Gosselin Law Blog

NEW BLOG FOR GOSSELIN & ASSOCIATES, P.C.

2007-08-06T09:11:00.000-05:00

Please be advised that we have gone live with a NEW and IMPROVED blog for Gosselin & Associates, P.C. Our new blog can be found here: http://blog.lawforlife.com/. As of today (August 6, 2007) we will no loger be posting to this blog. I apoligize for the incovenience but highly recommend saving our new blog to your 'Favorites' and continuing as a loyal reader. If you have any questions, please feel free to e-mail me at mbrickley@gosselinlaw.com, or contacting me via phone at (781) 729-0313. Thank you, Melissa Brickley Director of Client Services Gosselin & Associates, P.C.

Estate Planning for Mere Mortals - Become a Super Hero for Your Family

2007-07-18T05:58:00.000-05:00

Estate planning is for old people in hospice, right? Don't estate planning lawyers hang around nursing homes looking for dying people who need wills? I'm young, healthy and make big money - what do I need with planning for incapcity, I'll do that when I'm old. What does it take for an otherwise intelligent, caring and responsible person to call an estate planning lawyer to get a will drafted and their affairs in order? Well, I just came back from my Summer vacation (in Alaska and Seattle) using the disgrace that is our national air travel system. Despite my conscious person knowing that the cab ride to the airport was many times more dangerous than the metal tube hurtling through the air at 600 miles an hour, I knew somewhere within me that at any time I could become dust. As a rule I travel with my immediate family all together, yet I know others that always separate their children and spouses on the theory that 'at least one of us will survive.' Statistically I don't know if they're better off or not. In the months after 9/11 I saw a huge influx of new estate planning clients, many of whom never had done any estate planning of any kind. These were people in their 50's and 60's who had never had a will let alone an asset protection or liability protection plan in place for their families or their businesses. They had just been too busy to get their affairs in order apparently. It took the realization that they could have been on those planes or they could have been at Windows on the World having a coffee and Danish. From discussions with colleagues in New York City many new high net worth estate planning clients came in who admitted that previously they thought themselves invincible, immortal or just plain luckier than those poor slobs that become incapacitated at a young age or die leaving their families in dire straits. Couldn't happen to them. Every day we see disasters, car accidents, epidemics, crimes that destroy lives and cause untold distress to whole families. I am proud to provide at least some measure of peace of mind to those that seek protection, or at least preparation, for the worst that this world has to offer. You would think that with the unending flow of misery leading our headlines that estate planning lawyers would be beating off the business with a stick - but rather, in my experience, people cower and convince themselves that it is always someone else therefore they need not take responsibility for their own situations. I have filing cabinets full of this flawed reasoning, and the files are labelled with such terms as probate, guardianship, bankruptcy, litigation. Do yourself a favor and get some estate planning done. It need not be expensive. It need not take a lot of your precious time. And it doesn't make you look weak - on the contrary it shows that you are strong enough to acknowledge your own mortality, which as you've seen before in this blog is really one of the few things that distinguishes humans from all other life forms on Earth. And yes, the cobbler's kids have shoes.

All Hail Reverse Mortgages! Alia Acta Est!

2007-07-16T06:37:00.000-05:00

Who invented the Reverse Mortgage? Of course most lenders in the reverse mortgage space like Financial Freedom, Seattle Mortgage, Bank of New York, Wells Fargo, Countrywide, et al. would contend that they in fact have innovated the reverse mortgage. Nope. Go back a little further in time. Keep going. Still more. Stop right there, about 500BC, yes BC as in Fred Flintstone. You see reverse mortgages have effecitvely been around since Roman times in the form of usufruct. There is nothing new under the sun.

From Wikipedia:

Usufruct is the legal right to use and derive profit or benefit from property that belongs to another person, as long as the property is not damaged. In many legal systems of property, buyers of property may only purchase the usufruct of the property. Usufruct originates from civil law, where it is a real right of limited duration on the property of another. The holder of a usufruct, known as the usufructuary, has the right to use and enjoy the property, as well as the right to receive profits from the fruits of the property. The Latin words usus and fructus refer to the rights of use and fruit, respectively, and the English word usufruct derives from these Latin roots.

In Roman Law, usufruct was a type of servitude or ius in re aliena, a right in another's property. The usufructuary never had possession of this property (on the basis that if he possessed at all, he did so through the owner), but he did have an in rem right to the property itself. Unlike the owner, he did not have the right of alienation (abusus), but he could sell or let his enjoyment of the usufruct. Despite the usufructuary's lack of possession a modified form of the possessory interdicts was available to him. The term fruits should be understood to mean any replenishable commodity on the property, including (among others) actual fruits, livestock and even rental payments derived from the property. These may be divided into civil and natural fruits, the latter of which, in Roman law, included slaves and livestock.

As we know reverse mortgages today, their form has only taken shape over the past couple of decades. Here is an article that I have been working on as part of my new book on reverse mortgage issues:

Reverse Mortgages: Helping Seniors Improve Their Quality of Life or the Road to Financial Ruin?
I. INTRODUCTION
The phrase “demographic demand” refers to the idea that a person’s goals in obtaining credit may be influenced by age[1]. The borrowing patterns of young people provide the most familiar example of this phenomenon. In general, young people have not had the opportunity to accumulate savings, but they have a high potential to earn income on an increasing scale. They most often seek out credit to enable them to purchase major items of property, such as cars, furniture, appliances, and houses. Lenders extend them credit on the strength of their ability to earn income. It is widely known that the fastest growing demographic group is not young people, it is senior citizens.[2] When senior citizens apply for loans their goals are often the mirror image of those of younger people. Many senior citizens own major assets. They often own real estate outright, unencumbered by a mortgage. And they have often seen the value of their real estate rise considerably since it was purchased. Due to retirement, though, senior citizens’ incomes are diminished.[3] Lenders have noticed these differing needs of borrowers based on age. They have begun to develop loan products to cater to the needs of older people. One of the product lenders have developed to meet this need is known as the “reverse mortgage.”[4] It is not difficult to trace the source of bad impressions and mistrust that predominate conversations about reverse mortgages. The practice of “Equity Sharing,” the predecessor of reverse mortgages is the source of much of the confusion about how reverse mortgages really work. In the stereotypical equity sharing arrangement, individuals would approach cash-strapped seniors and offer to make lump-sum or over time payments to them in exchange for having the senior sign a deed, naming the “benefactor” as joint owner.[5] In scam awareness materials, senior advocates refer to this practice as “deed theft.”[6] Early in the reverse mortgage chronology, lending institutions perpetuated this reputation by inserting provisions into their reverse mortgage documentation that allowed them to claim all of the appreciation of the home on which they had issued a reverse mortgage. One such story occurred in Brigantine, N.J. “In 1988, Katherine and Harold Stephens, signed up for a reverse mortgage that guaranteed to pay them $312 a month for as long as they resided in their house near Atlantic City. At the time Katharine was 76 and Harold was 78. Harold later died, leaving Katharine living alone in the property. Like other reverse mortgages, the money sent by the lender each month represented a gradually growing debt that would have to be repaid when the owners sold the home or moved to a different residence or health care facility. The loan carried an annual interest rate of 11.5 percent, but it also had another problem. Buried in the contract block print was an equity provision. Besides the regular interest rate on outstanding balances, the lender received the right to 100 percent of all equity appreciation on the house from the day of settlement to the date of final sale or move out.”[7] Stories like this have prompted states and the Federal Government to step in and regulate the reverse mortgage industry.[8]

II. Chronological History of Reverse Mortgages[9]

The first Reverse Mortgage was issued in 1961, by Nelson Haynes of Deering Savings and Loan in Portland, Maine to Nellie Young, the widow of his high school football coach. In the 1970’s various educational institutions were writing technical documents on this new breed of lending product. In 1975, Jack Guttentag of University of Pennsylvania’s graduate school, The Wharton School drafted “Creating New Financial Instruments for the Aged.” Ohio took the lead on reverse mortgages in 1977, creating the first Reverse Mortgage Loan Program, “Equi-Pay.” The following year, Wisconsin’s Bureau on Aging funded the “Reverse Mortgage Study Project” and the Wisconsin Department of Local Affairs and Development offered the first statewide deferred loan payment program. The first national “Reverse Mortgage Development Conference” was held in Madison, Wisconsin in 1979. Reverse mortgage education and development began to move across the country shortly after that, with San Francisco creating a Reverse Annuity Mortgage program and studies being completed in Cambridge, Massachusetts on “Unlocking Home Equity for the Elderly.” National attention began to focus on this movement with a two-year “Home Equity Conversion Project” funded by the U. S. Administration on Aging and the endorsement of an FHA reverse mortgage insurance proposal in 1981 by the White House Conference on Aging. Throughout the 1980’s, reverse mortgage, or Home Equity Conversion (HEC) programs gained national exposure via multiple publications, conferences, and media coverage in Newsweek, Time, U.S. News, and Good Morning America. The U.S. Administration on Aging funded research on federal issues around HEC programs and the U.S. Senate Special Committee on Aging staged the first hearings on reverse mortgages and subsequently issued a report citing the need for reverse mortgages in 1982. This national exposure continued with an FHA reverse mortgage insurance demonstration program being proposed by the U. S. Department of Housing and Urban Development. In 1984, the first open-ended risk-pooling reverse mortgage was offered and in 1985, HUD sponsored its first national conference on home equity conversion. In 1986, AARP established the “Home Equity Information Center” to provide retired seniors with information on this rapidly expanding home mortgage option. In 1987 studies on home equity financing of long-term care were completed in Minnesota and Connecticut and the U. S. House Ways and Means Committee heard testimony on HEC and long-term care. In 1988, President Reagan signed FHA reverse mortgage insurance legislation and HUD created an HEC development team. 1989 saw the first line-of-credit reverse mortgage developed by the VA Housing Development Authority, followed by an announcement by Fannie Mae that it intended to purchase reverse mortgages insured by the FHA. That year, HUD selected fifty lenders by lottery to make the first FHA-insured reverse mortgages and released its “Home Equity Conversion Mortgage program handbook (#4235.1). Recognizing the need to educate counselors to assist the ever-growing senior population, multiple training sessions were conducted by both the AARP and HUD. Congress increased the FHA insurance authority to twenty-five thousand reverse mortgage loans by September 31, 1995 and the AARP published a “Model State Law on Reverse Mortgages. “Retirement Income on the House: Cashing In On Your Home with a Reverse Mortgage” was named the best book of 1992 on financial services for the elderly. By the end of 1993, the HECM program was in all states except AK, SD, and TX. In 1993, Congress enacted and the Federal Reserve published “Total Loan Cost Rate (TALC)” disclosure regulations for all reverse mortgages. Throughout the 1990’s, AARP and HUD sponsored and funded education for consumers, financial planners, elder law attorneys and community counselors, creating a reverse mortgage counselor exam by 1999 which was co-sponsored by Fannie Mae and National Reverse Mortgage Loan Association (NRMLA). Ever on the watch for abuses, Fannie Mae announced new consumer protections in 1999 and AARP and NRMLA supported absolute limits on origination fees. In 2000, the first national, reverse mortgage counseling exam was taken by four hundred twenty-five counselors in forty-three states. [10] The new millennium has seen publications by HUD, HECM, and AARP as well as a multitude of on-line resources for senior consumers and their families.[11]

III. How a Reverse Mortgage Works[12]

Under a reverse mortgage, the real estate to be mortgaged has already been purchased and any financial charges on title to it have been discharged. The borrower is not expected to make periodic payments, or any payments, until the loan comes due. For the lender, the value of the mortgaged property is paramount; for the borrower, the loan is obtained to supplement income or to enable purchases of assets other than the mortgaged property. Eligibility limits on reverse mortgages are much less stringent that traditional forward mortgages. Outside of homeownership, the borrower must be at least sixty-two years of age. Given the importance of the value of the reverse mortgage borrower’s property, reverse mortgage lenders require that potential borrowers obtain an appraisal of their property. The potential borrower must pay for this appraisal. The cost of the appraisal should be borne in mind by borrowers; it will form a non-interest charge that should be factored into determining the overall cost of borrowing under a reverse mortgage. Some reverse mortgage lenders require borrowers to retain independent legal representation for the reverse mortgage transaction. Others require borrowers to provide a certificate of independent legal advice as one of the closing documents for the loan. Reverse mortgage lenders insist on having the first mortgage on title to the borrower’s property. If the borrower’s title is encumbered by other financial charges, then the borrower will be obliged to use part of the reverse mortgage proceeds, or other funds, to pay out and discharge these other charges.

Amount of the Loan

Lenders determine the principal amount of the loan by reference to the value of the house and the age of the borrower or borrowers. Older borrowers are usually entitled to a larger loan. Reverse mortgages have a lower initial loan-to-value ratio than conventional mortgages. The principal advanced tends to fall in a range between 10 percent to 40 percent of the value of the mortgaged property. Of course, as interest accrues over time, this ratio will become higher. Interest The interest component of reverse mortgages is usually pegged to an external rate. For example, one lender charges interest at a rate of 4.75 percent above the Libor Index, as it is set by the index from time to time. The lender “resets” its interest rate each year to account for variations in the underlying Libor rate. This method of calculating variable interest is not unique to reverse mortgages. A key feature of reverse mortgages that may escape some borrowers is that reverse mortgages are rising debt loans. Since borrowers are not making periodic payments they are not reducing the amount of interest accruing on the loan. As that interest is regularly compounded (usually semi-annually), the amount outstanding under the loan can grow to be quite large, as the borrower ends up paying interest on the accumulating interest.

Term of Loan and Repayment

Most reverse mortgage loans are not made for a set term of years. Instead, the reverse mortgage becomes fully due and payable on the occurrence of a specified event. That event is typically the earliest to occur of: (1) A certain amount of days (for example, 120 days) after the date of the borrower’s death. (If there is more than one borrower, then this period begins to run after the date the last borrower dies.) (2) The date on which ownership of the mortgaged property is transferred to another person. (A transfer can be a sale of the property, or another transaction, such as a gift, that vests ownership in someone other than the borrower.) (3) The date on which the mortgaged property ceases to be the borrower’s principal residence. (Since it is often not a simple task to determine when a person’s principal residence changes, the reverse mortgage usually sets out a formula—such as three months continuous absence from the property—in order to determine when this event has occurred.)

