Estate planning also helps to protect assets and ensure that your money will be used as you want. While a will controls what happens to your assets upon your death (thus avoiding the cost of probate), be certain to get a durable power of attorney and living will as well. A durable power of attorney gives someone the authority to act for you, while a living will allows you to give instructions regarding life-sustaining treatments. Without them, your family may not be able to make financial or medical decisions on your behalf, should you not be in a position to do so.
While preparing your will, also inventory and list major assets, including bank accounts, investments, property and insurance policies. Make sure that your family knows where to find that information should you become incapacitated.
For many people, their chief asset may be their home. Indeed, many older people have quite a bit of equity in their home. If that's true for you, you may want to consider a reverse mortgage. Available through public and private programs to people 62 and older, reverse mortgages can supplement retirement savings or cover unexpected medical costs while allowing you to remain in your home.
Reverse Mortgages Q&A
What is a reverse mortgage? Reverse mortgages allow homeowners to turn the equity in their homes into cash without the burden of monthly loan payments. As a rule, the reverse mortgage must be the primary debt against a house. Most borrowers pay off an existing home mortgage with a lump sum advance from a reverse mortgage. Homeowners still are responsible for property taxes, home insurance and repairs.
How do they work? No payments are due as long as your home is your primary residence. However, when the last surviving borrower sells the home, permanently moves out or dies, the cash advance must be repaid with interest. You or your estate can keep whatever amount is left over if that amount is less than the home's value. However, you can never owe more than the home's worth when the loan is repaid.
How much money can I get? Generally, the more valuable your home and the older you are, the more you can borrow. Pay out options usually include monthly payments and/or a line of credit.
What are some of the reverse mortgages available?
The Home Equity Conversion Mortgage (HECM) is the most popular of all reverse mortgages and is insured by the Federal Housing Administration. The FHA limits loan amounts, but also restricts loan costs. HECMs are available to homeowners 62 and older, and the money can be used for any purpose.
Deferred Payment Loans are low-cost loans offered by many state and local governments, usually for repairing or improving a home. They go by a variety of names; contact your state housing finance agency to find out if one is available in your area. They are generally available to homeowners with low to moderate incomes.
The Fannie Mae Home Keeper® reverse mortgages are available to homeowners with houses with higher property values than those covered by HECMs as well as condo owners.
Other sources of information:
List of FHA approved lenders: 800/569-4287
Fannie Mae: Call 800/732-6643 to get a copy of A Consumers Guide to Reverse Mortgage Options
National Reverse Mortgage Lenders Association: http://www.reversemortgage.org/
Long-Term Care Insurance: Some Things To Consider
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Is the insurer financially stable and likely to still be around 20 or 30 years from now?
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Will you still be able to afford the premiums in your later years?
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What are the conditions for qualifying for benefits?
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Does the policy include a range of options, including home health care and assisted living?
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Does it include an option for inflation protection (to help pay for the increased cost of care in future)?
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If you buy a plan through your employer, can you continue it if you leave the company?
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Is it possible to buy coverage for your parents through your employer's plan?
Financial Help for Seniors
If you are helping a parent or relative with their financial affairs, here are some other resources that might be of help:
Medicare: A government health insurance plan for individuals age 65 and over. It is available to U.S. citizens or permanent residents if they, or their spouses, have worked in a Medicare-covered position for at least 10 years.
Medicaid: A health insurance plan for low-income individuals 65 and older (among others) with few resources.
Supplemental Social Security (SSI): Individuals 65 and older with limited income and limited resources are eligible for monthly cash benefits. In 2004, eligible recipients' cash and savings could not exceed $2,000 ($3,000 for a couple).
The Social Security Administration offers a quick screening tool online at http://best.ssa.gov/ that can help determine eligibility for SSI or other benefits.
Property Tax Deferral: Many state and local governments have programs that provide loans to seniors with low or moderate incomes to pay their property taxes. No repayment is required for as long as they remain in their homes.