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
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
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?
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
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
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
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
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
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
State says Winthrop
Galvin alleges funeral, insurance scams netted more than $1 million
A
State officials said the case involving Joseph Gennaco, who allegedly carried out the schemes with his sons-in-law, John Langone of
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
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
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
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.