Default

Reverse mortgage lenders tend to look only to the mortgaged property for repayment. Many reverse mortgages limit the recourse that lenders have against borrowers personally. If the agreement provides for this, even if the amount of principal and interest outstanding at the time the reverse mortgage comes due exceeds the value of the mortgaged property, the reverse mortgage lender is not permitted to sue the borrowers personally for the balance. This nonrecourse feature of reverse mortgages effectively caps the amount that borrowers will be required to repay at the value of the mortgaged property. Reverse mortgages, like mortgages generally, operate to secure repayment of a loan and performance of obligations by giving the lender enhanced rights if the borrower defaults. As is the case under a conventional mortgage, a default under a reverse mortgage leaves a borrower open to having his or her interest in the mortgaged property foreclosed. Reverse mortgages differ from conventional mortgages with respect to defaults in two main ways. First, the most common mortgage default is failure to make a periodic payment. Since reverse mortgage borrowers are not required to make periodic payments, as a practical matter they are less likely to default. This does not mean that defaults under a reverse mortgage are impossible. A borrower could fail to repay the loan when it comes due. In addition, a borrower who fails to make a property tax payment or a payment under a subordinate financial charge will, in all likelihood, find that such a failure constitutes a default under the reverse mortgage. Second, as noted above, reverse mortgages tend to be nonrecourse loans. In a true nonrecourse loan, the borrower has no personal liability to repay the loan or interest on it, and the lender’s remedies are confined to foreclosure or sale of the mortgaged property. Some reverse mortgage lenders operate on a true nonrecourse basis, and the mortgage limits their remedies for default to foreclosure. Other lenders provide that, while the original loan and interest on it are nonrecourse, the borrower will be personally liable for other types of charges. In addition, some reverse mortgages attempt to allow for changes in the value of real estate over time within a cap on the personal liability of a borrower. These lenders limit the borrower’s personal liability to the value of the mortgaged property at the time the reverse mortgage comes due, at the time it is sold, or at the time the reverse mortgage is actually paid, whichever is greatest. Since this conception of “value” could exceed the amount received from a sale of the mortgaged property, there is a possibility that a defaulting borrower could have to make up the difference personally.[13]

IV. Statutory and Federal Regulations

The increasing popularity of reverse mortgages has state and federal agencies working diligently to keep reverse mortgages regulated. As is normally the case in lending, predators and abuses are plentiful, and seniors are among the nation’s most vulnerable population.[14] State and Federal agencies offer consumer education and advocacy programs to help seniors protect themselves against reverse mortgage abuses.[15] Most reverse mortgage literature explains that they are complex transactions requiring the assistance of a lawyer. All reverse mortgages require that the senior participate in counseling to assess whether an HECM is the right vehicle for the senior. One such piece of protective legislation is the Consumer Credit Protection Act, which mandates that lenders disclose credit terms so that consumers can fairly and accurately assess whether a particular credit situation is right for them.[16] The Truth in Lending Act was created in 1968 to provide consumers with an avenue to cancel a transaction without penalty upon determination that terms and costs were not adequately disclosed by the lending institution.[17] In 1975, The Federal Home Mortgage Disclosure Act was created in response to lending institutions contributing to the decline of certain geographic areas by their failure to provide adequate home financing to qualified applicants on reasonable terms and conditions. The Act was designed to provide the citizens and public officials of the United States with sufficient information to enable them to determine whether lending institutions were meeting their communities’ needs and to help public officials in their determination of the distribution of public sector investments in a manner designed to improve the private investment environment.[18] The Fair and Accurate Credit Transactions Act was originally created in 2003, and was amended in 2004 to add identity theft prevention, improve resolution of consumer disputes, improve the accuracy of consumer records, and to make improvements in the use of, and consumer access to, credit information.[19] Advances in state and federal oversight and regulation of reverse mortgages are ongoing, with the House passing (415-7) the Expanding American Homeownership Act (H.R. 5121) that made substantial improvements to the FHA Home Equity Conversion Mortgage (HECM), the nation’s most popular reverse mortgage program on July 25, 2006. A Senate version, S.3535, is also under consideration.[20] On a state-by-state basis, reverse mortgage legislation has been enacted throughout the U.S. Massachusetts passed its legislation in 1998 to define reverse mortgages and provide protections for the Commonwealth’s senior population.[21] Consumer Protections for Reverse Mortgagors There are many protections in place for people who decide to take out a reverse mortgage. Federal Truth-in-Lending law requires that reverse mortgage lenders disclose the projected average annual cost of the loan. Borrowers can cancel the loan for any reason within three business days after closing. They must notify the lender in writing to terminate the reverse mortgage. Most lenders charge interest for a reverse mortgage at an adjustable rate on the loan balance. To protect borrowers, all reverse mortgage have limits on the rate at which interest costs for the loan can change within a year, as well as over the life of the loan. Changing interest rates do not affect the monthly payments that a borrower receives. The costs that reverse mortgage borrowers pay are similar to those of a traditional home loan or to refinance an existing mortgage. These include an origination fee, appraisal fee, and third party closing costs (fees for services such as an appraisal, title search and insurance, surveys, inspections, recording fees, etc.). Most of these up front costs are regulated, and there are limits on the total fees that can be charged for a reverse mortgage. Since most of these costs can be financed as part of the loan, borrowers typically face few out-of-pocket costs for a reverse mortgage (typically the appraisal fee and credit check to make sure that the borrower is not delinquent on any other federally insured loans). All reverse mortgages are non-recourse loans, which mean that the borrower or heirs never owe more that the value of the home at the time of sale or repayment of the loan. This important feature is especially critical to surviving spouses who might otherwise be impoverished due to the cost of the loan. To receive this protection, HECM borrowers pay a mortgage insurance premium. Mortgage insurance offers additional security to both borrowers and lenders. Borrowers are protected against default by lenders. Lenders avoid losses that arise when the HECM loan balance exceeds the value of the home at the time of sale (“crossover risk”.) FHA insures reverse mortgages issued under the HECM program. Borrowers who apply for any reverse mortgage must first receive independent counseling before they complete the loan application. This helps ensure that borrowers understand the advantages and limitations of this type of loan, and are aware of possible alternatives to reverse mortgages. Counselors must work for a HUD-approved agency and receive special training on reverse mortgages. Currently, there are about 800 approved HECM counseling agencies who offer information and assistance to seniors over the phone or in person. The AARP Foundation has developed a national certification program for reverse mortgage counselors.[22]

V. REVERSE MORTGAGE MYTHS & SCAMS

Despite increased popularity, even some of the most basic facts about reverse mortgages are often misunderstood. According to Peter Bell, the president of the National Reverse Mortgage Lenders Association, a relatively short industry history and rapid product evolution have deluged consumers with information that at times is confusing or inaccurate.[23] “The most common misconception we hear is, ‘A reverse mortgage is where the bank gives you some money and then takes your house,’” says Bell. “That couldn’t be further from the truth. Our mission,” Bell explains, “is to inform seniors about the benefits of reverse mortgages so that they can make empowered decisions about whether this product makes sense for their own particular situation. A reverse mortgage helps people to address their retirement needs.” The organizations website lists the most common questions asked by consumers about reverse mortgages, with the answers.[24] The questions are broken into three groups: those appropriate to ask before getting a reverse mortgage; those applicable during a reverse mortgage; and those applicable at the end of a reverse mortgage. This is the third guide published by NRMLA. The previous two are The NRMLA Consumer Guide to Reverse Mortgages, and Using Reverse Mortgages for Health Care: A NRMLA Guide for Consumers.[25] The organization produces a detailed list of reverse mortgage products now available and a state-by-state list of reverse mortgage lenders who are members of NRMLA.[26]

The Mortgage Calculator Scam[27]

Using an online calculator to get a cash-out estimate for a Reverse Mortgage is actually a very simple process. Most Reverse Mortgage calculators only require that you input the current value of your home, the balance of your existing mortgage, and the ages of the borrowers. You will then be provided with a reasonably accurate estimate of the money you can receive. Many unscrupulous lenders are plugging in inaccurate interest rates in their online calculators causing inflated cash-out figures. Remember that the interest rate is the same no matter which lender a senior chooses. The advice is that seniors not shop for a lender based on the results of their online calculator. The Department of Urban Development actually dictates what interest rate all properly licensed Reverse Mortgage lenders must use, so the results should be virtually identical from all lenders.[28]

Lenders MUST be Approved by the Government

All Reverse Mortgage lenders must be approved by the Department of Housing and Urban Development. Reports have been filed about companies claiming to have HUD approvals originating Reverse Mortgages and attempting to charge rates and fees in excess of those mandated by HUD. The HUD website contains a detailed list of approved lenders, to verify that a Reverse Mortgage lender is truly authorized to originate Reverse Mortgages.[29]

The "Shared Appreciation" Scam[30]

The federally insured Home Equity Conversion Mortgage (HECM) does not have an equity sharing or shared-appreciation feature. Any increase in equity belongs to the homeowner and/or their heirs. Current advice is for seniors to stay away from anyone offering the senior the “opportunity” to obtain more money in exchange for giving up a percentage of the future value of the home.[31]

V. Public Policy

The dramatically increasing numbers of seniors who may need financial support in excess of social security and other government programs require consideration of programs like reverse mortgages to support seniors. Indeed, data from HUD show that reverse mortgage use has increased substantially. Omitted* Statistics are through June 2006.[32] High levels of housing wealth among today’s seniors are a direct consequence of government policy to offer guaranteed home loans through the GI Bill and tax laws that allow mortgage interest deductions. Widespread availability of the thirty-year mortgage has also altered consumer attitudes toward debt. Even older Americans are now willing to refinance their homes and assume such lengthy mortgages. Having encouraged older Americans to accumulate over $2 trillion in housing wealth, is there now a need to create public policy that will encourage older homeowners to voluntarily tap home equity to pay for long-term care?[33] Promoting greater use of reverse mortgages for long-term care can be done incrementally, or as part of a larger effort to encourage seniors with resources to share more of the cost of Medicaid services. States could begin to encourage the use of reverse mortgages by addressing government regulations, along with program requirements and restrictions, that may present obstacles for impaired elders to “use their home to stay at home.” Eliminating such regulatory and eligibility barriers could unlock additional housing wealth by making the use of home equity more attractive to impaired, older homeowners.[34] Using a Reverse Mortgage to Stay at Home and Pay forLong-Term Care Surveys have found that many Americans are inadequately prepared for long-term care needs. One of the most prevalent perceptions among Americans is that they will never need long-term care. Although, a recent survey found that sixty-one percent of people ages forty to seventy believe that their chances of needing long-term care are greater than being in an auto accident, most people remain unaware of the challenges of meeting this need.[35] Over half of senior respondents (fifty-nine percent) to a recent National Council on Aging survey, believe that they are likely to extremely likely to stay in their own home once they need help with everyday activities. Despite this optimism, many senior respondents (forty-three percent) had not made any financial plans to cover the cost of help they would need to stay at home. Responses offered as “financial planning” ranged from insurance to government assistance to help from family members. About one-quarter (twenty-seven percent) of adult children did not know if their parents had made financial plans for long-term care.[36] Reverse mortgages can provide a substantial amount of additional funds for a broad range of older homeowners. However, most elders are likely to be reluctant to tap home equity until they need assistance. In a recent National Council of Aging study, of the 13.2 million candidate households, about 9.8 million (74 percent) are dealing with some level of impairment that affects their ability to live at home (Table 3.3). Of these, 1.75 million (13 percent) contain one or more elders who have an immediate need for long-term care. These elders need assistance to perform one or more ADLs or IADLs. Among these households, almost one million are on Medicaid or at financial risk for needing government assistance to pay for long-term care. An additional 1.96 million households (15 percent) would likely require assistance in the near future because they only have difficulty with ADLs or IADLs. Nearly half of candidate households (6.1 million) are coping with functional limitations. These homeowners are an important target population for reverse mortgages because they are not well served by traditional sources of long-term care financing that target elders with a high level of impairment. Only the sickest seniors may be eligible to receive services through the Medicaid program.[37] For example, beneficiaries receiving services under a Medicaid Home and Community Based Services Waiver (1915c) must be so severely impaired that they would otherwise require nursing home care before they can qualify for help at home. Similarly, long-term care insurance policyholders typically must need help with two or more ADLs to trigger their home care benefits. This makes it difficult for elders with limited financial resources and moderate levels of impairment to get timely help before they face a debilitating and costly crisis. By liquidating their housing wealth through a reverse mortgage, the 9.8 million candidate households dealing with some level of impairment would be able to access $695 billion in total through HECM loans. The 1.75 million candidate homeowners with an immediate need for help with ADLs or IADLs could access about $121 billion in total from these loans. These financial resources could have a significant impact on the well-being of impaired elders and their families. By having money of their own to pay for long-term care, elders can maintain their dignity, as well as retain some independence and control over their lives. For spouses and other family caregivers, these supports can help reduce the financial, emotional, and physical strain that often comes with caring for an impaired elder (Family Caregiver Alliance 2003).[38] Reverse Mortgages and Public Assistance Programs Many seniors appropriately question the impact of a reverse mortgage on their government entitlement programs: Social Security, Medicare, Supplemental Security Income or Medicaid benefits. Reverse mortgages do not affect Social Security or Medicare benefits because they are not based on the assets of the recipient. Federal SSI payments, however, require that beneficiaries keep their liquid resources under certain limits. Reverse mortgages offer the option of suspending payments if a senior is approaching the limit imposed by SSI guidelines.[39] Many states are creating legislation to assist seniors paying for home-care via reverse mortgages. These vary for state-administered programs such as Medicaid, Aid for Dependent Children (AFDC), and food stamps. The recommendation is that seniors consult local Council on Aging offices to determine how a reverse mortgage can impact local entitlements.

VII. CONCLUSION

Reverse mortgages may be an appropriate tool for improved quality of life and as a replacement for dwindling government assistance programs for senior care. Multiple state and federal organizations and agencies have spent considerable time and resources exploring and regulating this income-generating tool.[40] Demand for long-term care is growing in our rapidly aging society, placing an increasing burden on state Medicaid programs. As the second largest item in state budgets, Medicaid is already being targeted for cost control efforts.[41] In this tight fiscal environment, home equity could play an important role in reducing government expenditures for long-term care. As with all services tailored to the senior population, continuing oversight and guidance is necessary to prevent abuses.[42] [1]http://www.hud.gov/buying/rvrsmort.cfm [2] http://www.census.gov [3]http://www.ftc.gov/bcp/conline/pubs/alerts/revralrt.htm [4]http://www.aarp.org/revmort/ [5] http://www.consumeraffairs.com/news04/2005/ny_real_estate.html [6] Id. [7] http://realtytimes.com/rtcpages/20060515_toxicreversewidow.htm [8]12 U.S.C. '' 1715z-20(g) et seq.(1887)(Supp.V 1987), as amended by 12 U.S.C. '' 1735f-17(1990), 24 C.F.R. Parts 200 and 206 [9] http://www.reverse.org/History.HTM [10] http://www.reverse.org/History.HTM [11] www.aarp.org/revmort [12] http://www.yourhomeforlife.com [13] http://www.yourhomeforlife.com [14] http://www.hud.gov/offices/hsg/sfh/pred/predlend.cfm [15] http://www.hud.gov/offices/fheo/lending/index.cfm [16]15 U.S.C.A. §1644 [17] 15 U.S.C.A. § 1601 [18] 12 U.S.C. A. § 2801 [19] 15 U.S.C.A. § 1681 [20] Assessing a Reverse Mortgage, by Nena Groskind/BostonHerald.com; August 21, 2006 [21] http://www.mass.gov/legis/laws/seslaw98/sl980283.htm [22] http://www.aarp.org/money/revmort/ [23] http://www.nrmla.org [24] http://www.reversemortgage.org [25] Id. [26] http://www.reversemortgagetimes.org/pages/scamalert_01.htm [27] http://www.reversemortgagetimes.org/scamalert_01.htm [28] Id. [29] http://www.hud.gov [30] http://www.reversemortgagetimes.org/scamalert_01.htm [31] http://www.reversemortgagetimes.org/scamalert_01.htm [32] http://www.hud.gov [33]Use Your Home to Stay at Home, Expanding the Use of Reverse Mortgages for Long-Term Care: A Blueprint for Action, Barbara R. Stucki, Ph.D, 2005, The National Council on Aging, [34] Id. [35] MetLife Mature Market Institute, 2004b. [36]Use Your Home to Stay at Home, Expanding the Use of Reverse Mortgages for Long-Term Care: A Blueprint for Action, Barbara R. Stucki, Ph.D, 2005, The National Council on Aging [37]Use Your Home to Stay at Home, Expanding the Use of Reverse Mortgages for Long-Term Care: A Blueprint for Action, Barbara R. Stucki, Ph.D, 2005, The National Council on Aging [38]Use Your Home to Stay at Home, Expanding the Use of Reverse Mortgages for Long-Term Care: A Blueprint for Action, Barbara R. Stucki, Ph.D, 2005, The National Council on Aging. [39] http://www.reversemortgage.org [40] http://www.ncoa.org; http://www.hud.org; http://www.aarp.org [41]Use Your Home to Stay at Home, Expanding the Use of Reverse Mortgages for Long-Term Care: A Blueprint for Action, Barbara R. Stucki, Ph.D, 2005, The National Council on Aging [42] http://www.hud.gov/offices/hsg/sfh/pred/predlend.cfm

