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My parents are thinking about doing a reverse mortgage, and they live in Florida. They have been married for 40 years and retired in Florida in 2002. Is it a good idea for them to put my name on the deed of the home prior to doing the reverse mortgage? The reason for the question is in the case of something happening to both parents, we want to be able to refinance the loan and keep the home. Or is this more trouble due to them losing out on homestead taxes and anything else they are qualified for while still alive? I don't live in Florida. I live in another state, and I have been helping them out financially, but since they have equity in the home, I think they should enjoy what they have worked for all these years.
By CeeCee on 12.12.2018Hello CeeCee,
Good news! You can be added to the title of the property at any point, either before or after the reverse mortgage loan process is finalized, without impacting the loan. This flexibility became possible after HUD's 2017 ruling, which removed the previous restriction requiring addition to the title only post-loan closure.
One reason you might consider waiting to be added to the title is the simplicity it offers regarding the loan process. If you're not on the title at the time the loan closes, you're exempt from undergoing the mandatory counseling or signing the loan documents. The loan agreement allows for the addition of family members, friends, or others to the title, provided at least one of the initial borrowers remains.
As to whether adding your name to the title is a wise move, it certainly simplifies matters for the future disposition of the loan or property. Once both parents no longer reside in the home, dealing with the reverse mortgage lender will require proof of your legal right to act, which having your name on the title provides. Addressing title issues early on positions you favorably when the time comes to manage affairs post your parents' passing, especially concerning the loan.
However, it's essential to note that we're not equipped to offer tax or estate planning advice. Before making any changes to the title, it's crucial to consult with a tax attorney or your CPA/tax advisor. This step ensures that any modifications you make won't incur unintended tax liabilities or negatively affect any homestead exemptions. Your legal or tax advisor might recommend transferring the title to a trust or adding your name directly, based on what's best for your situation.
Should the advice lean towards creating a trust, ensure that this trust complies with HUD guidelines by getting it pre-approved by the loan servicer, especially if the reverse mortgage is already in place. This precaution helps avoid any complications down the line.
Always remember that planning ahead with the right professional guidance ensures you're making the best decisions for the present and future scenarios.
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