A Reverse Mortgage Counseling Session

My name is Claudia Fehribach and I’m a HUD-HECM counselor. When I tell people that, most of the time they have no idea what I am talking about. Well, I provide mandatory counseling for people that want to do a reverse mortgage.

A reverse mortgage is a program offered by HUD, where the homeowner, over 62, has the ability to access their house equity without having to move or sell their home.

The basics of this program:

• Pay off existing mortgages on the home.
• Loan proceeds are not taxable.
• Very easy to qualify: no minimum credit scores and no income requirements.
• No monthly mortgage payments for as long as the homeowner lives in the home

I counsel clients from all over the country and I always try my best to deliver the information in a way that can help the homeowners make an informed decision. As I speak with people from all types of backgrounds and levels of income, I realize how important my job really is.

I had a client for example that lived on a very tight budget. At times, she would eat only a bowl of cereal for lunch and dinner in order to be able to pay her bills. Seriously, in America, such a great and rich nation, we still have the most vulnerable suffering and enduring things that they shouldn’t have to. During my counseling, I was able to generate a personalized report that listed all options in terms of benefits that were available to her in the area that she lived.

I spend an hour talking to clients about Reverse Mortgage and at the end it’s really moving to hear how grateful they are for something so simple: information.

Information is knowledge and knowledge is power.

Claudia Fehribach
CPFC, HUD-HECM Exam Qualified Network Counselor
Credit Card Management Services, Inc
4611 Okeechobee Blvd, #114
West Palm Beach, FL 33417
cfehribach@debthelper.com
p: 800-920-2262

Reverse Mortgage Estate Taxing Matters

http://www.nj.com/business/index.ssf/2011/03/reverse_mortgage_complicates_i.html

Q. My mother and my aunt live in a house that is in my aunt’s name. My mother would inherit the house. My mother, being a sibling, would be a “Class C’’ relative and subject to 11 percent taxation. If they were both on the title as tenants in entirety, could this tax be avoided? Also there is a reverse mortgage involved, so what would that mean for the title?
—Glenn

A. Reverse mortgages can complicate matters, but first let’s address the inheritance tax.
If your mother and your aunt are sisters, then yes, your mother would be a Class “C” beneficiary for New Jersey inheritance tax purposes, and the tax would only apply if the house is in New Jersey.

“As the law exists today, the first $25,000 that your mother receives as a result of your aunt’s death is not subject to New Jersey inheritance tax, but the next $1.075 million of gifts is subject to inheritance tax at an 11 percent rate,’’ said Ruth Lynch Buchwalter, an estate planning attorney.

Inheritance tax is only assessed on the net value of the home. To the extent that the reverse mortgage needs to be paid, the net value that your mother receives will be reduced for the outstanding loan, Buchwalter said. For example, if the house is worth $300,000 and the reverse mortgage is $150,000, the inheritance tax would be 11 percent of $125,000. (The first $25,000 is not subject to the tax.)

On the reverse mortgage, it’s common that the mortgage could come due if your aunt makes any changes in the ownership of the home. She needs to check with the financial institution to see what conditions may apply, Buchwalter said.

Adding your mom as an owner isn’t as simple as you’re thinking.
Only a husband and wife can own property as tenancy by entirety, whereby it will pass to the survivor on the death of the first. Your aunt and your mom can, though, own property as joint tenants with right of survivorship, meaning upon the death of any one owner, his or her interest passes to the survivors, said Catherine Romania, an estate planning attorney.

But for inheritance tax purposes, Romania said upon the death of the transferor joint tenant (your aunt) within three years of the transfer, the property will be deemed to be owned entirely by your aunt and the transfer would be taxed as such. If the transfer is made more than three years before death, the entire transfer may still be subject to inheritance tax upon a joint tenant’s death.

“Transfer tax on all or a portion of the property may be avoided if it can be shown for example that the surviving joint tenant (your mom) previously owned or bought into the property for an adequate and fair price,’’ Romania said.

You should advise them to speak to an attorney who look at their entire financial situation to help make the smart choice, especially if your mom would stay in the home after your aunt’s death.

—Karin Price Mueller

www.Debthelper.com has qualified reverse mortgage professionals providing effective counseling solutions for your reverse mortgage. Call us today 800-920-2262 or visit us at www.reversemortgagehelper.org for more information.