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Aging

End of Life Planning Part 2

by Kylie Johnson
written by Kylie Johnson

Planning a Memorial

As your loved ones age, it’s important to know how they want to be memorialized and buried.

While many people still prefer solemn, formal funerals or mourning ceremonies, others are beginning to lean more towards parties and celebrations of life.

Knowing the kind of memorialization that your loved one wants will take the decision making off your shoulders when the time comes to carry out their wishes. Detailing these wishes as part of a legal document will ensure that your loved one is honored and memorialized as they want.

If you’re concerned about the cost of funerals, create a funeral plan at a funeral home. You can work with the funeral home to prepay for all funeral costs, so your family is not burdened with the responsibility of figuring out how they’ll pay for your loved one’s funeral.

How to do it

Find your state on this list from the Funeral Consumers Alliance. Depending on your state’s law, you may be able to make a legally binding document guaranteeing that your loved one’s wishes are carried out. Some states grant the health care proxy (named in the advance health care directive) the power to make funeral decisions for the deceased.

Distributing wealth and assets

According to the AARP, 60 percent of U.S. adults don’t have a will. Without this proof of your loved one’s financial wishes, control of their assets goes to the state they live in, which will distribute it among their family per state law.

A last will and testament solidifies your loved one’s wishes for how their property and wealth gets distributed after their death. Not having a will to go by can leave family members feeling slighted and resentful at their share of the loved one’s assets.

If they want to donate to a cause, a business or a university, the will can accomplish that. A will may also state that the deceased wants to establish a charitable trust in their name, distributing out their money over time to certain individuals.

Getting your loved one’s financial affairs in order will decrease the stress that the family has to feel later.

How to do it

Talk to a lawyer about setting up your last will and testament. Come with ideas on:

  • Who your loved one’s executor will be
  • Who your loved one’s beneficiaries will be
  • What your loved one wants to leave to them
  • Guardians for their minor children if they have any
  • Two witnesses who will attest to watching your loved one sign the will
 

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Aging

How to Make End of Life Plans Part 1

by Kylie Johnson
written by Kylie Johnson

According to the CDC, around 60 percent of U.S. adults have no plan in place for the end of their lives. Consequently, close friends and family are left to sort through personal belongings, funeral arrangements and asset distribution while they’re mourning. Solidifying an end of life plan can ease the minds of everyone involved. Your loved one’s final wishes can be known and recorded as an objective legal document. This gives you and your family a map to follow.

This process involves discussing all the conditions surrounding someone’s death before they die, as opposed to during or after. Having these discussions up front can make the process easier.

This article explains some of the benefits of end of life planning and explains the different parts of it: advance health care directives, memorialization and burial, financial affairs and preferred location of death.

Making health care decisions

An advance health care directive is a form that tells you how your loved ones want to be taken care of, in the case that they’re unable to do so themselves. Advance health care directives are sometimes known as living wills. An advance health care directive or living will is different from a power of attorney, which ensures that an agent of your loved one’s choosing can make medical decisions that are not covered by a living will.

If they’re incapacitated by a disease, an advance care directive will specify whether or not they wish to receive medical treatments such as:

  • CPR
  • Artificial respiration
  • Artificial hydration
  • Feeding tubes
  • Ventilators

 

Advance care directives allow adults of any age to control how they spend their final days.

These forms, once signed by two witnesses, are legal documents with legal power in the United States. While they don’t force your loved one’s doctor to comply, a doctor can’t be legally prosecuted for doing so.

However, not all situations will be covered by the advance health care directive. In the cases that aren’t covered, doctors can consult the health care proxy.

Health care proxy

Named in the advance care directive, the proxy (sometimes known as an “agent”) is legally able to make health care decisions on behalf of the dying person in the event that they’re unable to do so for themselves. The proxy can be anyone: friend, family, it doesn’t matter. This applies only when the advance health care directive doesn’t cover the situation.

How to do it

Download and print the advance health care directive form for your state. After talking it over with your loved one, ask them to fill out the questions or help them fill it out. Have two witnesses over 18 years old present when your loved one signs it.

The document is legally recognized once your loved one and witnesses have signed it, so you’re not required to take it to a lawyer. However, it’s always recommended to get legal consultation on these issues, if you’re able.

Make several copies for yourself, your loved one, concerned family members, your loved one’s physician and faith leaders. Discuss the advance health care directive with your loved one’s physician, and make sure they understand what your loved one wants to avoid confusion.