Estate Planning - Rich Dad, Poor Dad - Ask Mitt Romney

2007-06-27T06:31:00.000-05:00

Follow my estate planning advice and you can be as rich as Mitt Romney. The Boston Globe has been running a multi-part story about Mitt Romney over the past several days. Politics and Bain Capital aside, Mitt Romney is a successful man. Mitt Romney is a rich man. Mitt Romney is a humble man. I don't measure a man by his bank account or his heartfelt opinions, I measure him by how he lives his life. I met Mitt Romney about eight years ago. Mitt and I maintained an odd sort of relationship over a couple of years. He and I would sit twenty feet apart each week for five hours at at time. We never shared a word, but our eyes would meet almost every Friday evening with a "hey neighbor" nod of the head. I represented a company in Utah that is in the legal and real estate software business. From 1999 to 2001 I attended regular Friday morning meetings at the company's office in Provo, Utah. Each Friday night I would fly Delta back to Boston. Invariably I would see the same well dressed man traveling alone sitting in the waiting area. Often he would be reading business papers, but just as often he would be passively enjoying the throng of people filing through the airport. He was Mitt Romney, head of the Salt Lake City Olympic Committee, but I didn't put his face with his name for several months. I noticed something very different about this well dressed and outwardly successful man right from the beginning. As we boarded the plane, each traveling alone, I would take my seat in the first class cabin (because I traveled so much Delta upgraded me on every flight) and Mitt Romney would take his aisle seat in the coach cabin. One time I glanced at the flight manifest that they tack up in the first class galley and saw that Mitt Romney's name was in the list with mine as a "medallion flyer", meaning that he had the same privilege to sit in the front of the bus. And he's tall, and he traveled frequently, but he sat with the people. This was a five hour plus flight at night. The plane was normally only half full and was one of those dull dark rambling flights bringing people from one place to another place without any fanfare. Mitt Romney was not being watched by the Boston Globe or New York Times, he was not even a politician - just a tired business traveler trying to be home for the weekend. Back to the Boston Globe story and how this relates to estate planning, elder law and lawyers in Massachusetts generally. I have no affiliation with the Church of Jesus Christ of Latter Day Saints (Mormons) - those that know me know that I would last about ten minutes with their prohibitions on coffee, foul language and alcohol - not to mention where I stand on virtually every social issue of importance in modern life. But I have developed a great respect for their single most important belief - that our families our bound to us forever and therefore of utmost importance. Mitt Romney and I see few issues the same way on the scorecard of politics that the media requires of candidates, but I still see Mitt Romney as a worthy man for leadership in America. That's not to say I'd vote for him, I probably won't, but if Mitt Romney got elected at least I would trust that he would act honorably. The Boston Globe ran a 37 picture album of the Romney family today. From Mitt Romney's childhood through to his wife's birthday party this past Spring his devotion to family is without peer. Mitt Romney reads to his grandchildren. Mitt Romney brings his kids to school on their first day. Mitt Romney cuddles with his newborn son. Mitt Romney holds his wife's hand. Mitt Romney came home on Friday nights to be with his family, steerage class. I recently heard a story about Michael Eisner, the former head at Disney, who apparently had a sign in his office that read "If you're not here Saturday, don't bother coming in Sunday." You won't see this sign in Mitt Romney's oval office. Sure, he'll be available for emergencies of state, but more likely Mitt Romney will be at church and playing Wiffle Ball with his sons on the lawn of the White House. Learn from Mitt Romney. Not the politics (we can have that discussion another time). Learn how the man has enjoyed unimaginable financial and personal success but still goes to his lake house in New Hampshire most weekends to pull water skiers and attend his grand daughters' tea parties. Mitt Romney's devotion to family is worth emulating. In my elder law practice more than anywhere else I see the opposite example. I see parents that never made the time to read to their children, counsel them when they had problems or share their hobbies. What does this breed? Ask Harry Chapin (Cat's in the Cradle). These children impoverish the spirit of their parents by not helping when their parents need help the most. These children impoverish their children by living as their parents lived. It is not too late to mend your ways, especially if you still have young children in the house. Bring a kid golfing with you (Mitt Romney was his father's caddy). Skip your weekly poker game and bring your kids to the movies. Tell your boss that you can't make it to that late meeting because your son has a little league game. Eat your meals together as a family, at a table, without a television or iPod and talk about the events of the day. Go camping, in a tent, with nothing run by electricity. Mitt Romney did these things in spades with his busy father and as a busy father. If you treat your children as an extension of yourself and you bond your family together on the premise that you will be spiritually together for an eternity or at least while your hearts are beating (whatever your beliefs may be), you will be rich - richer than you can ever imagine. Ask Mitt Romney.

Elder Law - HALF a Penny for Your Thoughts

2007-06-26T06:58:00.000-05:00

A reverse mortgage to feed a slot machine? Can a car alarm reduce depression in elders? What can you buy for half a penny? I have just returned from an estate planning conference in Las Vegas. This was a conference like many others where we were trapped in a windowless conference room for hours on end as speakers droned on about the latest innovations in avoiding estate taxation and applying new techniques to serve estate planning clients. Yawn. Boring. A far better lesson in estate planning and elder law was available just outside the conference room doors. Those of you that have been to Sin City know exactly what I am talking about; those that don't are better off. Las Vegas, and gambling halls generally, have become the churches of Godless and desperate people. The vast majority of those in casinos are not there to blow off a little steam or throw caution aside for a few hours of distraction. No, the people who are drawn to this mecca of neon and nicotine come out of their own desperation. They come to be winners. The losers in modern American life - the sick, the unattractive, the decrepit, the old, the mentally ill - the losers come to have a chance, just for a little while, to be winners. They come for hope. Hope that the machine will tell them that they are jackpot winners by making noises and illuminating bright lights. Casinos are ordinarily divided into two main sections, one for table games (blackjack, baccarat, roulette, craps) and one for slot machines (the infamous "one arm bandits"). Walking around the casinos it quickly became apparent that those playing at the tables were mostly younger and middle aged men, mostly in small groups, making some serious calculations of their potential success. These were men who knew the odds and were consciously putting their money on the line strictly for a speculative financial return. Many of these men lead ordinary lives as lawyers, accountants, managers - people who take little risk in their "day" jobs, but vent their conservative natures from time to time by visiting Lady Luck. These are the same folks who drive Toyota Camry's during the week and Harley Davidsons on the weekend. Put in perspective, these gamblers understand the risks they are taking at the tables and are prepared to lose their grubstake as dues for the release that being a "player" brings to them. Seldom do these gamblers gamble their rent or food money. Since there were two people who could communicate with each other there was this type of gambling - "hey Org, I'll bet you a rock that you get eaten by that sabre tooth tiger first!" As an elder law lawyer, I am far more concerned with the other side of the casino. Like a vast sea of buzzing alarm clocks, beeping microwave ovens and unstoppable car alarms - the cacophony of the slot machine areas in casinos sounds like a virtuoso performance to those seeking to be winners. BAR - BAR - BAR. 7 - 7 - 7. With carpal tunnel inducing repetition the nicotine induced masses monotonously search for the machines' positive feedback. Most of the people at the slot machines appear to be obsessed by the prospect that they could be winners - some of the machines even say "You're a Winner", never telling you that you are a loser. But these people are the losers in life. Whether by illness, financial distress or merely addictive natures, many people are drawn to spending what remains of their lives and savings fixated on the hope of positive reinforcement from a machine. The real walk-out-the-door payouts are meager. Few walk out of the casino with a surplus - they let it ride, and when they do, they lose. Like the lonely elders who spend all their money on meaningless junk just so they can chat with their favorite Home Shopping Network or QVC operator, casinos provide a sense of community in a soulless country that abandons its losers. This is not a good reason to keep building casinos. It would seem that the vast majority of the masses in the Las Vegas casinos are there to pass time in an atmosphere where there is a chance of rising from the crowd, where your car alarm goes off, your lights blink and everyone knows that you're a winner. I am concerned that far too many elders are in casinos with funds that they need for their own protection. In fact, I recently became aware of a reverse mortgage company that is promoting their services along side a major casino. Reverse mortgages have an important place in elder law planning. They are a financial tool to protect an elder's standard of living, dignity and sense of place in remaining in their own home. Reverse mortgages are not a remedy of last resort. By advertising reverse mortgages in a context of gambling is mercenary and solicitous of the very people who need sound financial planning and advice from a competent elder law lawyer. A casino in Connecticut that advertises heavily in the Boston market, Mohegan Sun, offers this new innovation: ************[from MoheganSun.com]**********"It’s the latest trend in slot machines and only Mohegan Sun has it. The Northeast’s premier entertainment destination installs 20 half-cent slot machines in its Casino of the Earth and Casino of the Sky. This makes Mohegan Sun the only destination in the United States to offer this new technology. This latest offering allows customers to wager half a cent instead of the traditional quarter, dollar or even penny it's just another way Mohegan Sun is revolutionizing the gaming industry.********** You read it right. HALF-cent machines. Boy, they sure are revolutionizing the gaming industry. And legislators say that casinos are not preying on the elderly? The poor? The stupid? (I personally believe that stupid people should be protected from themselves when at all possible.) Apparently the government is so blinded by the voluntary tax dollars that pour into state coffers that they don't see the societal and financial evil brought on by the wholesale distribution of false hope and deus ex machina for sad lives. This is the same government that cannot provide long term care without impoverishing its people, cannot offer even a remotely intelligible drug benefit for Medicare recipients and is afraid to impose meaningful taxes on the very rich. I imagine there are many casino owners in that category - they are easy to recognize, they are laughing and like a heroin dealer that never shoots up, you won't see them pulling the handle of that revolutionary ha'penny machine. We don't need more casinos. We don't need any casinos. I think we need some new ideas. As many know, I love inventions. My latest invention? The Jackpot Emulator (tm). I see this as a Medicare reimbursable device not unlike a prosthetic or a wheelchair. Like a slot machine in every way, but the JE does not require the payment of any money, nor does it pay out any money, but rather brightly colored slips of paper that exclaim - YOU'RE A WINNER!! For the cost of the machine and a little electricity we could set up Jackpot Emulator (tm) rooms in nursing homes and senior centers where elders could push buttons and hear whirring happy sounds to their hearts' content and then go home with the satisfaction of being a "winner" with no possible way of putting their personal financial security at risk. Now that is revolutionary.

Reverse Mortgage Alphabet Soup - FHA; HECM; MIP; NRMLA; H.R. 1852

2007-06-18T15:51:00.001-05:00

Reverse mortgages are statutory creatures. Reverse mortgages exist because the Congress says that they exist, and so, they are creatures of government standard abbreviations. Just like being at OCS to get your O-1 and then a rack in BOQ for USN-SWOS. For land-lubbering taxpayers, that's Officer Candidate School for Officer Grade 1 (Ensign) and housing in the Bachelor Officer Quarters at Surface Warfare Officer School in the US Navy.

Go HERE for an exhaustive listing of all the terms and features of FHA's (Federal Housing Administration) products and services.

But today's blog is about something far more exciting than abbreviations, although without them the short press release below from NRMLA on the FHA H.R. 1852 HECM modernization plan would be nearly incomprehensible. *********

NRMLA Anticipates Movement on FHA Modernization Bill

NRMLA is hopeful that the FHA modernization bill (H.R. 1852) will start moving in the next couple weeks and be voted on by the full House of Representatives after the July 4th recess.

Sponsored by Financial Services Committee Chairman Barney Frank (D-MA) and Rep. Maxine Waters (D-CA), the bill would: 1) Permanently eliminate the HECM loan cap; 2) Permit HECM for home purchase; 3) Allow HECMs on housing cooperatives; and 4) Require HUD to study the impact of reducing mortgage insurance premiums, and exempting borrowers from paying any MIP if all, or a portion, of the loan proceeds are used to purchase long-term care insurance.

In addition, H.R. 1852 would increase lending limits for all FHA programs, especially in high-cost areas, like California, New York and Massachusetts by raising FHA's maximum mortgage limits to 100 percent of an area's median home price.

Over the past couple weeks, NRMLA has been negotiating with other stakeholder groups to remove a provision that would lower origination fees on HECMs to no more than 2% of the "original principal limit of the mortgage." Stay tuned for further updates.

******** I like to say that we are at the beginning of the beginning for reverse mortgages. As much as reverse mortgages have been around for 40 years in a formal sense (and over 2,500 years in other forms - a short history of the world of reverses is coming soon), reverse mortgages are metaphorically hitting their next threshold in Moore's Law. Which is a nice way of saying that the market for reverse mortgages is growing at an exponential rate - and with all good growing businesses; it's ripe for more government regulation.

H.R. 1852 as set out above, starts to address the initial framework of reverse mortgages - a framework that served us well until now. Reading some of the dicta and side notes of the committees behind this legislation reveals that the government did not expect reverse mortgages to be so successful a product so fast. It makes you almost wonder whether there will be a rush to "irrational exuberance" over reverse mortgages? I don't believe that the market will ever become large enough to impact the overall economy too much, but it will be interesting to watch seniors taking responsibility for their own expenses from their own wealth and not relying on government programs or family members for their living expenses. A reverse mortgage is the ultimate libertarian gesture - I will take care of myself, thank you very much. Should be really popular in New Hampshire.

Looking in the crystal ball I think that you will see MIP (mortgage insurance premium) get rolled into the interest rate of the reverse mortgage loans and all but disappear. Despite NRMLA's obvious incentives in maintaining high loan origination fee caps, you will see a study and drastic reduction in the overall cost of originating reverse mortgages. I think that price competition, which has essentially destroyed the conventional forward mortgage business, will come into the reverse mortgage market. This price competition will at first cause the early entrants to lose market share and gross revenue and for new entrants to take business. Over time it is my opinion that the reverse mortgage lenders that embrace seniors, understand the good karma of reverse mortgages and only sell to those that truly need reverse mortgages will be rewarded with lasting market share. When banks take reverse mortgages as a product focus, especially Bank of America, we will see a transformation of the marketplace that will further and permanently reduce the costs (and therefore origination revenue) of reverse mortgages across the board.

