Perspective For Reverse

Mortgage Customers

It is traditional to pass on our worldly goods AFTER we die.  In fact it seems to be almost a rule amongst the seniors that I talk to that they must hang on to everything until the will or the trust disburses after they have left the scene!  Sometimes this is absolutely necessary because their needs are uncertain and they are not sure if they have enough money to support themselves before they pass away.  But, what this article addresses is the folks that know they have more than enough.  The folks that strongly believe they want to pass on their home to their children "free and clear". 

What we want these folks to understand is that the goal is really not to pass on the house - but the equity IN the house.  Very few children move into their parents' house when their parents are gone.  It is almost always sold and the proceeds are divided.  

Most of the time, they call the realtor and put up a "for sale" sign.  If that is the most likely scenario, why is it so important to pass on the house free and clear?  The truth is that the children really could put the equity to better use in their 40's and 50's than when they get to retirement age themselves.  If parents live into their 80's and 90's, which is the common life expectancy, then their children are usually above 60 and looking at retirement themselves.  An inheritance is always appreciated, but likely needed more at a younger age.

Many folks over 62 will tell us that they don't NEED a reverse mortgage and that is certainly true.  They have lots of other assets, retirement plans, pensions etc.  Those are the folks that I talk to about passing on the equity in their home early.  If they know they will never need part, or all of that equity, then they should think about passing it on to their children or charity now rather then later.  Time value of money clearly dictates that the money is worth more today than it will be in 2042.  Ask any investment planner when is the best time to invest money and they will tell you when you are 20 as compared to starting when you are 40.  If the grandkids need to go to college, helping today is a great investment in their future. 

The most important factor is how I would like to conclude this blog.  Perhaps you have seen the movie or read the book, The Ultimate Gift by James Stovall.  If you have not, go get one today or rent the movie.  I won't spoil the story line, but the lesson is that money is not the most important thing that we leave behind.  It is our values and our wisdom.  We have all seen or heard stories about heirs wasting money in months that took their parents a lifetime to save.  It is important to realize that if you give your kids their inheritance while they are alive, you can do it coupled with your wisdom and advice.  Give me $50,000 with 70 years of life experience and I will likely do better than if the attorney calls and tells me to pick up a check at his office that my parents left for me. 

Seniors really don't realize how much knowledge and wisdom can be passed on to their children if they give it with their money while they are still alive.