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Caregiving

Incapacity Happens

by Barbara Bates Sedoric
written by Barbara Bates Sedoric

What does Dad want? Have you asked? How about Mom? Does anyone know what her wishes are? Has anyone asked her? And is anyone really listening to what they are saying? Incapacity Happens

Life can turn on a dime. Incapacity happens. Wouldn’t it be better to take some time now to get prepared? There is no time like the present to ask questions and get some answers. It’s never too late until it really is too late!

Engaging in conversations about what to do in the event of incapacity or death and formulating a plan ahead of any crisis situation is a winning combination. Talking about the “what if’s” now will help diffuse and negate the possibility of a terrible outcome during a difficult situation.

In case you have been busy and not taken time to be up with the news, there’s a movement afoot. It will change the current absence of meaningful and necessary conversations. End-of-life conversations will soon become an integral part of exchanges between doctors, patients, caregivers and family members when it matters most. Why the changing tide? Medicare will reimburse physicians for their time spent having these important discussions with their patients and family members. One’s end-of-life wishes will soon become an integral part of the conversation when you visit your doctor for an annual check-up or if you end up in a hospital in a crisis situation.

There will be no more excuses for ignoring the pleas from patients and families to be “heard” when end-of-life decisions are first and foremost on their minds. We’ve all heard stories about family conflicts and family tragedies – so isn’t it better to have these conversations well in advance of a crisis?

The ending of Bobby Kristina Brown’s life exemplifies a worst-case scenario – the losing combination of a lack of prior conversations, the lack of any clear planning, the added complications of a blended family, and no person “in charge” of handling the life-changing event.

Time is often of the essence. Asking Mom and Dad to communicate their wishes is a priceless gift to you. Telling them your wishes is your gift to them too! Bobby Kristina Brown’s situation reminds us that these kinds of events can and do happen at any age.

Think about it. Talk to your parents, your spouse, your physician, and your adult children and make some of these difficult decisions now. Knowing your loved ones wishes and expressing you own will help alleviate the fear and the chaos of “what to do” when incapacity or death happens.

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HealthHealthy Living

Dealing with Life after Loss

by Kendall VanBlarcom
written by Kendall VanBlarcom

When you are trying to cope, dealing with life after loss, it can be very, very difficult. When we lose someone close to us, particularly if it is a family member or a lifelong friend, the grief can be an exceptionally powerful force in our day-to-day lives.

While we can logically understand that loss is part of life, when we lose someone close, it can cause confusion, sadness, and depression. How each person copes with grief can differ, but typically time passing is what helps. But that time period may be months or even a year. There is no set time on how long the grieving process takes.

Accept that it will take time. While a supportive environment and taking care of yourself can help, you will need to adjust to the idea of the loss before you are able to accept your current situation and move forward. Talking to a counselor or other mental health professional can help.

Asking for Help When Dealing with Life After Loss

If you feel your grief is consuming you, know you are not alone. Many dealing with life after loss describe their sadness overtaking their whole lives, including their thoughts and emotions. Understand your feelings are adjusting, making sense of something that seemed impossible before.

Talking through your emotions can help. You don’t need to go through this alone. If a friend wants to bring over dinner and visit, try to take them up on it. If you are unable to talk with those closest to you, consider seeking professional help.

Be Present As You Heal

Living in the past and continually replaying memories in your mind can cause intense sadness. Particularly if you are worried about the future, too. Learn to live in the moment. Focus on the present.

To live your best each day, take care of yourself. Remember to eat well, get exercise, and stay on a consistent sleep schedule. Solid, healthy patterns are important. You may be tempted to dull your feelings with alcohol or other substances, but this will not help you heal. Turning off your emotions can even lead to it taking even longer for you to feel better again.

Get the help you need and recognize that your grief is yours. While it may be helpful to hear about or read about stages of grief or timelines of grief, know that you will move forward on your own path to healing.

You may be in the process of becoming a completely different person. Or, you are settling in to be happy as the person you’ve always known yourself to be. Either way, change can be very upsetting and you may resist it, but change can also be growth. When you are dealing with life after loss, be kind to yourself, and eventually, you will feel strong again.

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How to Avoid Probate Litigation After Death
Estate Planning

How to Avoid Probate Litigation After Death

by Barbara Bates Sedoric
written by Barbara Bates Sedoric

 

 
If you have given any thought about to whom you want to give your belongings after your death, you will likely hire an estate lawyer to draft legal documents to carry out those intentions. Because of the formality of the estate planning process, we all somehow assume that we can easily check that difficult task off our to-do list after we sign those documents. How to Avoid Probate Litigation After Death

But Not So Fast!