Just so you all know I will be on vacation for the next couple of weeks, so please expect pretty light blogging. Happy 4th of July.

Probate - Where There's a Will, There's a Way - to the Massachusetts Probate Court!

2007-06-16T06:52:00.000-05:00

I have been asked over and again by my blog readers to give a simple outline of what needs to be done upon someone's death. So, because it is both a popular subject and really something that everyone will need to address in one manner or another, here goes. In Massachusetts, probate is the process by which a deceased person's property, known as the "estate," is passed to his or her heirs and legatees (people named in the will). The entire process, supervised by the Massachusetts probate court, usually takes a little longer than a year. However, substantial distributions from the estate can ordinarily be made in the interim so long estate tax and creditor obligations can be determined with some degree of certainty. The emotional trauma brought on by the death of a close family member often is accompanied by bewilderment about the financial and legal steps the survivors must take. The spouse who passed away may have handled all of the couple's finances. Or perhaps a child must begin taking care of probating an estate about which he or she knows little. And this task may come on top of commitments to family and work that can't be set aside. Finally, the estate itself may be in disarray or scattered among many accounts, which is not unusual with a generation that saw banks collapse during the Depression. Here we set out the steps the surviving family members should take. These responsibilities ultimately fall on whoever was appointed executor or personal representative in the deceased family member's will. Matters can be a bit more complicated in the absence of a will, because it may not be clear who has the responsibility of carrying out these steps. First, secure the tangible property. This means anything you can touch, such as silverware, dishes, furniture, or artwork. You will need to determine accurate values of each piece of property, which may require appraisals, and then distribute the property as the deceased directed. If property is passed around to family members before you have the opportunity to take an inventory, this will become a difficult, if not impossible, task. Of course, this does not apply to gifts the deceased may have made during life, which will not be part of his or her estate. Second, take your time. GRIEVE. You do not need to take any other steps immediately. While bills do need to be paid, they can wait a month or two without adverse repercussions. It's more important that you and your family have time to grieve. Financial matters can wait. (One exception: Social Security should be notified within a month of death. If checks are issued following death, you could be in for a battle. For more on Social Security's death procedures, click on http://www.ssa.gov/pubs/deathbenefits.htm) When you're ready, but not a day sooner, give me or another Massachusetts probate lawyer a call to review the steps necessary to administer the deceased's estate. Bring as much information as possible about finances, taxes and debts. Don't worry about putting the papers in order first; as full service probate lawyers, we have experience in organizing and understanding confusing financial statements. The exact rules of Massachusetts estate administration differ are complex, so it is best to speak with a probate lawyer. In general, they include the following steps: 1. Filing the will and petition at the Massachusetts probate court in order to be appointed executor or personal representative. In the absence of a will, heirs must petition the court to be appointed "administrator" of the estate. 2. Marshaling, or collecting, the assets. This means that you have to find out everything the deceased owned. You need to file a list, known as an "inventory," with the probate court. It's generally best to consolidate all the estate funds to the extent possible. Bills and bequests should be paid from a single checking account, our law firm would establish and help you administer this account, so that you can keep track of all expenditures. 3. Paying bills and taxes. If an Massachusetts (or Federal) estate tax return is needed---generally if the estate exceeds $1 million in value---it must be filed within nine months of the date of death. If you miss this deadline and the estate is taxable, severe penalties and interest may apply. If you do not have all the information available in time, you can file for an extension and pay your best estimate of the tax due. 4. Filing tax returns. You must also file a final income tax return for the decedent and, if the estate holds any assets and earns interest or dividends, an income tax return for the estate. If the estate does earn income during the administration process, it will have to obtain its own tax identification number in order to keep track of such earnings. Our law firm has a CPA on retainer to make all of this simple and easy for our probate clients. 5. Distributing property to the heirs and legatees. Generally, executors do not pay out all of the estate assets until the period runs out for creditors to make claims, which in Massachusetts is a year after the date of death. But, in many cases, once the executor understands the estate and the likely claims, he or she can distribute most of the assets, retaining a reserve for unanticipated claims and the costs of closing out the estate. 6. Filing a final account. The executor must file an account with the Massachusetts probate court listing any income to the estate since the date of death and all expenses and estate distributions. Once the court approves this final account, the executor can distribute whatever is left in the closing reserve, and finish his or her work. Some of these steps can be eliminated by avoiding probate through proper estate planning and through the use of trusts. Whoever is left in charge still has to pay all debts, file tax returns, and distribute the property to the rightful heirs. You can make it easier for your heirs by keeping good records of your assets and liabilities. This will shorten the process and simplify things for your probate lawyer (thank you for that, by the way).

Elder Law - A Reverse Mortgage Lawyer at Home

2007-06-16T06:28:00.000-05:00

Over the years I have learned that elder clients are not so much disturbed about their eventual deaths as they are about changes in their lives as they age. I think it's true about houses too.Just yesterday I sat with two elderly sisters who have lived together in the same house for their entire lives (a combined 187 years!!). One of the sisters is seriously ill with a prognosis of about 6 months to live while her older sister has mid-stage dementia and no longer recognizes her sister. It is time for them to move to a nursing home, but how do they leave their home of so many years? Who will tend the roses? How will the birds (and squirrels) make it through the Winter without their help? Will the new owners be able to make that quirky furnace run properly? Does The Globe deliver to nursing homes? These are the real questions I was asked. I couldn't bring myself to tell them that the house will likely be bulldozered in favor of a couple of townhouses. I believe that there is a karma to a house, good and bad. When I am working on probating an estate I am often called to go in and evaluate properties. You can almost hear the children singing happy birthday, the puppy chewing the corner of the good oriental rug, the smell of grandmother's garlicky tomato "gravy" for Sunday dinner. Sometimes I hear the raised voices of a bad marriage fueled by alcohol and crushing debt, or the long suffering of a COPD patient dying slowly before their loved ones, and all too often the nightly crying of a lonely widow pining for her long lost bedfellow. Are there ghosts? Is it spirits?In this modern age so many people think of their houses as mere way stations as they are transferred up the corporate ladder. Or perhaps they never find the family's home as they feel compelled to upgrade their house and furnishings in each new wave of fashion, like shoes or hairstyles. I feel sorry for people who do not have the patience to impart their personal signature on a place; stay a while, you'll like it - and it will like you back. From a financial perspective, those clients that have stayed in their homes for many years and have been able to pay off their mortgages one payment at a time enjoy much more financial stability than those clients that have progressively taken on more and more mortgage and other debt to acquire real estate they think will make them 'happy'. My Massachusetts legal advice to first time home buyers? Find a happy house. Spend a couple of hours enjoying tea in its living room with the lonely widow before your closing. Ask to keep a photo or chatchke of the seller as a piece of goodwill. Leave a little corner of that awful wallpaper. Stay in the house as long as you can, feel the good karma. And when you sell that happy little house, shed a tear as you drive away. Elder homeowners' advice from a Massachusetts lawyer? Stand your ground. Don't sell your house until you cannot make up the stairs or you can't get a neighborhood boy to shovel the snow. If the money runs out, use a reverse mortgage to tap that hard fought equity. Take care of yourself, first. Don't let a real estate broker convince you that leaving the house is the right thing to do. Make sure you believe that it is the right thing to do. Ask your kids to move home with you with their families. This was always the way in the old days, and it wasn't such a bad idea.

Elder Law - Help for Long Term Care Planning

2007-06-16T06:23:00.000-05:00

The concept of eldercare or long term care planning is fairly new. A fast-growing generation of elderly people needing care is starting to put a great deal of pressure on caregiving family members and government programs for long term care. More and more we are seeing articles and books about the burden of long term care on families. And a huge group of 77 million baby boomers, poised for retirement, is causing alarm in the eldercare provider community. Over the years, we have met with many families in a crisis mode, struggling to find services and preserve assets for loved ones needing long term care. When statistics tell us about one out of two people will need long term care, it's appalling that most of the current generation of elderly have not planned for this crisis in their lives. And the current pre-retirement generation is doing no better. Sometimes I think Americans are about as unprepared as the ancient tribes of Israel wandering in the desert. When the time comes for long term care, most people believe help will come to them like manna from heaven. In most cases this won't happen. I've encountered it so many times, I am no longer surprised when people ask me if there's not some kind of government program that will pay them to quit their jobs and to stay at home and provide long term care for their loved ones. According to research By the National Care Planning Council only about 16% of long-term care services are covered by the government. The other 84% are provided free of charge by family caregivers or provided by services paid out-of-pocket by families or from those receiving care. And the bulk of government care services are provided only after a care recipient has depleted all of his or her savings. The Council also estimates that at any given time approximately 22% of the population over age 65 is receiving some form of long term care support. According to an April 2005 congressional hearing press release from Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on Health of the Committee on Ways and Means, "...In 2004, according to CBO, approximately $135 billion was spent on long term care for the elderly. Sixty percent of this amount was financed through Medicaid and Medicare, one third through out-of-pocket payments, and the remainder by other programs and private insurance. This funding excludes the significant resources devoted to long term care by informal caregivers (primarily spouses and children). The CBO estimates that informal care is the largest single component of long term care...." In conjunction with the spending estimates above, the National Care Planning Council has actually estimated the equivalent cost of care provided for free by informal caregivers. We think it is close to a staggering $313 billion for the year 2005. This is almost four times the amount the federal and state governments currently pay for all long term care services nationwide. It would bankrupt the federal and state governments if they had to pick up the cost of these free services. Many groups are pushing for the government to do just that -- pay a greater share of informal care services. The process of long term care planning involves seven steps that embody the following four principles: Knowledge is the key to success. Professional help is crucial in saving time, money and stress. The planning process is most effective when there is money available. Success is assured through a written agreement with all parties involved. "Guide to Long Term Care Planning" is a new online resource developed by the National Care Planning Council for use by the public and to support the Long Term Care Consumer Awareness Campaign from the Department of Health and Human Services. This free, noncommercial source of information is the largest and most comprehensive work on long term care planning ever produced. This public-service, online publication contains over 670 printable pages including 96 charts and graphs. It is written by eight experts and organized into 35 chapters. It also includes a section on helping seniors with the new Medicare prescription drug benefit. The URL for this online publication is found at www.longtermcarelink.net/guide.

Reverse Mortgage - Beer, Donuts & Golf?

2007-06-15T05:02:00.000-05:00

Massachusetts lawyers act as title companies in virtually all real estate transactions in Massachusetts. This has been the case for several hundred years. Not to bore you with history, but I need to set the scene, it all goes back to the China Trade when wealthy merchant marine captains would set out for years long voyages in search of fortune. While they were away they entrusted their Boston lawyers to conduct their business for them with the banks and protect their families generally. This led to lawyers in Massachusetts taking on the role of trustee for wealthy families, but also put them firmly in control of the transfer of real estate and bank relations. Until recently the Massachusetts Real Estate Bar called it "conveyancing", I guess to make it sound more British. Whatever the case, lawyers as title companies and corporate title companies in most other states developed rapidly after World War II due to the large number of returning veterans seeking the American Dream. As mortgage lending became more commonplace and title insurance more lucrative for title insurance agents, lawyers embraced conveyancing as a money making practice area. For the first several hundred years of real estate closings in Massachusetts conveyancers were highly skilled technicians who were able to interpret the often cryptic records of land ownership left to us by our ancestors. It was tedious and persnickety work. The fees were based on the work performed by the lawyer and a lawyer could make a good day's wage for drafting mortgages and recording deeds. In the early 1970's title insurance became a required element for most mortgages. Title insurance for the most part is an assurance to a mortgage lender that it is in first lien position on a particular parcel of land on which it has placed a mortgage lien. In its simplest form title insurance is what enables the American financial community to provide ready capital and reasonable rates to the market place as it helps to commoditize mortgages so they can be converted into financial vehicles on Wall Street. The basic protection of title insurance is vital and beneficial to both mortgage lenders and their customers. In Massachusetts, virtually all title insurance is sold by lawyers as agents for the major title insurance underwriters, companies include: Ticor Title Insurance - Fidelity Financial; Stewart Title; Old Republic; LandAmerica (Lawyers & Commonwealth brands); and Talon Group - First American. Each of these companies offers a similar product developed in cooperation with the American Land Title Association which serves as the trade association for the title insurance industry. Boy, this blog is really boring. Where's the beer, donuts & golf? Title insurance is sold in Massachusetts based on a formula of coverage per thousand dollars of loan amount or purchase price. There are essentially two core products, lender title insurance to protect the lender's interest and owner title insurance to protect the home owner's equity in the real estate. There are a few other bells and whistles, but it is essentially a vanilla product to consumers. Title insurance in Massachusetts is underwritten by lawyers by virtue of completing a title examination and reviewing the summary or title abstract to assess risk. Title insurance is paid for by the consumer as part of the closing costs. The other major closing cost paid by the consumer for title services is ordinarily paid in the form of an attorney fee. In my 17 years of working in the mortgage and real estate industries in Massachusetts not only has this fee decreased in nominal terms, but taking inflation into account it has actually decreased by more than 50%. Did he say attorney fees have decreased by 50% in real terms over the past two decades? Yup. What gives? Title insurance agents are paid a commission for underwriting and selling title insurance. A big, big commission. In Massachusetts, lawyers are paid an average of 70% of the title insurance premium in addition to their attorney fee. Lenders direct which lawyer will conduct which real estate closing. Lawyers who do closings have become specialized in handling large volumes of real estate transactions thanks to the Internet (for searching records) and transaction management systems (like the company I co-founded, E-Closing) to e-recording (like the other company I co-founded, SimpliFile). It can be a very financially rewarding business in Massachusetts, just like in the rest of the states where most closings are conducted either directly by the title insurance companies or by corporate style title companies (not lawyers). Closing lawyers want to close loans quickly, efficiently and profitably. You said there would be beer, where's the beer? Due to a number of factors, such as the large number of law schools in Boston, the overall high profit in closing mortgage loans and the relative ease of entry into the closing business; conveyancing is a highly competitive business in Massachusetts. The most successful closing lawyers are expert marketers who can swing a golf club with bankers and tell great stories at the 19th hole (NOTE: for those that don't know, the 19th is where the beer can be found). They have attractive and persuasive staff calling on their customers with donuts and smiles, not unlike those Pfizer or Merck representatives with the trays of sandwiches and freebies for doctors. There is nothing wrong with any of this, it's how the forward mortgage and closing business is done. In addition, the lawyers will send potential borrowers to the lenders that they work with as a way to keep the skids greased and to show good faith in the relationship. The lenders rely on referrals from their closing lawyers and in many cases make it a declared ab initio to any new business. My law practice includes, as you would expect, a significant number of mortgage lenders and banks that hire me to develop strategies for reverse mortgages, automate closing processes and conduct training programs for loan and branch staff. A few weeks back I was asked to meet with one of the leading mortgage companies in the Northeast (by dollar volume) to discuss making them a market leader in reverse mortgages. We discussed my role in marketing, training, product selection, etc. As compensation we discussed my role conducting reverse mortgage closings in the states where we are licensed for the title business (MA, NH, ME, RI, NY). I explained how my law firm has special expertise in this business. We treat reverse mortgage closings very differently than conventional mortgage closings. This is due, more than anything else, to the fact that we consider ourselves elder law lawyers first and not only lawyers engaged in the business of closing mortgage loans. We add significant value to every mortgage loan that we close through compassion, experience and patience. A reverse mortgage closing should be unlike any other closing. First, we assist the borrower with understanding their estate planning and asset protection planning issues. Then, we evaluate their government benefits to determine the appropriate lending program and to counsel them on potential traps in the reverse mortgage lending process that may lead to adverse consequences. We call borrowers in the morning when they are most awake and can understand what we need from them. We plan two hours for each closing. We show up on time. W e s p e a k s l o w l y. AND LOUDLY. We bring felt tip pens to make signing easier for arthritic hands. We enlarge the document copies so tired eyes can actually read them. We speak English. We welcome them to have their children or best friend at the closing. We stop to drink the tea and stale cookies that we are offered. We ask about that Army medal proudly hung above the mantel. We touch their hands when they tell their life stories. We tell them about our kids and where our parents grew up. We tell them to call us if they have any questions (and we mean it). We bring their first disbursement checks to their bank for them and call so they don't worry about it getting in the bank. We thank them for their time. The big mortgage company said that my thoughts on the subject were quaint but that "business is business" and they didn't have the time to coddle every borrower. "We need to fill the pipeline and get these numbers up, we want to be number one!!" "Ever read the Lorax by Dr. Seuss?", I thought to myself. They decided that they would continue to use the golf buddies of the company founder for closings, because, I quote "they will be able to refer us the reverse mortgage business to help us grow, our closing lawyers get business because they give us business and close deals no matter what." Ouch. Where are they going to find impoverished elders? The golf course. When elders consider borrowing on a reverse mortgage many emotions become part of the equation. A good friend in the reverse mortgage business (he is actually "number one" in my book) always says "reverse mortgages are not sold to people, they are presented and it either makes sense or it doesn't." If mortgage lenders treat reverse mortgages as just another product in their arsenal and not as the special estate planning tool that it is, we will be seeing abuses of the elderly of epic proportion in the coming years. NOTE TO MORTGAGE LENDERS (in Massachusetts and elsewhere): Make the connection between a compassionate elder law lawyer that cares about the protection and well being of the elder community and the closing of a reverse mortgage (invite them to go out with the title company or loan originator to check on the borrower's well being.) Be like those far away ship captains knowing that their loved ones are in the safe hands of a Boston lawyer focused on nothing more than their well being. Don't be swayed by what makes you happy in the forward world (beer, donuts, golf?), what will make you a happy lender in the reverse mortgage industry is tea, stale cookies and bingo.

