Expert: Dick Dennis - 1/22/2011

Question
I am a 72 yr old widower. I currently have about a $25,000 mortgage on my approx $80,000 home and am considering selling it to my son with the understanding that I continue living in the home. I would pay him enough each month to cover the loan, insurance and taxes and would do all upkeep needed. Since I do this anyway now, it would be no additional cost to me and I would be able to have the equity I have in the home to do some things while I still am able. It would also eliminate any probate problems after I'm gone. Does this seem feasible and legal?

Answer
Everything you mentioned, Larry, indicates you should be considering contacting an estate attorney to create a revocable living trust. With a trust, your home is owned by that trust. You are the main trustee and your son is the successor trustee (second in command). And best of all, you can forget about probate and you continue to live the way you have been. Trusts are the main tool to negate probates.

Very simply, nothing really changes. The trust, with the home, transfers over to your son when you are gone. Just go ahead and continue to pay the mortgage, insurance, taxes and upkeep. If by some chance you become incapacitated, or expect to, you can have your son take over as trustee. In effect, no problems as he has takes over as owner. Sounds simple, right?

A lesser effective way would be for you to consider a reverse mortgage. FHA guarantees the mortgage on the house and you are paid each month, or you can get a lump sum or a combination of the two. They pay off your existing mortgage in the process. That is something you may want to talk with the attorney about. To make sure you are satisfied with that, just go online and bring up reverse mortgage. That site will indicate what lenders specialize in reverse mortgaqes.

If you don't need the additional income from the reverse mortgage, then the first alternative would be your best bet. Just one thing about reverse mortgages: heirs often object to them (even though the house belongs to you and you can do as you please with it). They feel "their" equity is disappearing the longer you live. And that is probably true, but you can stay in that house until you're 172 and the bank will continue to pay you. You run the show. I do wish you well.

Dick Dennis
CA Broker lic.# 00349415
dixiedee@aol.com