If you haven’t told your family your specific intentions, or discussed with them what possessions they would like to receive, they may not follow your instructions! A reading of the will or a trust to those loved ones you leave behind will not necessarily clear things up. How to Avoid Probate Litigation After Death

Fighting over your intentions.

Surviving family members are increasingly suing each other over the deceased’s intentions. Family members each have their own views of what you actually meant, what should happen, and their place in the family. After you are gone, the only formal avenue to sort out these differing viewpoints is in the Probate Court. Probate litigation is the fastest growing litigation area for lawyers now. These cases involve estates of all sizes. Evidently, there is no estate too small to argue over. These cases, usually pitting family members against each other, can take years to resolve because they involve grieving parties each asserting their own grief in a process that is ill suited for handling the emotions that accompany the death of a loved one.

Not Pretty.

Recurring themes in these Probate litigation cases include: unequal distributions, step or blended families with differing expectations, lingering sibling rivalries and jealousies, and heirs who were intentionally omitted from distribution of assets. These matters are complicated by the fact that often the elderly, now deceased, relative tells each beneficiary whatever they want to hear to be accommodating and not rock the boat of family dynamics. Claims of the elderly relative’s incapacity and the undue influence by a beneficiary are particularly divisive and common assertions in probate litigation. As a mediator, I’ve seen these matters up close and personal and they are not pretty.

A Solution: Talk.

I know we cannot resolve all our conflicts with and between family members before we die. But we can help our survivors administer our estates while preserving our assets. We do that by telling our family what we want, while we are still alive to have those kinds of conversations. We need to talk to one another. “Death is inevitable and everyone dies. Yet it is extraordinarily difficult to face and to discuss with loved ones. At the same time, planning for death is an absolute necessity to save grieving family members and friends from chaos and confusion during an emotionally challenging time,” to quote Barbara Bates Sedoric, Founder of LastingMatters.
Here’s how to share your estate planning intentions with your family:
Speak to the lawyer that prepared your estate plan and tell him/her you want to meet with your beneficiaries with the help of a trained probate mediator. Meet with the mediator and your lawyer about the issues that you predict will arise and make a plan to meet everyone together or separately, if necessary. The mediator will provide a respectful, safe process for everyone to hear your wishes and implement them, including how to introduce the subject. The goal is for your intentions to be paramount and honored.
If you haven’t done so already, complete The LastingMatters Organizer, so that you and your advisors understand and organize your current assets and intentions. Then meet with your family together, or in smaller groups, according to the plan worked out in advance with the mediator. If you invite your beneficiaries, they are very likely to attend.
In the meeting, your lawyer will explain how the estate documents and the legal process works. Everyone will hear the reasons why “Johnny is getting less than Sally”, what you mean by “equal”, and how your assets will be distributed. The family will be helped to understand why Aunt Jane is getting the cherished Picasso painting and the “xyz” funds (so that the painting can be restored – not because Aunt Jane unduly influenced you). Your relatives will have an opportunity to talk to you about your wishes, ask questions, and they may get an opportunity to vent their feelings.
Everyone will sign an agreement at the end of the mediation process and years of expensive, emotionally wrought future litigation will be avoided. Personal vendettas between siblings and family units will not play out due to any misunderstanding of your intentions. Families will not be divided into separate warring factions for generations to come. If you meet with family members in a mediation setting, Probate litigation can likely be avoided. People can address planning for the inevitable honestly and openly. We are all going to die and you are dealing with the inevitable life event realistically, describing to those you love what you want to have happen when you die.
Explaining your intentions in a mediated meeting is a price worth paying for avoiding the ‘chaos and confusion of an emotionally challenging time.’ How to Avoid Probate Litigation After Death
By Connie Rakowsky
Connie Rakowsky mediates probate and other types of disputes. Experience has been her teacher: she mediated hundreds of probate disputes and, in her own life, experienced intergenerational family rivalries between her father and his siblings. Connie’s paternal grandfather favored her father over his two older sisters in the family business. Generations later the resentments are baked into the family relationships. Formerly a successful business and bankruptcy lawyer for three decades, she handled sophisticated matters for clients while employing a practical approach.
For further information, contact Connie Rakowsky at RakowskyMediation.com

How to Avoid Probate Litigation After Death

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How to Avoid Probate Litigation After Death

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Why don't we talk about death?
Aging

Why don't we talk about death?

by Barbara Bates Sedoric
written by Barbara Bates Sedoric
Why don’t we talk about death? First of all, it’s going to happen to each and every one of us. Yet, why does initiating a conversation about planning ahead for death always seem to make people run in the other direction? Why don’t we talk about death?
What is it that makes us so fearful? Do you think that having conversations about end-of-life plans will in fact “jinx” you? Why don’t we talk about death?