Reverse Mortgage - A Happy Pill?

2007-06-14T05:25:00.000-05:00

Can a mortgage make you happy? As an elder law lawyer in Massachusetts I see the worst of the human condition on a daily basis - depression, debilitating illness, greed, elder abuse, death. Seldom is the lawyer brought in to celebrate good news with an elder law client. The most common characteristic of our elder law clients is depression. Whether caused by isolation, grief or worry depression is epidemic among the elderly. It is particularly noteworthy in elders that live alone in their own homes. It's difficult to know which is the proverbial cart and which is the horse, but it would seem that aside from grief over the loss of a spouse (often the husband has passed first), the isolation and worry are caused by financial insecurity. When an elder lacks financial resources to purchase groceries let alone take part in ordinary social rituals (church, bingo, social clubs) for fear of the stigmatization of poverty they withdraw from the very community that should be there to support them emotionally in their time of need. In most elders' minds American society rewards financially successful people with acceptance and shuns those that cannot achieve their own financial security. Over time this withdrawal from community compounds the issues of limited financial resources and depression. The further effects of malnutrition, reduced medical care (often in the form of splitting pills to non-therapeutic doses) and the physical dilapidation of the elder's home leads the elder to long term care facilities and being forced to sell their home in an unplanned manner. The elder's "house rich" circumstances control the situation and the inevitable outcome. Many elders have children who lack either the means or will to provide financial aid to their parents (if they could provide financial support to their elder parent homeowner, I can recommend looking at the new program offered by Circle Lending (not a lender) called Family Advantage - it's basically a privately funded reverse mortgage). While selling the home is always an option it seldom helps the elder and often further sends them the message that they have failed to maintain the lifestyle to which they had worked for throughout their lives. I have been witness to miracles brought about by elders making the decision to help themselves by obtaining a reverse mortgage. Contrary to the conventional "wisdom" that has shrouded reverse mortgages for years; reverse mortgages are good solutions in the right situations. "You mean I will receive $1,100 every month for the rest of my life? - I'm going to start swimming again at the Y." That is what I heard just yesterday at a reverse mortgage closing. By being able to tap the equity in the real estate that they own elders can access value without disrupting their personal culture and well being by selling their home. It is an empowering thing to be given freedom from lingering debt or years of insufficient income. Anecdotally, I have seen many elder law clients of my law firm emerge from their funks and indeed their depressions, to get back on their feet using their home equity. Contrary to some popular thinking, despite the cost of obtaining a reverse mortgage (nothing in this life is free from what I can tell) and the thought that there will be less inheritance left for the aforementioned good for little children; reverse mortgages are lifelines for the elder community. Reverse mortgages solve problems. Reverse mortgages unlock the paper appreciation in real estate over a lifetime of hard work. Reverse mortgages are the friend of the elderly. Reverse mortgages make elders smile. As I work further towards building a strong presence in the blogosphere, I want to thank my hundreds (thousands?) of readers for keeping me moving in the right direction. Soon you will be seeing a whole new blog, indeed a whole new blog experience, as we migrate this simple site to LexBlog, the leading website for blogging lawyers. LexBlog will provide me with substantial software resources so that I can incorporate many new useful features to my blogs. The topics will remain the same, although I am now working with several reverse mortgage lenders on bringing new lending programs to the market so I hope to be a resource for the reverse mortgage community on trends and traps in the industry. I will also continue to provide clear insights on the risks of dying without an adequate estate plan and the accompanying costs and hassles of probate in Massachusetts. Thanks again for your continued support!

Reverse Mortgage - Forward Thinking

2007-06-13T05:37:00.000-05:00

Reverse mortgage lenders, the elder law bar and the public did not get off on the right foot when reverse mortgages became generally available. There were many confusing features to the initial loans and the government and banks did little to help borrowers understand their transactions. Reverse mortgages became known as the estate planning tool of last resort for truly financially needy elders. The elder law bar was hesitant to recommend reverse mortgages, estate planning lawyers put their heads in the sand and real estate lawyers, at least many of the real estate lawyers in Massachusetts that my law firm deals with, were completely in the dark on the workings and benefits of reverse mortgages. So what has changed? In a word, education. The reverse mortgage industry made it their mission to educate the market place, not only consumers but also lenders about the powerful benefits of reverse mortgages. As with any schooling it takes time. Sometimes you take the wrong class or get a bad professor, but if you stick to it great things can happen. That is the case with reverse mortgages. Lawyers, geriatric care managers, lenders, borrowers and other interested parties are now coming to see the place for reverse mortgages in elder law planning. To me the key benefit of reverse mortgages is their ability to create peace of mind through financial independence (or "financial freedom", Financial Freedom is one of the largest reverse mortgage lenders -they run those TV ads with James Garner). So there has been education; why else have reverse mortgages suddenly emerged as a viable planning tool for older estate planning clients? Life is expensive, particularly in states like Massachusetts where we seldom see a purchase and sale agreement for less than $400,000. As the population ages and the housing market remains strong (yes, it is still very strong by historical measures - in the Boston area real estate is still considerably overpriced when taking all other aspects of the cost of living into account,) elders have more month than they have monthly income. Most reverse mortgages are used to convert home equity into a replacement for insufficient income. When you look deeper the net effect of reverse mortgages is that more elders can stay in their own homes longer, more elders are able to afford home care services and more elders have the sense of financial freedom that only comes from knowing that there is money in the bank. What's not to love about reverse mortgages? Well, real estate brokers in Massachusetts don't like reverse mortgages - they slow down the transaction pace and change the traditional marketing cycle of listing elders' homes when they can no longer afford them. The assisted living industry doesn't like reverse mortgages. How could they? They depend on elders giving up their old homes in return for 3 squares and a cot at their local "Happy Garden Loving Home for Golden Years on Smiling Hill Assisted Living and Schmaltz Factory." I found this primer on reverse mortgages useful, not only for my elder law colleagues that follow the blog, but also for the general public that wants to more about the basic mechanics of reverse mortgages. Just remember that reverse mortgage laws can vary by state and also it is a good idea to consult an elder law lawyer in Massachusetts or your state before proceeding with a reverse mortgage or any estate plan or real estate transaction. Reverse Mortgage Loans For many seniors the equity in their home is their largest single asset, yet it is unavailable to use unless they use a conventional home-equity loan. But a conventional loan really doesn't free up the equity because the money has to be paid back with interest. A reverse mortgage is a risk-free way of tapping into home equity without creating monthly payments and without requiring the money to be paid back during a person's lifetime. Instead of making payments the cash flow is reversed and the senior receives payments from the bank. Thus the title "reverse mortgage". Many seniors are finding they can use a reverse mortgage to pay off an existing conventional mortgage, to create money for a down payment for a second home or to pay off debt. Popularity is skyrocketing. Over the last five years the number of reverse mortgages nationwide has tripled. The uses of this untapped wealth are only limited by a person's imagination. For those seniors who earn low incomes but own a home, a reverse mortgage can allow them to remain in the home by creating extra income. It can also allow for remodeling or repairs and when the time comes to sell, the investment in the home can make it more valuable. False Beliefs about Reverse Mortgages “The lender could take my house.” The homeowner retains full ownership. The Reverse Mortgage is just like any other mortgage; you own the title and the bank holds a lien. You can pay it off anytime you like. “I can be thrown out of my own home.” Homeowners can stay in the home as long as they live, with no payment requirement. “I could end up owing more than my house is worth.” The homeowner can never owe more than the value of the home at the time the loan is due. “My heirs will be against it.” Experience demonstrates heirs are in favor of Reverse Mortgages. Virtually anyone can qualify. You must be at least 62, own and live in, as a primary residence, a home [1-4 family residence, condominium, co-op, permanent mobile home, or manufactured home] in order to qualify for a reverse mortgage. There are no income, asset or credit requirements. It is the easiest loan to qualify for. A reverse mortgage is similar to a conventional mortgage. As an example: The bank does not own the home but owns a lien on the property just as with any other mortgage You continue to hold title to the property as with any other mortgage The bank has no recourse to demand payment from any family member if there is not enough equity to cover paying off the loan There is no penalty to pay off the mortgage early When the loan becomes due, you can refinance and keep the house. The proceeds from a reverse mortgage are tax-free and can be used for any legal purpose you wish: daily living expenses home repairs and improvements medical bills and prescription drugs pay-off of existing debts education, travel long-term care and/or long-term care insurance financial and estate tax plans gifts and trusts to purchase life insurance or any other needs you may have. The amount of reverse mortgage benefit for which you may qualify, will depend on your age at the time you apply for the loan, the reverse mortgage program you choose, the value of your home, current interest rates, and for some products, where you live. As a general rule, the older you are and the greater your equity, the larger the reverse mortgage benefit will be (up to certain limits, in some cases). The reverse mortgage must pay off any outstanding liens against your property before you can withdraw additional funds. The loan is not due and payable until the borrower no longer occupies the home as a principal residence (i.e. the borrower sells, moves out permanently or passes away). At that time, the balance of borrowed funds is due and payable, all additional equity in the property belongs to the owners or their beneficiaries. If the heirs want to keep the home with the additional equity, they can refinance with a conventional loan. There are three reverse mortgage loan products available, the FHA - HECM (Home Equity Conversion Mortgage), Fannie Mae - HomeKeeper®, and the Cash Account programs. Over 90% of all reverse mortgages are HECM contracts. The costs associated with getting a reverse mortgage are similar to those with a conventional mortgage, such as the origination fee, appraisal and inspection fees, title policy, mortgage insurance and other normal closing costs. With a reverse mortgage, all of these costs will be financed as part of the mortgage prior to your withdrawal of additional funds. You must participate in an independent Credit Counseling session with an FHA-approved counselor early in the application process for a reverse mortgage. The counselor's job is to educate you about all of your mortgage options. This counseling session is at no cost to the borrower and can be done in person or, more typically, over the telephone. After completing this counseling, you will receive a Counseling Certificate in the mail which must be included as part of the reverse mortgage application. You can choose 3 options to receive the money from a reverse mortgage: 1) all at once (lump sum); 2) fixed monthly payments (for up to life); 3) a line of credit; or a combination of a line of credit and monthly payments. The most popular option, chosen by more than 60 percent of borrowers, is the line of credit, which allows you to draw on the loan proceeds at any time. The line of credit also earns interest which in essence is allowing the equity in the home to grow. For example $120,000 in a line of credit earning 5% would be worth almost 200,$000 10 years from now. Keeping money in a reverse mortgage line of credit in most states will not count as an asset for Medicaid eligibility as this would be considered a loan and not a resource for Medicaid spend down. In other words, keeping the money in the line of credit will not disqualify you from becoming Medicaid eligible. However, transferring the money to an investment or to a bank account would represent an asset and would trigger a spend down requirement and delay eligibility. Please note however that distinguishing between what portion of reverse mortgage proceeds might be counted as a loan and what portion as an asset is not a simple black and white decision. It is best to get an opinion from an elder attorney in your state. If a senior homeowner chooses to repay any portion of the interest accruing against his borrowed funds, the payment of this interest may be deductible (just as any mortgage interest may be). A reverse mortgage loan will be available to a senior homeowner to draw upon for as long as that person lives in the home. And, in some cases, the lender increases the total amount of the line of credit over time (unlike a traditional Home Equity Line where the credit limit is established at origination). If a senior homeowner stays in the property until he or she dies, his or her estate valuation will be reduced by the amount of the debt. At the death of the last borrower or the sale of the home, the loan is repaid from equity in the home. Any remaining equity (which is often the case) goes to the heirs. Almost all reverse mortgages are the HECM loan which is guaranteed by FHA mortgage insurance. If there is not enough equity to cover the loan, the insurance satisfies the loan by paying the deficit. With a HECM loan, the bank will never come after the heirs to satisfy the mortgage obligation. Good resources for reverse mortgage information are AARP, the Your Home for Life mortgage company and the National Reverse Mortgage Lenders Association.

Making it Simple - Wills, Probate, Power of Attorney

2007-06-08T13:47:00.000-05:00

The knowledge that we will eventually die is one of the things that seems to distinguish humans from other living beings. At the same time, no one likes to dwell on the prospect of his or her own death. But if you postpone planning for your demise until it is too late, you run the risk that your intended beneficiaries -- those you love the most -- may not receive what you would want them to receive whether due to extra administration costs, unnecessary taxes or squabbling among your heirs.

