Do Reverse Mortgages Impact Your Children’s Inheritance?


Reverse mortgages are a type of loan that allows individuals who are 62 years of age or older to use the equity in their home to provide for the loan itself. It is generally intended for those who have paid off most or all of their mortgage. However, if you have children or other heirs, you might be concerned about how a reverse mortgage might impact their future. The home they hoped to inherit might no longer be theirs when you pass away and they might very well have to turn it over to the lender to satisfy your debts.

Selling or Keeping the Home

Heirs usually have 30 days, beginning on the date they receive the due and payable notice from the lender to either turn the home over to the lender, buy the home, or sell the home. In some cases, however, heirs can extend the deadline for up to a year. An extension can give heirs time to decide what to do with the home or if it is possible to secure the financing necessary to purchase the home. If they do not have the funds to pay off the loan balance and the balance is more than the home is worth, they will not have to pay the difference.

If your heirs wish to keep the home, it must be paid off with a different source of funds. That said, they will not be expected to pay more than the full loan balance or 85% of its appraised value, depending on which is less.

What Next?

If you would like to leave the home to your children or another beneficiary, they should know your plan for paying off the loan in the aftermath of your death, and be equipped with the necessary tools to execute your wishes. One option is to get a will before you take out the reverse mortgage to ensure your assets are distributed to the right person after you pass. In the absence of a will, the state will decide who will inherit your home.

You should also make sure your records are all up to date. It would be a great benefit for your heirs if they could show exactly how you used the funds from your reverse mortgage. The more impeccable your record-keeping is, the better off your heirs will be.

Schedule a Consultation with an Estate Planning Attorney Today!

If you are considering a reverse mortgage and wish to protect your children’s future inheritance, you need to speak with an estate planning attorney to review all of your options to ensure you select the best one for your family’s needs. With the Law Office of Wendra J. Moran on your side, you will have a plan that best suits your goals, so the future of your heirs remains uncompromised.

Discuss your needs with us today and contact our office at (225) 228-4445 to schedule a consultation.