Why talking about death and planning ahead is beneficial:

  • We are less prepared to tackle end-of-life decisions during a crisis (when incapacity occurs or when a loved one dies). Why don’t we talk about death
  • The lack of advance planning often divides family members when making difficult decisions.
  • The emotions of grief and vulnerability tend to increase all kinds of costs – including unplanned funeral expenses.
  • It’s better to be proactive and get ready than to be reactive with little or no guidance.
  • We are living longer and the increase Alzheimer’s presents a greater, more urgent, need to plan ahead.

Having counsel from both a Financial Advisor and an Estate Attorney is a good idea.

Financial Advisors engage in a wide range of conversations with their clients when strategic financial planning is done during their lifetimes. If your financial advisor is a fiduciary, the conversations should also include your individual life goals, family legacies, and the stewardship of your assets before and after death occurs.
Estate attorneys help adults plan ahead by writing legal documents, such as a will, to dictate what will happen to your money and real estate, minor children, and other assets in the event of incapacity or death. Estate planning also includes getting beneficiary designations in order, executing a durable power of attorney, and a health care power of attorney for if you become incapacitated and can’t speak for yourself.
It’s also a good idea to talk to your spouse, partner, aging parents and your adult children while you have opportunities to do so. Why don’t we talk about death?

Questions that might help jump-start those conversations:

  • What music would you like at your funeral or memorial service?
  • What interesting things do you want included in your obituary?
  • Does anyone know all of your passwords or where to find them?
  • If someone wants to make a donation in your memory, where would you like that donation to go?
  • Who should deliver the eulogy at your service?
  • What do you want your family to know that you haven’t yet communicated?
  • What do you want to have happen to your dog after your death?
  • What do you want done with your belongings?

“It always seems too early until it’s too late” is the theme for National Healthcare Decisions Day, held annually on April 16. NHDD.org is an organization whose mission it is to help you understand the value of advance healthcare planning encouraging every adult to make an advance care plan for the sake of their loved ones.

So why is it important to talk about death?

Because any information given or received is better than no information at all and because “what is in your head is gone when you’re dead”. You might even overcome your fears so that talking about death isn’t scary. Why don’t we talk about death?

Why don’t we talk about death

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Real Estate Documents Your Children Need After You Die

Real Estate Documents Your Children Need After You Die

by Barbara Bates Sedoric
written by Barbara Bates Sedoric

5 Real Estate Documents Your Children Will Need After You Pass Away

Planning ahead for what happens at the end-of-life shouldn’t involve frantic last minute searches for information that someone in your family will need, and want, after you are gone. It’s so much easier if you take some time now to plan ahead. Real Estate Documents Your Children Need After You Die

One of the biggest items to plan for is what happens to your real estate.

Unless you want to send your loved ones on a wild goose chase looking for documents, keys, and other assorted valuable information that you’ve stored in a variety of places, getting your real estate assets organized for them now will be appreciated in the future. Real Estate Documents Your Children Need After You Die

Starting with the basics, the following are the five most important groups of documents you should gather in one place so that your children and/or other loved ones are able to easily access them in the event of your passing. At the very least, write down the precise locations of these items to avoid a scavenger hunt later on.

1. Land and Property Deeds

  • Address and location of any keys
  • Maintenance providers’ contact information
  • Title of property (joint or individual)
  • Location of original deed and other relevant documents
  • Title insurance document
  • Property easements and locations of documents
  • Current estimated value

2. Rental Agreements and Leases

  • Rental property location and landlord contact information
  • Location of rental agreement document and location of key to property
  • Information on any property you own and rent to others
  • List property location and lessee contact information
  • Location of rental property agreement and location of keys to rental property

3. Mortgage Papers

  • Mortgage company and contact information
  • Location of original document
  • Paperwork showing balance of Mortgage

4. Utility Company Information

  • Oil company and contact information
  • Oil tank refuel access location
  • Prepaid oil contract details
  • Gas/electric company(s) and contact information

5. Alarm/Security System Information

  • Security company and contact information
  • Alarm code or alarm password

Getting the information about your real estate assets in order is one of the biggest gifts you can give to your loved ones after you are gone.