This is why estate planning is so important, no matter how small your estate may be. It allows you, while you are still living, to ensure that your property will go to the people you want, in the way you want, and when you want. It permits you to save as much as possible on taxes, court costs and attorneys' fees; and it affords the comfort that your loved ones can mourn your loss without being simultaneously burdened with unnecessary red tape and financial confusion.

All estate plans should include, at minimum, two important estate planning instruments: a durable power of attorney and a will. The first is for managing your property during your life, in case you are ever unable to do so yourself. The second is for the management and distribution of your property after death. In addition, more and more, Americans also are using revocable (or "living") trusts to avoid probate and to manage their estates both during their lives and after they're gone.

Asset Protection - Nevada, Delaware, Alaska, Mars?

2007-06-07T05:20:00.000-05:00

The death of emergency Medicaid planning is official. Let us mourn the techniques of the estate planning and elder law bar that allowed elders to qualify for Medicaid benefits despite having significant assets. Due to the Deficit Reduction Act of 2005 (passed in 2006) most planning opportunities now involve five year plans and more complex trust instruments. While we are still working on these more complex trusts, including irrevocable trusts, intentionally defective grantor trusts and the like; the demand for our services at the time of Medicaid application has diminished markedly. Despite the law change in Massachusetts (and Federal law), there are still steps we can take for asset protection for elders at the time of application including promissory notes, certain annuities and special needs trusts for certain family members - Medicaid planning is not entirely hopeless, but the best opportunities for elder law attorneys have been signed away by the governments lawyers and Congress. So, what is a lawyer to do? We are not the type to passively sit by as other lawyers eat our lunch. We have been working diligently for the past several months re-tooling the asset protection aspects of our law firm to be more directly focused on the asset protection needs of high and ultra high net worth individuals who are concerned with protecting assets from all types of judgment creditors. This planning involves the use of trusts, corporate entities and legal jurisdictions where the laws favor the protection of assets (in exchange for bringing new cash to places perhaps not normally thought of as centers of the legal or financial world - like Nevada and Alaska). In the coming weeks I will be participating in significant training and axe sharpening programs to help make sure that our law firm is on the cutting edge of asset protection, not only in the US but also in cooperation with certain off-shore legal jurisdictions where certain planning can be beneficial for particular clients. I leave shortly for a conference in Las Vegas where the Nevada trust industry will woo my estate planning asset protection attention. In a nutshell, asset protection involves transferring legal ownership of assets to another person, in most cases this person is a trustee and under the various state laws (such as Nevada asset protection law) at least of these trustees must be a Nevada trust company. By so transferring the legal ownership, as well as structuring the language and documentation of the trust so that it conforms with state law, you can achieve protection from certain types of creditors over time (in Nevada you can protect assets in as little as two years), including judgment creditors and even spouses in a divorce. Our law firm works cooperatively with Nevada legal counsel to make sure that all asset protection documents conform to Nevada legal requirements as these are not Massachusetts documents. We will be revisiting this topic in much greater detail in the coming months as our law firm will be working diligently to bring our clients up to speed on this exciting estate planning opportunity. The main advantage of Nevada asset protection and other state and countries is the use of charging orders (how creditors are paid in the event of a claim) and certain tax benefits. Not only is this legal, but it is a prudent use of client's resources as it is one of the few ways that we can preserve estate tax planning opportunities while locking in the protection of assets.

After the Purchase & Sale Agreement, How to Take Title on Your Deed

2007-06-06T05:56:00.000-05:00

The earliest landowners probably demarcated their property by saying, “I own my cave and 100 steps in every direction from its entrance.” Over time, as the number of humans increased, the law had to evolve in order to regulate more complex ownership interests. Any form of regulation requires balancing rights and duties. And when “a house is divided,” i.e., when several people share ownership of the same piece of property, it becomes especially important to explicitly define each party’s rights and delineate each party’s duties. In legal terms, there are three ways in which co-ownership (known as concurrent ownership) is structured: The parties can be (1) joint tenants, (2) tenants by the entirety or, (3) tenants in common. It is important to note that concurrent ownership is a concept that only applies to present possessory interests in the same property, so, for example, that if the same piece of property is given in a will to several people, these persons will not be considered concurrent owners. Joint Tenancy Traditionally, joint tenants must receive their interest at the same time and through the same document, like a will or a deed. The other important characteristic of joint tenancy is survivorship; meaning, that if one of the joint tenants dies, the other co-co-owners continue to enjoy the same ownership rights. The heirs of the deceased joint tenant or those named in her will do not have the right to inherit the property. In order to create this type joint ownership, the party or parties seeking to create it must use specific language demonstrating that intent. For example, if Grandpa Adam wishes to give his apartment to grandsons Cain and Abel for them to share as joint tenants with right of survivorship, the legal document giving the apartment to Cain and Abel must specifically say something like to Cain and Abel, as joint tenants. Each joint tenant's interest must be equal in amount. So, using the example above, Cain and Abel each must have equal, undivided one-half interests. And like a tenancy-in-common (discussed later) each joint tenant has the same the rights of ownership, i.e., each can use, occupy and possess the property at the same time. A joint tenancy can continue indefinitely unless one of the tenants does something to sever it. Certain actions (like partition, discussed below) will break the joint tenancy and automatically make the co-owners tenants-in-common. Tenancy-by-the-Entirety A tenancy-by-the-entirety is a form of co-ownership that applies only to husbands and wives while they are married. It is based on the archaic common law view that husband and wife is one person for the purpose of owning property. As long as they are still married, neither the husband nor the wife separately has an interest that can be sold, mortgaged, leased or liened against; nor can the property be divided or partitioned between them. Each spouse has an undivided interest in the whole property and the right to sole ownership when the other spouse dies. Since a tenancy-by-the-entirety applies only to a husband and wife during a valid marriage, if they divorce, the tenancy-by-the-entirety is automatically converted into a tenancy-in-common with each person owning a one-half interest in the property. At the outset, husbands and wives who do not want to be tenants by the entirety, should make sure that any property they acquire while they are married is documented using language which clearly states that they do not own the property as tenants by the entirety. Tenancy-in-Common A tenancy-in-common generally applies to two or more persons who are not husband and wife, who own the same property. The owners may have unequal interests or shares and may have received their interests at different times and through different means or documents. A tenancy-in-common may be specifically defined in a written agreement or by default (as discussed above in the case of broken joint tenancies and severed tenancies by the entirety.) The key difference between a tenancy-in-common and other types of co-ownership is survivorship rights. Upon death, a tenant-in-common’s interest passes to her heirs or those named in her will. There is, therefore, no right of survivorship that transfers the decedent's interest or share in the property to the other co-owners. Each tenant-in-common can occupy and utilize every portion of the property at all times and in all circumstances and, each co-owner is also responsible for a proportionate share of the expenses, taxes and repairs incident to property ownership. If the all of the expenses are paid by one co-owner, the other co-owners must reimburse her for their share of the costs. Or should they refuse to pay her, she may petition the court to levy a lien against their interests in the property. Co-owners have the right to sell their interest in the property, giving it away while they are alive or transferring it to persons of their choice at death, without the consent of the other co-owners, with the buyers or inheritors sharing the same rights and duties of ownership as the co-tenant who passed on her interest. If tenants-in-common wish to terminate their joint ownership of the property they may voluntarily do so by signing an agreement to partition or they may file a court action for partition in the Probate Court or Land Court. Petitions to Partition Property can only be partitioned if co-tenants share a present, undivided legal interest and theymay either divide the property into parcels or, if the land cannot be fairly divided, the court may order that that the property be sold by private sale or public auction and apportion the proceeds equitably among the co-owners. A property can be partitioned even if there is a lease on it and someone living in a leased, partitioned property, by law, must be permitted to continue living there. Merely instituting partition proceedings does not terminate a tenancy. Partition proceedings, like any other legal action, cost money. The court determines the reasonable expenses and charges of the proceedings. If the property is sold, these expenses and charges are paid out of the sale proceeds and in those cases where the property is divided, the petitioner (person asking for partition) pays the expenses and charges with contribution from the other parties in proportion to their respective interests, unless the court finds that a different ratio would be more equitable. Conclusion Even the most primitive conceptions of ownership probably recognized the importance of specificallydefining the rights and duties of each co-owner when more than one person owns the same piece of property. The earliest assertions of concurrent ownership probably went something like, “We both own this cave. I have a right to live here and you do too. You have to clean it and I will clean it too.” Today, because more and more people are co-owning property, “dividing the house” has become an even more complex task for which professionals are needed. Seniors who like to co-own property or who’d like to get their money out of a piece of property that they own with others, should contact a lawyer and/or a real estate professional. Lawyers can be instrumental in drafting the appropriate legal documents that define co-ownership, and in the event of a voluntary or court-ordered partition, lawyers can draft the requisite partition agreements or can represent petitioners in probate or land court proceedings. When “a house is divided” someone should be there to make sure that it doesn’t fall as the pieces are being put together and if/when they are being taken apart.

Reverse Mortgages - An Elder Law Tool for Massachusetts Lawyers

2007-06-05T05:32:00.000-05:00

Reverse Mortgage: Gimmick or Good Deal? Today, several of the new skin products being marketed tout that they can reverse the signs of aging. They make claims that they can remove wrinkles or increase energy or improve memory. I don’t know if any of these products can deliver on their claims. But for seniors 62-years-old or older who own (or almost own) the home they live in, there is a way to reverse one thing in their lives, the mortgage on their homes. How? In a typical mortgage, a home owner pays the bank a monthly amortized amount. In a reverse mortgage, a home owner pays the bank a monthly amortized amount. Does this sound too good to be true? Is this another anti-aging product gimmick? It’s not. For many seniors, a reverse mortgage is a sound financial planning tool, and according to Paul Conlin of Greenpark Mortgage Company in Needham, Mass., “A reverse mortgage might be the ideal option for seniors to maintain their financial independence.” Some Reverse Mortgage History Reverse mortgages have been available in the United States since 1961 but with considerable variation from one region of the country to another. In 1991 the Federal government expanded its insurance of reverse mortgages, thereby increasing the availability of reverse mortgages across the map. And with the rising cost of healthcare, unanticipated increases in inflation, pension plans going under and the unpredictable nature of Social Security more seniors are looking towards their houses for the cash they need. In fact, as property values have risen, a number of seniors who took out reverse mortgage loans years ago are returning for second and even third reverse mortgages to harvest the additional equity that has built up in their homes. “Most senior homeowners just want to remain comfortable in their own home.” States Ed Barrett, a reverse mortgage specialist from Your Home for Life in Westwood, Mass. “With the rising costs of everything today, that is becoming harder and harder to do. Now, with the federally insured reverse mortgage, there is a new option available that really provides for financial security and peace of mind. It really can be Your Home For Life.” According to the Federal Housing Administration, which insures most reverse mortgages, by September of 2005, homeowners had taken out about 43,000 reverse mortgages, that was up from about 37,829 the year before and from 7,700 in 2001. And demand continues to rise with 56% more loans taken out in the first quarter of 2006 than in 2005. The Ins & Outs of Reverse Mortgages To qualify for a reverse mortgage at least one person on the home’s title must be 62 years old, the home must be the owner’s primary residence (i.e., the homeowner must actually live in the home) and the home must be owned outright or the reverse mortgage loan must be used to pay off the outstanding mortgage balance. The Federal reverse mortgage loan program has a cap on the size of the mortgage loan it provides so for those seeking amounts in excess of the Federal limits, state programs and private lenders are a better choice. For both Federal and state programs, there may be restrictions on the types of residences that qualify. For example, under the Federal program condos are eligible but shareholder-owned cooperatives are not. In Massachusetts SFR, MFR (1-4 units), Condo’s, and HUD-approved manufactured housing are eligible. Loans generally are written for no more than one-half to two-thirds the value of a home and even if the value of the home changes while the loan is outstanding, the borrower only owes the amount of the loan. The repayment amount can never exceed the value of the home. In fact, under the Federal program, the government makes up the deficiency, if any, to the lending institution, and while Private Placement programs are not insured, all are “non-recourse”. The borrower decides how to receive the loan money. There are four payment options: (1) an up-front lump sum payment, (2) a line of credit, (3) fixed monthly payments or a combination of a line of credit and fixed monthly payments. With any of these options there are fees and costs but many of these are the same fees and costs that would be incurred with any loan; for example, there’s an origination fee, an up-front mortgage insurance fee, an appraisal fee, and standard closing costs. As far as Uncle Sam is concerned, the money received from a reverse mortgage is not taxable as income, regardless of the way the money is paid. Likewise, many states do not consider reverse mortgages as income and neither do they count as disqualifying resources for most Federal and state public assistance programs. A reverse mortgage must be carefully evaluated as it is more complex than other secured loans (like home equity loans, for example). It is suggested that seniors considering one seek the advice of a legal, tax or financial advisor. In fact, the law requires that seniors receive counseling before they obtain a loan. Typically, such counseling covers budgeting and general financial planning, as well as the tax implications and Medicaid/public assistance ramifications. The AARP, Fannie Mae and HUD are three agencies that provide counselor referrals. As previously mentioned, reverse mortgage loans, contain fees and costs. However, the fees and costs are low and are not paid out of pocket or up front. They are added to the total loan amount along with the interest, and are paid when the loan’s term expires. For a reverse mortgage that is structured as monthly payments for life, this can mean that the estate will pay off the loan. The Federal reverse mortgage program assumes a life expectancy of 100 years, thus, monthly payments may be lower for seniors closer to age 62 than for those nearer to 100. The life expectancy assumed by Massachusetts, as well as for all other programs is 100 years. One thing about reverse mortgages that seems to worry most seniors is that having a reverse mortgage loan will prevent their children and grandchildren from inheriting the home. Seniors who want to make sure that their heirs are provided for could take advantage of the new transfer rules under the Deficit Reduction Act of 2005 (passed in 2006) which allows, among other things, that transfers made five years prior to an application for Medicaid will be outside the look-back period and will not be penalized. This means that if a senior gives some of her savings and investments to her grandchildren (for example) five years before she needs Medicaid, she will be outside the look-back period and qualify immediately, provided of course, that she is careful not to make it seem like the transfer was made for the sole purpose of qualifying. And even if seniors do not take advantage of the new transfer rules, the rising costs of real estate should protect the home for their heirs who can sell the house and use the proceeds to pay off the reverse mortgage note and keep the profit. In fact under the Deficit Reduction Act, seniors with more mortgage on their home may fair better (in some circumstances) that those who have higher equity. The new law’s limit on home equity of $500,000 (which can be increased up to $750,000 at state option) may well mean that seniors owning homes with greater equity could risk not qualifying for Medicaid coverage. But if the equity is tapped using a reverse mortgage loan, this may shelter those seniors from disqualification. Because You Were Curious: Other Home Equity Conversion Mechanisms The desire of seniors to utilize the value of their homes’ equity while continuing to live in their homes has led to banks offering various other home equity conversion mechanisms in addition to reverse mortgages. Home equity loans, sale-leasebacks and financial arrangements in which seniors retain a life interest in the home while selling the remainder interest are other ways for seniors to harness the equity in their homes. However, none of them are as beneficial to seniors or are as easy to obtain as a reverse mortgage. For example, most home equity loans require that the borrower demonstrate a dependable source of income that can support monthly repayment obligations thus most seniors in retirement are not likely to have the income that is necessary to obtain a home equity loan; and in a sale-leaseback (where the home is sold and then simultaneously leased back to the person for life) or a sale of a remainder interest transaction (where the homeowner retains a life estate in the home while selling the remainder interest) a major concern, in each of these transactions, is that it may be difficult to find a suitable buyer who is willing to buy the home subject to the sort of leasehold restrictions that an older homeowner requires. In sale-leaseback and remainder interest transactions, there are also tax and public assistance issues that may not make these viable options for seniors. Reverse Mortgage in Summary A reverse mortgage is a financial planning tool that is increasingly being used by senior homeowners from all walks of life. They are an attractive option that allows seniors across the economic spectrum to have more cash by increasing the liquidity of an asset that most do not think of as liquid, a home. According to Charlie Magliato of Rockland Trust, “Reverses offer a better quality of life for those who need more cash flow than offered by a pension or social security benefits and enable much needed repairs to your home to be made, all without making a single monthly payment,” and while reverse mortgages can’t remove wrinkles, increase energy or improve memory, they do help seniors lead a richer and more rewarding life. To help you choose a reverse mortgage company, I have provided a few of our preferred reverse mortgage originators: Your Home For Life Ed Barrett555 High StreetWestwood, MA 02090(781)329-6644 or (508) 654-4656 Greenpark Mortgage Corp. Paul Conlin140 Gould StreetNeedham, MA 02494(781) 726-6095 ext. 154 or (508) 680-6387 Rockland Trust Charles Magliato 60 Mall Road, Burlington, MA 01803 (781)982-6755 or 781-775-1266

