Should I have a trust if I have a reverse mortgage?
I just discussed the issue of reverse mortgages with a client. She has a $425K home with a $325K RM and assumed she did not need a trust.
I explained that for her heirs to receive the equity in her home after she passed away the house would have to be sold within 6 months to pay off the RM.
If the house is in trust this could be done quickly by the trustee. If no trust then off to probate court to secure a court order to permit the sale. Since probate can take a minimum of 6 months, the reverse mortgage company will be forced to start foreclosure proceedings before that time. I faced this footrace several times with heirs and the reverse mortgage companies can ring up some hefty pre-foreclosures fees that will come right out of the equity in the home.
Bottom line was probate would cost her estate $13,100 -- $11,500 in lawyers fees and $1,600 in costs.
She choose to do a trust and saved her heirs this unnecessary expense and delays of the probate process.