Would you like a place to keep track of and organize this kind of information? LastingMatters provides an easy, affordable and comprehensive way to document and organize your personal wishes and intentions related to end-of-life planning and planning for death, helping to ensure peace of mind for your loved ones.

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Initiating End-Of-Life Conversations with Parents
Aging

Initiating End-Of-Life Conversations with Parents

by Barbara Bates Sedoric
written by Barbara Bates Sedoric

Whether you plan ahead or you’re thrown into a situation due to a sudden health crisis, end-of-life conversations are never easy. Couple that with trying to initiate these conversations with your aging parents. End-of-Life talks can be excruciatingly delicate and sometimes difficult. One must simultaneously tread lightly, yet boldly. Initiating End-Of-Life Conversations with Parents

Here are some basic guidelines to help prepare for these very important and personal discussions. Initiating End-Of-Life Conversations with Parents

Start now Initiating End-Of-Life Conversations with Parents

If you think it’s difficult to find the time today, it could be much harder. Imagine what it will be like trying to discuss end-of-life matters with your mom when she is gravely ill, incapacitated, or worse. Imagine what would happen if she were no longer here to have these conversations. In other words, don’t wait. Your parents are likely the healthiest they will be today.

Pick a comfortable spot, both mentally and physically

Do not bring your mother (or father) to the local Applebee’s to have this type of conversation. She does not want to discuss her personal matters while enjoying a meal in a restaurant. We suggest initiating this talk at your parents’ home, where they are most comfortable and it’s private.

Do your homework Initiating End-Of-Life Conversations with Parents

Before initiating this meeting, prepare a list of questions to help your parent. We suggest referring to one of the many checklists in The LastingMatters Organizer. You may think of the basics (ie. whether they prefer a traditional graveyard burial or they wish to be cremated). However, you may be overlooking dozens of other considerations that you haven’t thought about.

Be straight and be clear

Ease into the conversations by first letting your parent(s) know that you honestly don’t want to broach end-of-life subjects. However, it is best for everyone involved to be prepared in advance for any kind of future life-changing event – incapacity, dementia or death. Remind them that a feeling of accomplishment comes from the knowledge that their affairs are in order. With their wishes articulated, affirm that their intentions will be honored. Help your parent(s) understand that these conversations are tough for all involved, but these conversations are also the right thing to do. Initiating End-Of-Life Conversations with Parents

Give yourself, and your parents, a break

When discussing end-of-life matters with a loved one, often the biggest concern is how to make your parent(s) most comfortable in tackling these important decisions. This is not going to be a one time conversation and will take time for your parents to consider and organize their wishes. Take breaks from these discussions, but be sure to revisit topics. Continue to gather the information that will be needed, and wanted, when something happens. Easier said than done, right?

This is by no means an all-inclusive list, but it will help you ignite a conversation.

Initiating End-Of-Life Conversations with ParentsWhile you, and/or your parents, may have your own checklists, referring to The LastingMatters Organizer as a comprehensive tool and resource will make the task and the conversations easier.

If for any reason your parents choose not to engage in these conversations with you, you can simply ask them to quietly fill out the Organizer. The information they can provide you will be a gift to you in the future – when it matters most.