Forget Estate Taxes, Pay Tuition Forever

2007-06-01T06:18:00.000-05:00

There's been a lot of buzz lately about the estate tax limits being raised by this Congress to lofty new levels. Once they raise estate tax exemption limits (estate taxes are taxes paid as part of the probate and non-probate administration processes to both Federal and Massachusetts tax authorities, currently estate taxes kick in at $2,000,000 for Federal purposes, Massachusetts law lowers this limit to collect Massachusetts a few more dollars), estate planning will become less of an exercise in tax avoidance and more targeted to special needs planning, trusts for various special purposes (like dynasty trusts, spendthrift trusts, asset protection, elder law and Medicaid planning, charitable trusts, really whatever estate planning lawyers can think up), and just simple will planning.

So what's going to be fun about that? Our legal clients will no longer be the near affluent seeking to minimize their estate taxes, but either we will have more of the super rich seeking lawyers who can minimize their estate taxes and help them avoid probate or we will have families with unique estate planning opportunities. An article that caught my eye talks about a unique way to dispose of your corpse by helping your alma mater raise a few new dollars. Colleges are now pushing for niches for cremains or full blown cemeteries on their properties. I wonder if the school's cheer leading squad, marching band and mascot can be hired to come to your funeral? Is your final resting place determined by your grade point average? If so, some students may find themselves near the campus laundry instead of on a nice bluff overlooking the quad.

Note to Middlebury College (my alma mater): you are already included in my estate planning; I send you a check or two every year and I volunteer a 100 or so hours a year interviewing new prospects between trying to be a lawyer in Massachusetts - so, you can't have my body too. Once my probate administration is over down at the Middlesex Probate Court, I want my family to rest comfortably knowing that all my debts have been paid and they can file my final probate account in peace. Thanks, but no thanks, I'm not paying any more tuition bills. **************LOS ANGELES -- The rooms in this college dorm have no electricity, no running water, and ceilings that are just 11 inches high. But the residents don't mind. They're dead. Draped in sky-blue marble, the honeycombed structure -- which is tucked behind a set of spooky glowing stones at Chapman University in Orange, Calif. -- is designed to house the cremated ashes of alumni, faculty, and pets.

The mini-cemetery is part of a small but growing trend on college campuses. This summer, Notre Dame will unveil a pair of limestone and brick mausoleums laced with full-body crypts selling for as much as $11,000. And the Citadel military college in South Carolina is adding 400 urn niches to a carillon tower that holds one of the Western Hemisphere's biggest collections of Dutch bells. The University of Southern California is also studying the idea of campus tombs for a proposed multifaith chapel.

Think of it as continuing ed for the dead -- or the ultimate college reunion. In today's mobile society, some people feel more connected to their alma mater than to their hometown, said cemetery consultant Mel Malkoff, who oversees Chapman's columbarium and is working on similar projects with other schools. "People look back on their college years and say, `Those were the best days of my life,' " Malkoff said. "Why not spend eternity there?" Hoping to cash in on such sentiments, some universities don't stop with enrollment space. They also offer custom urns -- or coffins blessed by monks. As odd as such practices might sound, they're rooted in the past. College graveyards were once fairly common, said historian David Sloane of USC, author of "The Last Great Necessity: Cemeteries in American History." In the early 1800s, before embalming became widespread, it was often impractical to ship home the body of a deceased student or professor. Iowa State University's 131-year-old dead zone holds about 800 corpses, mostly faculty but also two students, a night watchman, and his dog. Notre Dame's sprawling burial ground debuted in 1843, one year after the school was founded, along with a mortuary that helped subsidize tuition costs. By the late 20th century, many longtime college cemeteries were languishing. The University of Virginia's 1828 graveyard ran out of room in the early 1960s, said Dr. Dearing Johns, a cardiology professor who heads the school's cemetery committee. School officials decided against expanding it -- until an alum who wanted to be buried on campus suggested a columbarium wall and paid for the construction with three friends. It's a great way to generate money," said columbarium chief Andrea Patenaude of the University of Richmond, which recently transformed a sliver of campus into a million-dollar serpentine wall carved with 2,900 niches priced at $3,000 each. A spider logo, depicting the school's mascot, climbs the bamboo gate leading to the wall. Duke University is charging $25,000 a pop to bury ashes in its new 2-acre memorial garden. Part of the motivation for Duke's program was that people had begun scattering ashes there on the sly. The profits will help finance the school's vast public gardens. Chapman's dorm for the dead, with prices ranging from $2,500 to $5,000 per two-urn chamber, was built to help fund the school's new chapel. A meditative garden leads to the memorial, which sits behind a wall of white onyx that is illuminated from within to symbolize "the elusive separation between the living and the dead, a separation of a single breath," according to designer Susan Narduli. Colleges aren't the only institutions offering alternative burial space. A German soccer team recently announced plans to open a public cemetery next to its stadium, according to news reports. A similar idea was floated in San Diego a decade ago, when a businessman urged the Padres baseball team to install 70,000 cremation niches in the outfield wall of its new park. Despite a potential windfall of $175 million, Padres management balked at the proposal.**************** If Red Sox nation could put little cremains niches in the Green Monster with glass walls so you have an unobstructed view of Manny Ramirez running down fly balls... I might want to get half a dozen of those now just to stretch out and watch the game without getting beer spilled on me. Since this is supposed to be a legal blog, there are a few things that you should know about the disposition of a corpse in Massachusetts. Under Massachusetts law your corpse is not the property of your executor or your probate estate. Your corpse belongs to your next of kin. Effectively there is an order of degrees or relations that Massachusetts law requires you to follow. Your spouse has first claim to your corpse (even that 24 hour romance in Vegas counts). We have had many a case of the new spouse (often known as the StepMonster, not to be confused with the Green Monster) burying or cremating their spouse completely contrary to the wishes of the family (and even the deceased spouse). After the spouse, the children have collective priority, an issue when they do not agree as to the disposition of the corpse. The most famous case happened in Red Sox Nation, when Ted Williams' family needed to go to probate court to decide whether the splendid splinter would be frozen or cremated. My advice as a lawyer is to pre-pay for your funeral. I have only had a couple of cases where the family would rather pay from their inheritance to arrange burial instead of taking the freebie. NOTE - The response to the blog has been overwhelming, from best we can tell there are hundreds of regular readers already. I apologize again for using some words a little too much (you know the words: probate; Massachusetts law; Boston lawyer; real estate; estate planning; elder law; Medicaid), we expect that this will no longer be so necessary as the blog is added to its own server and web site soon. I also promise to bring you entries that relate to your interests and concerns. To do this, I need your input and ideas. Feel free to email me at Gosselin@GosselinLaw.com or add comments. PS - The new building is near getting its permits, we expect the construction trailer to be on site next week and the fun to get started. To those that do not know, Gosselin & Associates, P.C. (from now forward to be known publicly as "Gosselin Law") is creating the largest and most modern law office ever in Winchester, Massachusetts (hey, can't fault me for bragging a little!). Seriously, we will have about 8,000sf of space, a conference facility seating about 60, several conference rooms, a full service kitchen, a gym with a personal trainer on staff, a children's room, all on site storage and a great parking lot - even a dog yard for my Australian Shepherd. My big headache at the moment is trying to figure out the difference between "Whisper Sage" and "Dusty Hemlock", those who know what this means, know what I mean. More construction updates as I get them. We hope to move in October or November.

When Probate is a Memorable Event

2007-05-24T08:18:00.001-05:00

It seems that most every day in my office is Memorial Day. Not the one where you dust off deck chairs, fill propane tanks and enjoy a hard earned day off, but the one for remembering the dead. As a probate lawyer in Massachusetts I commit my time to working with the families of recently deceased loved ones. Often it is uneventful as the death was anticipated or the decedent was quite elderly and there is no sadness, only necessity of clearing up probate and real estate matters as required by Massachusetts law. We file a few papers in the probate court in Boston and after a little time their real estate title passes and the estate taxes are paid and the family moves on. These families use our probate services as any other service, they have a need, we provide a service, they pay a fee, we complete the probate process as required by Massachusetts law. But other times our clients' needs are far more spiritual and intangible than ethereal. Will contests where family is torn apart by perceived (and real) injustices in a parent's estate planning; abusive behavior towards an elder - such that there has been a complete breach of trust and of the very fiduciary duty to which the presumably honest family member had been entrusted. Premature death of a young parent or even a child are always the hardest cases. Many a time I will speak with the grieving spouse or parent and each time I have a lump in my throat just to bring up some mundane subject like estate taxes or probate or how handle a real estate matter. I am embarrassed by my efficiency, but it is a necessary part of our probate practice. To assuage this anxiety and trepidation in serving our probate clients, I teach my staff to remember compassion as an honorable attribute of even the most technically proficient probate lawyer. No initial client consultation begins until I have humbly expressed my sympathy at the loss of the decedent and a gesture that I will do all that is within my power to make the probate process and all of the ensuing consequences of estate administration in Massachusetts as simple and efficient as possible. I often ask my probate clients to show me photographs of a decedent that I don't know, to tell me stories of their lives - and stories from the 'greatest generation' can be fascinating. I have had survivors of the Holocaust, the killing fields of Cambodia, decorated war veterans, a 43 year veteran of the postal service, a prima ballerina in a Russian ballet, a long forgotten Red Sox player, a mother of 6 and grandmother of 23. Every other year I bring my children to my family's cemetery plot in Mattapan, near one of Boston's most historically impoverished areas. I remind my children that their ancestors arrived in Boston over 150 years ago with nothing but strong muscles and a faith that God would see them through. They worked hard, suffered horrible tragedies from tuberculosis to influenza to death in child birth to the deadly trenches of France - one great uncle was crushed by a granite block while working day labor in a quarry; but above all they persevered and kept their goals in front of them. Hard work, education, family, faith - a proven formula for a good life lived. I'd ask you to take a little time and remember those that came before us, go visit their graves with your children, remind them where you came from. If you don't, they won't remind their children and the chain to your family's unique story will be broken. If you are from a far away place and have no family graves to visit, go and visit our forgotten war veterans for whom Memorial Day is reserved.

Why We Need Elder Law Lawyers in Massachusetts - Worst Case

2007-05-22T08:26:00.000-05:00

This story boiled my blood this morning. It's like a drunk driver that's put back on the road or a murderer paroled after too short a visit to Cedar Junction. Elders are easy prey to confidence men with an agenda. Often they are easily tired, many face chronic depression, still others so lack social contact that they seek friendship in all the wrong places. I can't tell you how many times we have had to come into a situation where the elder has spent their life savings on Home Shopping Network or QVC - just to hear the voices of the friendly operators. The alleged perpetrator in this story allegedly preyed on elders' pocket books with pure greed and disregard for his client's real needs. The opportunity to take advantage of elders was such low hanging fruit for this individual that even after getting caught for fraud he went back to the forbidden well and continued to abuse the trust that he conned elders into having in him.

The National Academy of Elder Law Attorneys as well as the Massachusetts Attorney General do not take kindly to those that abuse the elderly. It is a declared mission of elder law practice in Massachusetts, and for me personally, to serve the elders in our probate and elder law practice with the utmost compassion and concern for their overall well being. Antying less and we are a disservice to our clients and the communities we serve in the Boston area and across Massachusetts.

How can you help? I suggest that you ASK an elder that you know or care about if they have responded to any solicitation or "friend's recommendations" about changing their finances or investing in something too good to be true. Very often these con men give a free lunch at a local restaurant by sending "tickets" to elders to entice them to bring a friend to hear about the latest in financial and estate planning tools, only to be conned into high cost annuities or worse. For more information about elder abuse, you can also call in Massachusetts, 1-800-AGE-INFO which is a great resource of the Office of Elder Affairs.

State says Winthrop man bilked elderly

Galvin alleges funeral, insurance scams netted more than $1 million

By Sacha Pfeiffer, Globe Staff May 18, 2007

A Winthrop man has defrauded elderly North Shore residents of more than $1 million by selling them fraudulent life insurance policies and by failing to return some or all of their prepaid funeral expenses, which he persuaded funeral directors to invest with him, according to an administrative complaint filed yesterday by Secretary of State William F. Galvin.

State officials said the case involving Joseph Gennaco, who allegedly carried out the schemes with his sons-in-law, John Langone of Winthrop and Peter Salvitti of Revere, highlights how prone senior citizens can be to financial fraud.

Gennaco targeted his victims when they were emotionally fragile, such as after a family member had died or while they were planning for their own deaths, according to the complaint.

"This is a guy who appears to have deliberately gone after people he thought were vulnerable because of recently having lost a spouse," said Galvin, who called the case "sinister" and said he may refer it to state or federal prosecutors for possible criminal investigation.

A call to Gennaco was returned by his Quincy lawyer, George Hardiman, who said Gennaco denies the allegations.

Gennaco "feels that he's a professional with the best of intentions and he's not some fly-by-night operation," Hardiman said, adding that the complaint was based on "false and inaccurate information" provided to state officials by someone who "has a very personal agenda."

Langone and Salvitti did not return calls for comment.

According to the complaint, one of Gennaco's alleged scams, operated through a firm called Gennaco Associates, involved persuading senior citizens to purchase life insurance policies, and arranging for those investors to receive loans secured by those policies. But the loans carried interest rates of more than 100 percent over two years, which many investors were unable to pay.

In another scheme, the complaint says, Gennaco convinced senior citizens to exchange their old insurance or annuity policies for new ones, which he established through his business entity, GCT Trust. Galvin's complaint alleges that when the policies matured, Gennaco did not repay the money, and in at least one case invested it without permission in a hedge fund called Oceanview Life Settlements/Life Plus.

