Helpful Info on Life Estates, Trusts, Power of Attorney, Guardianship. (FOR DEED QUESTIONS, PLEASE CONSULT YOUR ATTORNEY, ESPECIALLY WITH TENANTS IN COMMON DEEDS.)
DEEDS, LIFE ESTATES, TRUSTS
The information contained below is merely designed to clarify important issues in the Reverse Mortgage process. It is not meant to replace sound legal advice from an attorney. Please consult an attorney about any and all legal issues.
Life Estate Deed: In the United States, a Life Estate is typically used as an estate planning tool. The use of a Life Estate can avoid probate and ensure an intended heir will receive title to real property. A Life Estate is an estate where you have executed a deed that transferred the ownership of your property to your heirs or someone else. The duration of the Life Estate is limited to the life of an individual (usually the party holding the Life Estate who is referred to as the "life tenant"). It is a legal arrangement whereby the "life tenant" during his or her life retains use (right to rent and profits), possession of the property and costs of maintaining the property as well as paying real estate taxes and homeowner's insurance. The life tenant cannot sell the property without the consent of the "remaindermen", who are typically the heirs. You must get permission from the "remaindermen" before you can sell the property, obtain a mortgage (any kind of mortgage), or encumber the property in any manner.
Once again, you, as the "life tenant", are responsible for paying real estate taxes, homeowner's insurance, and maintaining the property in adequate condition. Upon your passing, the Life Estate literally ends, and the property goes to the remainderman. If there is a mortgage in your name, it must be satisfied by either a sale of the property or a new mortgage in which the mortgagee will be paid off.
VERY IMPORTANT! The remindermen, since they now appear on the deed as property owners, must be present at any mortgage closing, such as a Reverse Mortgage.
If for some reason one or all parties cannot be present at the time of closing, a person must be appointed the Power of Attorney to sign for the missing party. If you or another party will be absent, please be prepared to appoint a Power of Attorney before closing.
Tenants in Common Deed: Tenants in Common is a way to hold title and own property by two or more individuals. Sometimes it is referred to as Tenancy in Common. There is no limit to the number of individuals who can hold title to one piece of real estate. A property held by tenants in common can be owned by two owners or 100+ owners. (Click here for more info on Deeds)
Living Trusts: Revocable Trusts are acceptable with the FHA HECM Reverse Mortgage. A copy of the trust must be reviewed by the lender for approval. Irrevocable Trusts may be considered for approval by the lender on a case by case basis for certain types of proprietary products (usually on jumbo loans by certain lenders). However, Income Only Trusts are not usually acceptable. Please provide a photocopy at time of application for the lender to review. If acceptable, your loan will go forward. If unacceptable, you will be advised that the loan has not been approved. (This is rare; we will review your document before submitting to the lender).
Power of Attorney must be Durable! A Durable Power of Attorney (executed while the person was coherent and able to make decisions) continues notwithstanding the disability of the principal if certain language is included in the document.
The Power of Attorney can sign documents where the borrower is uanble to do so. In some cases, a doctor's note may be required by the lender to determine whether or not the Power of Attorney was executed prior to (and enough time prior to) the disability which caused the borower to be unable to execute the Reverse Mortgage documents
IMPORTANT! Please be sure to present the original Power of Attorney to your Reverse Mortgage advisor at time of application for review and be sure to bring the original to your closing! Closings will be adjourned if the original document is not presented as you cannot close without the original. At closing, the original Power of Attorney will be submitted to the title closer and will be sent to the county where you reside to be recorded. It will be returned to you after recording and can take a few months. NOTE: If you only possess one original Power of Attorney, go to the county clerk's office in your area and request a certified copy of your P.O.A. and have it recorded. A certified copy is as good as having the original. Depending on how backed up things are in the clerk's office, it can take months for your original to be returned once submitted at closing. It's a good idea to have a second original or certified copy.
d) Guardianship: A guardian ia an individual appointed by the court to be a legal guardian of a person and to whom the court specifically requires use his/her own financial resources to support that person. Copies of the guardianship must be presented at time of application. The guardian will execute the Reverse Mortgage documents where the borrower is unable to sign. (Click here for info on deeds, etc. (Source: click here)
Be sure to discuss Reverse Mortgages with a Reverse Mortgage specialist, trusted advisors, and your family.
Reverse Mortgages are changing lives. A Reverse Mortgage can provide peace of mind and security in your retirement years, so investigate the possiblities.
For information, call 1-888-290-5558
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