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Boomer Retirement Sad Truth

Boomer Retirement Sad Truth

by Kimberly Johnson
written by Kimberly Johnson

Boomer Retirement Sad Truth

Boomer Retirement Sad TruthIf you were born between 1946 and 1964, you are considered part of the most influential generation in American history— the Baby Boomers. You see, after U.S. troops returned from World War II, they quickly settled down and everyone started having lots and lots of babies. This gigantic generation has transformed America as they have passed through each stage of life. Now they are retired or getting ready to retire. In fact, according to the Social Security Administration, starting in 2012 and for the next 19 years, every single day more than 10,000 Baby Boomers will reach the age of 65. Sad Truth
Around thirty 30 years ago, when the Boomers were in their 20s and 30s, the transition of responsibility for retirement savings shifted from the employer to the individual with the development of individual retirement accounts, IRAs and 401(K)s. Initially they were introduced as a supplement to pensions and social security, not a replacement. Yet the change allowed many companies to drop their employer-paid pensions, making individual retirement accounts and Social Security income the primary and often only retirement funding vehicle people have access to.
Boomers were happy to take control of these new programs and opened up new IRAs and 401(K)s with great projections for their retirement savings. With annual contributions and market growth, the individual retirement accounts would provide them with a comfortable retirement.
But to the surprise and misfortune of all the Boomers, the following thirty 30 years brought four historic market crashes that ultimately decimated Boomers’ retirement savings projections.
Thanks to the brutal combination of these past financial crises, along with the rising cost of health care and the dim outlook of our Social Security program, today’s Boomers have a huge financial gap between what they will need in savings and what they actually have to retire on without making drastic lifestyle changes.
If you’re in this group, you’re in a tough spot—there’s no way around it. It’s true that there’s no magic formula that will instantly give you a multi-million-dollar nest egg, but with an open mind, a different way of thinking, careful planning, disciplined budgeting, and a positive outlook, you can still have a decent retirement.
The purpose of the book is to introduce an option that applies to many retirees. This option will utilize your currently untapped assets to bridge the financial gap and increase monthly income, while still maintaining your current lifestyle and living the American retirement dream of: Financial Security, leaving an Inheritance and Living in My Own Home.
Sure, I want you to obtain all of your retirement goals and objectives, but my primary concerns are that you will always have your home to live in and that you will not outlive your money. The realization of these core objectives becomes so overwhelming to retirees that they start to compromise their perception of the American Dream and begin to consider alternatives. I call these alternatives to retirement “Plan B.”
Each of these core objectives needs careful attention and planning. The goal of this book is to address all three by focusing on the last objective—securing your home for your retirement years.
The Solution
In my normal course of business, I have seen thousands of clients’ portfolios. I see their income, their savings, their home loans and home values. I talk with them about their goals and their dreams. As a Boomer myself, I can fully relate to their situations. When I talk to clients who are Boomers, at times I feel like I am talking to myself. I have been down the same road—I have the same dreams, and I have many of the same concerns for my own retirement plans.
As I analyze and think of all my Boomer clients between the ages of 55 and 65, I am so sorry to say that 50 percent of them come to me not knowing how they are going to retire on their current savings and are considering other Plan B options.
Several years ago, I set out to find a solution that would put my clients back on track with minimal risk and minimal life style change. As a mortgage banker and a real estate broker, I understand the financial pros and cons of mortgage lending as well as the pros and cons of real estate. I am aware of and understand all the various loan options offered by the banking industry. I tapped into my experience and resources in the industry to find a way to help my clients renew their Plan A vision for retirement.
When I found the answer to my question, the solution, I went into test mode. I had many meetings with my support team—my attorney, financial advisor, and accountant—to test my conclusions. After our analysis, they all concluded that for the right person, in the right situation, my solution is a sound strategy.
Fundamentally, my solution is very simple. Restructure current non-liquid assets into a liquid asset. We are not adding or investing; there’s no buying or selling. We are simply restructuring what you already have. And the best part is that the restructure has very little additional risk.
Two Words That May Change Your Life
If the next two words bring about any negative thoughts, please stick with me. Hear me out. There is a lot of misinformation out there, and I want you to have a clear understanding of this potentially life changing alternative.
“Reverse Mortgage.” These two words can drastically change your outlook for retirement. Forget what you’ve heard in that past. Trust me; the new updated reverse mortgages are not the old unfriendly reverse mortgages of past years.
You do not lose your home to the government. You remain one hundred percent owner of your home. When you die, your children still get all of the equity in your home. And it is not expensive.
In recent years, the government has made reverse mortgage loans very user-friendly and affordable. Now called a Home Equity Conversion Mortgage (HECM), it is a great tool to satisfy all the objectives we have covered.
A reverse mortgage will:

  • Secure your home
  • Allow you to maintain your financial self-sufficiency and your pre-retirement standard of living
  • Enable you to pass on wealth to your family
  • Make it possible to create a rainy day fund