Oceanview supposedly pooled investor money to buy and sell life insurance settlement policies on the secondary market, according to the complaint. But Gennaco is alleged to have rarely, if ever, purchased such policies, and instead used new investor money to pay old investors or to pay himself.

Gennaco also preyed on funeral homes that allow people to prepay burial expenses, Galvin's office said. Funeral home directors are required to invest that prepaid money, so Gennaco allegedly solicited undertakers to invest it with him.

But after people who had prepaid for their funerals died, Gennaco did not immediately return the prepayment money to the funeral homes, and sometimes never returned it, according to the complaint.

Gennaco has been the target of state regulators before.

In 2001, the state Securities Division ordered him to close his Winthrop company, Taurus Capital Investment Group, and return nearly $1.9 million to investors after he allegedly promised them guaranteed returns, but failed to obtain a securities license.

Gennaro is licensed by the Massachusetts Division of Insurance, which is currently investigating him, according to agency spokeswoman Kim Haberlin.

That Gennaco has allegedly continued to defraud investors despite previous action by the state, Galvin said, "shows that when an individual is cunning and unscrupulous, the regulatory process is unsatisfactory to stop their thievery."

Galvin said he is unsure whether Gennaco's alleged victims will be able to recoup their investments. But he noted that, in the past, Gennaco's investors have recovered some or all of their money when he was threatened with regulatory or legal sanctions.

In addition to Gennaco, the complaint names Gennaco Associates, GCT Trust, and Oceanview Life Settlements LLC. Gennaco allegedly operated his schemes under entities including GCT Trust Private Annuity, Oceanview Life Settlements/Life Plus, and Premium Financing Plus, according to the complaint.

Real Estate Development Scams, Contentious Inheritances and Saturday Morning

2007-05-16T08:28:00.000-05:00

The other day I was asked how I became an elder law lawyer that handles real estate and probate matters. I responded in the usual manner that my father was a trial lawyer and my mother a nurse at a Massachusetts nursing home and I wanted to combine my quantitative aptitude with my interest in directly helping people. But, then I put a little more thought into what it was in my origins that passively educated me in dealing with real estate development, probate, elder law and other areas of Massachusetts law. It had a lot more to do with Saturday mornings. There was this farm operated by old farmer Jones who was a fourth generation farmer. He had a hired man, Mike, that helped care for the animals. Mike had only been working there for a few months when farmer Jones' daughter's friends came by for a visit. You see the farm was right near a new interstate and would be a perfect place for a new shopping mall worth millions of dollars. But farmer Jones had no interest in real estate development, he wanted to keep the family farm for his children. Then farmer Jones' great-great grandfather showed up and started to scare all the animals and the Jones family as a spooky floating ghost. One of the friends that was visiting noticed that after the ghost showed his haunting face that there were footsteps with drops of glow-in-the-dark paint. She went with her dog to follow the tracks and after a few crazy chases around the farm - they caught the "ghost". He was unmasked by the gang of friends - it was Mike the caretaker! Apparently he thought he could force farmer Jones to sell the farm to him cheaply so he could build a shopping mall. Mike's comment? "I would have gotten away with it too, if not for those pesky kids and that dog!" Roh, Roh. Yes, Scooby Doo has more probate cases, real estate development schemes and legal problems than any cartoon in modern history. Look closely next time you're watching the show or even the dreadful Scooby Doo movies. There's one movie from Hawai'i that is about a local kid scaring everyone away with evil spirits so he can scoop up their seaside village for real estate development. Another one where a well intending nephew is really trying to get title to the family's hotel. There isn't a Scooby Doo without a storyline that any Massachusetts lawyer wouldn't love.

Infinite Monkey Theorem of Prime Boston Real Estate

2007-05-14T08:42:00.000-05:00

I went to the Boston Red Sox this past Saturday with my 7 year old. I measure the success of a trip to the Red Sox with one of my sons by a complicated calculus of the number of innings we actually watch, the number of innings spent in the restroom, the cost of souvenirs and the number of different snacks consumed. Well, this game was a winner on all counts. It started as we settled into our comfortable first base line seats with our Fenway Franks and peanuts still in the shell. A father and son of about the same age as my son and myself desperately came up to us and asked if we would switch seats with them. You see, the little boy, in his little league Red Sox uniform and wearing his Franklin/Butch Hobson glove - must have been dad's glove, was focused on catching a foul ball. His dad, through one connection or another had managed to get the 'seats of a lifetime' directly behind home plate. These seats offered an amazing view of every pitch and a closeness to the players that verges on creepy. But, because of some Massachusetts lawyer in 1912, there's a net behind home plate so the well-heeled fans don't lose any teeth. Seeing that I could both score great seats and make this little boy's day (that would be the little boy in ME), we moved down to Section 47. We did see what we had expected from this very special little piece of prime Boston real estate - not to mention hearing the sounds of the game like never before. A Curt Shilling fast ball smacking Varitek's glove brings resounding joy to the true believers. Because of the netting surrounding our little area, it can feel a little like a cage with us chimpanzees looking out at the rest of the fans and the field. After $100 a ticket for the seat, probably $50 a head in snacks and drinks and as much to park - do you think that some of the best major league ball players in the world would provide the best entertainment to those lucky chimpanzees in the home plate cage? Nope. Pro baseball was a distant second to the chimpanzees' favorite sport - watching people relate to foul balls. Not a stray ball was hit that didn't lead the crowd to a strong emotional response. OOOHHHH!!! She really got 'beaned' by that one! Beer Bath Row 15!! One hander! Cute kid with glove run down by fat drunk guy! Fumble by the rich guy with the field seat he doesn't deserve the ball. Holy Bleachers Batman! He's going to fall into left field! And on, and on, and on. I have never seen such a degree of mass human entertainment since those expert lawyers in the OJ Case made a mockery of the American legal system and embarrassed lawyers wholesale across the country. And so it went for the entire game (which was as good as a baseball game gets by the way) - the chimpanzees hooped and hollered about every last ball. Don't forget the grounded fouls. "Give the ball to the kid." The all powerful ball boy granted $6 rawhide wishes on deserving fans throughout the game. Even Manny Ramirez and David Ortiz went out of their ways to toss balls into the stands - they know how the chimpanzees love their bananas! We could all save a lot of money and just have a pitcher and a batter on the field (that should keep us under the payroll cap) hitting balls into the stands to see who loses a tooth, gets a black eye or makes the people 25 feet below him smell like a brewery. It might lower the cost of this Boston real estate, but then again with all the lawyers in Boston, they might make them put up a net around the whole crowd - even people in the cheap real estate can then be chimpanzees too!

Probate is for the Dogs

2007-05-08T09:48:00.001-05:00

My favorite general store plaque is "I wish I were half the man that my dog thinks I am." It really is true, every night when I come home from my long day of being a probate lawyer in Massachusetts, Hobart, my 4 month old Australian Shepherd, thinks I walk on water. He is always happy to see me, no matter what. I wish I could say the same for the rest of my household! The bond between an owner and his pet can be quite strong, so strong in fact that many of our clients treat their furry friends as objects of their estate planning, creating elaborate Massachusetts trusts that provide for lifetime care and protection of their dear Fido (or worse, a parrot or turtle each of which can live beyond a human lifespan!). Lack of planning for the disposition of a pet, which at common law is nothing more than a piece of personal property like a sofa or a pair of skis, can cause all sorts of disagreement. See this article that was recently in the odds and ends part of Boston.com: ------------

Most-wanted part of $2M estate: the dog

May 8, 2007

MEMPHIS, Tenn. --A man who didn't have a will left a $2 million estate, but the most hotly contested item in court has been his golden retriever, Alex.

The four-way dispute over the 13-year-old pet was so intense, an attorney was appointed to represent the dog's interest. On Monday, the judge decided the man's divorced parents should split custody, The Commercial Appeal reported.

"At first glance, the petition seems almost frivolous, but after speaking with all parties, it is evident that this is a highly emotional issue for all involved," said Alex's attorney, Paul Royal, in his report to the probate court.

Ron Callan Jr., 35, committed suicide on New Year's Day. He had been a partner with his father in Callan Salvage & Appraisal Co., and the father was named the estate's administrator.

In the consent order the judge approved, the elder Callan and his ex-wife, Esther Snow Gnall, will trade custody of Alex every two weeks. Both parents also agreed to take the dog to the veterinarian for arthritis treatments and any other needed procedures.

Before the agreement was reached, the elder Callan had custody and took Alex to work during the day. The father has cats at home, though, so at night, the dog stayed with Callan Jr.'s former girlfriend, who had known Alex since he was a puppy.

The son's fiancee also was interested in Alex, and Gnall had said if she won custody, she would allow the fiancee to spend time with the dog.

Royal, the dog's attorney, said he believes all four people love Alex and would take good care of him, but they were using the fight for the dog to punish each other for past transgressions.

"This case is similar to a bitter custody battle involving children where each party loves the children, but the kids are stuck between two people who cannot coexist," the attorney said in his report. ---------- King Solomon is alive and well in the Probate Court. Our estate planning practice routinely brings out discussions with our clients about what is important to them - not just avoiding probate or saving on estate taxes, but more holistic issues like disposition of pets, articles of sentimental value, and more importantly the clients legacy. We have had much more call for "ethical wills" or "legacy wills" wherein clients impart not only a distribution of their assets to their heirs, but also impart accumulated wisdom regarding their personal and family history. I'm a strong believer in demonstrating to future generations lives well lived in their family's past - how did we get here? What obstacles did our ancestors overcome? What can we achieve in the next generation? One measure of our humanity is how we care for those that depend upon us for their very existence, our pets. So why not spend just a little time thinking about your pets future and estate planning for your pet so that it does not become the subject of a protracted battle in the probate court?

Do I qualify for Elder Law?

2007-04-29T16:01:00.001-05:00

I have just come to another milestone in my life. My oldest son (9) decided that he will no longer be calling me "daddy", but that I am forever more to be referred to as "dad." As third graders are wont to do my son was teased by a classmate for calling his parents mommy and daddy. To conform to the bully's wishes my son just made me middle aged. I'm Massachusetts most recent middle aged lawyer father. I was a twenty something and have been enjoying my thirty somethings when this came out of the blue. In my elder law practice I am asked by prospective clients about what is and what is not elder law. Some fifty somethings ask whether they can 'qualify' to use my services for a trust or a will, while some octogenarians don't feel old enough to seek services meant for the elderly, after all "they're old people." What it all comes down to is that age is a state of mind. I tell my elder law clients that how old you think you are is so much more important than how old you are according to your birth certificate.

Desperate Real Estate Brokers

2007-04-27T07:40:00.001-05:00

I'll admit publicly to watching the following programs on a somewhat regular basis (normally by TiVo): 24; Prison Break; Heroes; Sopranos; CSI:Miami; CSI:Vegas. I will neither admit or deny regularly watching: Grey's Anatomy; Ugly Betty; and Lost. I would never admit to ever watching Desperate Housewives, except every time it's on a Sunday night. I don't watch any lawyer programs, I get enough law firm drama at work. A couple weeks ago there was a Desperate Housewives scene that caused me to nearly snort my diet ginger ale through my nose. The blonde bombshell, Edie, who is a real estate broker and generally heartless persona found a paramour in the recently divorced Carlos. The only problem is that Edie has a child living in her home that isn't ready to know about his Mom's extracurricular activities and Carlos has a roommate that wouldn't quite understand. So Edie and Carlos needed a place to call their own for their afternoon trysts. Edie's plan? Well, of course, she has keys to the finest homes in town! Yes, that's right, Edie and Carlos toured the master bedrooms of several of "Fairview's" lovely Stepford like homes in the pursuit of purient joy. It's no secret how I feel about conniving, dishonest real estate brokers. Check out my cover story interview in Boston Magazine . As a result I've become an effigy for many real estate brokers in Massachusetts - hey, if the shoe fits wear it. Not all real estate brokers in Massachusetts are bad, but the bad real estate brokers are out there. What's the best way to work with a real estate broker? On the homebuying side, my advice is to focus on publicly available information first, like Realtor.com or even Craigslist for information about what homes are on the market. From there I recommend finding a real estate broker to represent you in the transaction, it won't cost you anything out of pocket and it will put someone between you and the listing agent who is clearly not working in your best interest. The buyer broker is paid normally 1/2 of the commission on the property - this could be as much as $15,000 for merely turning a key in a lock on a typical $600,000 house. My suggestion is to ask the real estate broker to rebate part of their commission to you in the form of a closing credit to help offset lender closing costs, attorney fees, moving expenses, etc. There are new companies popping up all the time that offer some variation of this program or another. So long as you have done your own homework on the neighborhood and hired a competent home inspector and real estate lawyer to keep things legit, there's no need to pay the full commission. So you need to sell a house? Here's where my legal advice might surprise you: pay the commission, the whole, whopping 5% (which is typical for most properties, could be 4% or 6% under different circumstances). Why? Well, in today's real estate market in Massachusetts there is so much competition that your real estate broker must have sufficient financial resources to advertise and market your property beyond merely listing it on MLS. But if they all charge the same rate how to pick a good broker? First off, don't hire your friend, mother in law or cousin's first husband to list your house. See The Gosselin Theory of Relativity for a detailed explanation. Second, don't be the real estate broker's first listing - hire an experienced real estate broker along with an experienced real estate lawyer. Last, and most importantly, have an entire cup of coffee with your real estate broker in your kitchen and make sure that the real estate broker is the kind human that you like to spend time with, because at the end of the day the real estate broker is in the people business and you want good people representing you.

Clients First - A Mission Against File Numbers

2007-04-25T15:31:00.000-05:00

My law firm handles a large number of mortgage closings and probate administrations. Honestly, it is quite monotonous, dull work. We input information into the computer and the computer spits out all the magic documents. Then we do it again, and again, and again. As dull as it may be I make a point of instilling in my staff the mission of the law firm. Our mission, simply, is Clients First. Behind each mortgage is a young couple buying their first home. A spendthrift trying again to get their head above water with their credit card company. A divorcing couple splitting their only real asset. An investor looking to hit it rich with an old house. A necessary evil, sure, but we try hard to put a human side to each mortgage closing we push out the door. Each probate involves the death of a loved one, the tension of families revealing their greed to each other, the grieving that makes it ever so hard to hold that green certificate of death in your hands. We see each probate file as something that needs to be handled with great care and respect. Whenever I first meet with a family after a death the first words from my lips after extending my sympathy is that we are here just to talk about the process and your feelings in divvying up your loved one's affairs. I'm often surprised just how many clients take me up on my free ear and shoulder. I have been looking around for other monotonous jobs and tried to look a little deeper at what defines excellent service in the face of boredom. It all comes down to people, people make life interesting. My favorite librarian that keeps those books in perfect order is just waiting for a patron to ask her about a good book about Antarctic exploration. My accountant can discuss boats with me until the cows come home, even manages a smile when he tells me that I owe money (I swear the IRS gives him a commission), probably because he is thinking of buying another boat. The firefighters (whose jobs are 95% boredom and 5% adrenaline) I know enjoy sharing current events, recipes and get-rich-quick ideas. What do these boring jobs have in common? People. Good people caring about helping others, but focused on the people they serve. Otherwise they would be easily replaced by machines.