Florida Elder Law Blog - ElderLawAssociates.com

Asset protection planning is about protecting your assets from creditors -- and it is not just for the super-wealthy.

Anyone can get sued. Lawsuits can stem from car accidents, credit card debt, bank foreclosures, or unhappy customers, among many other things. If someone wins a monetary judgment against you, your family could become bankrupt trying to pay it off. To keep your assets away from creditors, you need to move them somewhere where creditors can't reach them. Asset protection techniques include maximizing contributions to IRAs, moving funds to an irrevocable trust, retitling various assets, or using limited liability companies or family limited partnerships.

To develop an asset protection plan, you need to talk to your attorney. Your attorney can discuss your short- and long-term financial goals and help you create a plan that will work for you.

It is important to note that asset protection planning only works if you act before you are sued. Under the law, you may not defraud current creditors. If you are already being sued or if you know you are going to be sued and you transfer assets so that creditors can't reach them, the court will reverse the transfer. That is why it is a good idea to put a plan into place now -- before it is too late.

For more information on asset protection planning, click here.

To contact Elder Law Associates about Asset Protection Planning, click here.

Labels: florida elder law, Florida Elder Law Attorney, Florida Estate Planning

Charging that reverse mortgage borrowers were caught in what amounts to a regulatory bait and switch, the AARP's legal arm is suing the Department of Housing and Urban Development (HUD) on behalf of three now-deceased borrowers' surviving spouses who are facing imminent foreclosure and eviction from their homes.

The case involves the spouses of individuals who took out Home Equity Conversion Mortgages (HECM), which are the most widely available reverse mortgage and are administered by HUD. A reverse mortgage allows homeowners who are at least 62 years old to borrow money on their houses. The loans do not have to be repaid until the last surviving borrower dies, sells the home, or permanently moves out.

The borrowers in the AARP case all died, leaving their spouses, who were not listed on the loan documents, living in the mortgaged homes. Because of the housing downturn, the homes are now worth less than the balance due on the reverse mortgages. None of the three spouses -- residents of Indiana, New York and Maryland -- can obtain loans for more than their homes are worth and so are facing eviction.

Since 1989, HUD rules governing reverse mortgages have stated that a borrower or heirs would never owe more than the home was worth at the time of repayment. But at the end of 2008, the Bush administration abruptly changed this policy and said that an heir -- including a surviving spouse who was not named on the mortgage -- must pay the full mortgage balance to keep the home, even it if exceeds the value of the property. This, AARP says, violates existing contracts between reverse mortgage borrowers and lenders.

"HUD has illegally and without notice changed the rules in the middle of the game at the expense of vulnerable older people," said Jean Constantine-Davis, a senior lawyer with the AARP Foundation, the organization's charitable unit.

A spouse might not be named on the mortgage for a number of reasons: one spouse may have taken out the reverse mortgage before the marriage, or one spouse may be under age 62 and ineligible, or, more likely, lenders often encourage the younger spouse not to be named as a borrower because then the loan amount can be larger. AARP notes that, perversely, under HUDs current rule a stranger can purchase the property for its current appraised value, but a surviving spouse cannot. The policy also negates a key purpose for which borrowers pay for insurance, AARP adds, pointing out that reverse mortgage borrowers have always paid insurance premiums to protect against going "underwater" -- owing more than their homes are worth.

The suit charges that HUD is ignoring another provision of the HECM program that protects a surviving spouse from being arbitrarily displaced from the home upon the death of the borrower.

"This is shameful and we intend to make HUD honor the representations and promises they made to borrowers when they signed up for these government-insured loans," Steven A. Skalet, of Mehri & Skalet, the law firm pursuing the case for the AARP Foundation. The case was filed in Federal District Court for the District of Columbia. HUD had no comment on the pending litigation.

Nearly one-quarter of all mortgaged homes are underwater, according to CoreLogic, a housing data firm.

For AARP's news release on the lawsuit, click here.

For a New York Times article on the case, click here.

For excellent analyses by the Times and Reuters, click here and here.

For more on reverse mortgages, click here.

Labels: florida elder law, Florida Elder Law Attorney, Florida Litigation

For many seniors the equity in their home is their largest single asset, yet it is unavailable to use unless they use a 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 to pay off debt, make home repairs, or for remodeling.

For those seniors who are in need of long term care and want to stay in their home, a reverse mortgage can create the money needed to pay for in-home personal and medical care. They can also pay for needed medical equipment and handicap adaptation to their home.

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
* The proceeds from a reverse mortgage are tax-free and can be used for any legal purpose you wish

False Beliefs Regarding 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.

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 or borrowers no longer occupy 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.

The most popular reverse mortgages are the so-called HECM loans. HECM loans require that the applicant meet with a government approved counseling agency to be sure the applicant understands the reverse mortgage process.

The Federal Trade Commission states:

“Before applying for a HECM, you must meet with a counselor from an independent government-approved housing counseling agency. Some lenders offering proprietary reverse mortgages also require counseling. The counselor is required to explain the loan’s costs and financial implications, and possible alternatives to a HECM, like government and nonprofit programs or a single-purpose or proprietary reverse mortgage. The counselor also should be able to help you compare the costs of different types of reverse mortgages and tell you how different payment options, fees, and other costs affect the total cost of the loan over time. Most counseling agencies charge around $125 for their services. The fee can be paid from the loan proceeds, but you cannot be turned away if you can’t afford the fee.”

A Reverse Mortgage Specialist in your area can answer your questions, calculate the amount of loan you can receive and advise the type of loan for your needs.

Labels: Florida Elder Care