Theory Behind The Solution
As a financial problem solver, I begin with the end in mind. What is the end goal? At the end of the process, will we end up where we want to be?
By design, retirement meets our financial needs and objectives by depleting the funds we have saved just for this season of life. I know it runs counter to the notion of always having abundant savings at hand, but think about it. We saved through all our employment years for retirement so that we can now deplete what we have saved. And, to complicate things, we hope to not outlive our retirement funds. After saving for so long, it is not easy to change our mindset from “saving” to “depleting,” but that is exactly the way retirement works.
Fundamentally, our retirement goal is very simple. At retirement, we want to begin using our savings to live on, while at the same time securing our home, ensuring that our income does not run out, remaining in control of our finances, enjoying life, and hopefully having something to leave our family.
That’s exactly what a reverse mortgage loan does. It secures your home while allowing you to use the equity to increase your spendable income.
Let me try to explain how this works and how easy it really is. I tell my clients to think of their assets and income as “buckets.” Each bucket is filled with money. I love the mental picture of these buckets because I can visualize a full bucket of money, a depleting bucket of money, and an empty bucket.
In my explanations, I narrow it down to three basic assets buckets: a saving bucket, a Social Security/pension bucket, and a home equity bucket. Although most retirees have several types of investments and sources of possible retirement income, I keep it as simple as possible since these are the three categories most assets fall under.
Savings:
Retirement savings are your 401(k), your IRA, and other types of savings that are drawn on once retired. These funds are, for the most part, liquid. This means they can be converted into cash quickly with minimal impact to the value.
Each month you deduct steady income from these savings accounts. The negative aspect of drawing funds from qualified retirement savings, except for a ROTH IRA, is that these funds are taxable when you draw from them as income, reducing your spendable income. And furthermore, when you draw on the funds, the balance is being depleted. If you have other sources to draw from, it is my suggestion to withdraw as little as possible out of your savings account. Why? Keeping a higher balance will allow compound interest to work and build up the balance. If you keep depleting your savings, it can result in the retiree’s biggest retirement fear—once your savings are gone, they’re gone. My solution will reveal other sources so you can maintain your savings.
Pension or Social Security income
Your pension and Social Security income are fairly straightforward. They are regular payments made during a person’s retirement from their past employer or from Social Security. Once you start collecting, you get the same amount every month for life.
Home Equity
Equity is the difference between your home value and the amount you owe on the home. Equity continues to grow, or appreciate, regardless of how much is owed on the property. The concept of growth regardless of equity is one of the most valuable aspects of real property. The negative side of equity is that it is not liquid by nature. Equity is an asset that remains in your home. It’s locked, and you cannot use the equity without converting it to cash. You can convert it to cash by selling the home and paying off any loans, or you can convert it to cash by getting a new conventional home loan with a cash-out refinance or a home equity line. The problem with refinancing or getting a home equity line is you’re getting a bigger loan, and the higher loan will cause your payment to go up. And if you sell your home, you create another problem—finding a new place to live and paying all the extra costs of moving.
Three Asset Sources But Only Two Income Sources
While there are three assets sources—savings, Social Security, and home equity—only two of them, savings and monthly Social Security, will provide you with spendable income that you can draw from. You do not have access to your home equity without selling your home or refinancing it.
Spendable Income by Receiving Income From All Three Sources
The beauty of a reverse mortgage is that you convert your third source, your home equity, into additional monthly spendable income. In most cases, you can increase your spendable income between $1,000 to $2,000 a month.
How does a reverse mortgage increase spendable income and savings?
Depending on your age and the value of your home, a reverse mortgage will give you around 50 percent of your home value. If your home value is $600,000, you can get a reverse mortgage for approximately $300,000.
With the funds from the reverse mortgage, your existing home loan is paid off. Not having a mortgage payment will increase your spendable income by whatever your mortgage payment was. If your mortgage payment is $1,800 and you get a reverse mortgage, you will increase your spendable income by $1,800 because you no longer have to make that payment.
Depending on the amount you qualify for on a reverse mortgage, you can receive funds in addition to paying off your existing home loan. These additional funds can come to you in a cash lump sum, a credit line, or monthly payments made to you. These additional funds can be used for anything you want—home repairs, travel, college, savings, or even to spoil your grandchildren.
Keep in mind that with a reverse mortgage, you never make a monthly payment on the funds you receive regardless of whether funds are used to pay off the existing loan or you get the funds in a lump payment, a credit line, or monthly payments.
Depletion of Assets, Buckets of Money, and Death
Let’s go back to my bucket illustrations. We know that retirement is when we shift from building our assets to depleting our assets to live on. But what bucket do you pull money from first? And what are the pros and cons of pulling from each of the different buckets?
When a person dies, 99 percent of the time, his or her assets are liquidated by their family, combined into cash, and distributed per the instructions in their will or trust.
To analyze this a little more closely, let me ask you the same questions that I ask my clients.
“When you die, if all of your asset buckets, including your home, are liquidated, converted to cash, put into one estate bucket, and then distributed, does it really make a difference if you depleted your savings bucket or your home equity bucket while alive?”
Almost all my clients agree that it doesn’t matter in the long run which bucket is depleted while they are alive as long as the other objectives are not compromised. Specifically, they want a secured home to live in and income that will live on and not run out.
Retirement Security
The other question I ask is: “What makes you feel secure?”
The number one reply is, “Knowing my money will not run out before I die.” And the number two reply is: “That I will have a place to live.”
Logically speaking, home equity or a paid-off house equals security. But really the security we want is not the equity in the home but what that equity yields—no mortgage payment and a place to live.
Old school retirement planning said our equity is more important than our savings. Today I disagree with that statement. If you have your home secured, I would rather see you secure your savings before you secure your home equity.
Leaving an Inheritance
The objective of passing on wealth has always been a traditional core retirement objective. Most of us would like to leave something to our children and grandchildren. With a reverse mortgage, you can still pass on wealth through the equity in your home.
Remember, you remain one hundred percent owner of your home when you get a reverse mortgage. And your home continues to appreciate in value. This appreciation retains much of your equity, even after the depletion with a reverse mortgage.
Naysayers
With every idea, especially financial ideas come the “naysayers”—all the people who try and convince you not to move forward in an area that is outside their comfort zone.
If you Google “reverse mortgage loans,” you will find as many naysayers as there are believers. The naysayers have three similar oppositions to reverse mortgage loans:

  • When you get a reverse mortgage loan, you are increasing debt.
  • Reverse mortgage loans are too costly.
  • Your heirs might not get your house.

Let me address these three common objections.
Regarding increasing debt: The reverse mortgage loan is a loan that needs to be paid back when you die or when you leave the home. All loans are considered debt. So if we isolate the word “loan,” I have to agree with the naysayers. But consider what the reverse loan is secured against. The loan is secured against the home’s equity. The equity is yours. It is what a large portion of your payments have gone toward for many years. The fact is, when you’re borrowing from the equity, you’re borrowing from yourself. The term “reverse” refers to a reverse position with the bank. In a conventional loan, you pay the bank. In a reverse loan, the bank is now paying you back your equity, the same payments you have made to them in the past. It is a very difficult concept, but the bottom line is, the debt the naysayers are referring to is paid back by your decreased equity when you leave the home or when you die. You never have to actually write a check to pay the loan back; you just get less of your equity back— which is what depletion of equity is. Naysayers call it debt; I call it a depletion of equity.
The second thing naysayers don’t like about a reverse mortgage is, according to them, it is too expensive. Yes, there are lenders who charge high fees, but on the other hand, there are lenders who will credit you all the costs and fees, making it a no-cost no-fee loan to you. This is why you need to shop for the best deal. All lenders charge different costs and fees, and you need to find an experienced loan officer who you can trust.
These naysayers will also tell you that the mortgage insurance cost of the loan is too much. But in the same breath, they recommend other types of insurance, such as health insurance, life insurance, or auto insurance. It is true there is a monthly fee coming out of your equity called mortgage insurance. But like all insurance products, there is a benefit to the insurance. In a reverse mortgage, the insurance guarantees that the borrower can live in the home for as long as they want and guarantees that the borrower or the borrower’s family will never owe more than the value of the home. Naysayers call this an unworthy expense. I call it security.
It appears that naysayers do not appreciate the fact that with a reverse mortgage you have a place to live for as long as you desire. Or perhaps they don’t value the improved quality of life that a reverse mortgage can offer because of the extra spendable income and the convenience of not having a mortgage payment to make.
In reality, the naysayers themselves would benefit from a change of attitude—a shift in perspective that would could allow them to view home equity as an asset owned by the homeowner and appreciate the value of converting that asset into spendable cash.
Lastly, the notion that a reverse mortgage means your heirs might not get the house is very misleading. Regardless of the type of mortgage loan on your home, your loan balance needs to be paid off by your heirs when you die. If your heirs want the home, they need to pay off any existing loans with cash or by putting a new loan on the property. So to rebut the naysayers your heirs can keep the property if they want to; they just need to pay off any loan balance. But as we discussed in the previous chapter, most of the time your heirs will sell the home and divide the remaining equity per your instructions in your living trust or will.
Problem with Naysayers
The thing that frustrates me the most about reverse mortgage naysayers is that their critical attacks result in very challenging consequences—spend less, make do without, ask the government for help, get a roommate, move in with family, or sell your home and move to a less expensive area away from family and friends.
Naysayers, are any of these options a desirable solution? In my view, they are nothing close to the American Retirement Dream. I want to see Baby Boomers living close to family, hosting family gatherings in the family home, spoiling their grandchildren, and growing old with life-long friends. I believe that during retirement, you should be able to maintain the same life style that you had when you were working. I want you to continue to go out to dinner, going on vacations, and giving of your time to your church and charitable causes. Working more and spending less is not a reasonable solution to the retirement problem.
I believe securing your home for as long as you want to live in it and increasing your spendable income by converting your own equity is an Easy WIN Solution.

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