to meet.
Over coffee I explained to Sherry everything that her mother and I had discussed. She said no she didn’t think a reverse mortgage was a good idea. I asked if she and her brother could help her parents out with $600 a week each. She said no. She confirmed that when both parents were gone that she and her brother intended to sell the home. We discussed every fallacy about reverse mortgages. I gave her all the facts. I showed her all the numbers.
There was no logical reason not to do this loan. So I said,
"That only leaves one of two reasons not to do this, Sherry. Either emotionally you feel the need to hurt your parents for some reason or you don’t want any of your inheritance to be used to improve your parents’ lives. Either way that is abusing your parents and you shouldn’t do it."
The tears began to fall and she finally opened up to me. In this case, I was able to overcome an abusive situation. That is not always the case.
Don’t let this happen in your family, to your clients, friends or neighbors. HECM programs were designed to help people like Ronald and Francine receive proper care and have a better quality of life. No one should be abused for their inheritance or made to suffer as a form of revenge.