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Monthly Archives: September 2010

When Your Parents Move in with You

Here’s a tough one . . . Your Mom and/or Dad has moved in with you. At some point s/he told you s/he wants to pay you something to help defray the cost and you said no. Or maybe when the subject came up and you were uncomfortable and said “let’s discuss it later”.

I mean. . . what do you say? Your aging loved one is now living with you so s/he is not a guest. In fact, it’s even worse than that . . . they’re your parents!! After all they’ve done for you, can you seriously ask them to pay rent? So now s/he has moved in with you and the issue of money has never been resolved.

First of all, repeat after me: “Yes, s/he is my parent but we’re not living together as parent and child – we’re living together as adults and this is an adult/adult relationship.” Please keep this mantra in mind. You might even want to print it out and tape it onto your mirror.

And second, no, I’m not saying they should pay rent or any expenses. Nor am I saying they shouldn’t. You may have plenty of money and you don’t want them to pay for anything. Or you many need them to chip in and help defray some of the costs. And frankly, your aging loved one probably wants to contribute something. The point is that money is one of the most sensitive issues you’ll have to address with your aging loved one so it shouldn’t be ignored either.

The thing about expenses is that usually they are in such small, “insignificant” amounts that you don’t realize how much money you’re actually spending. Whether it’s paying for things like medications or purchasing additional food or toilet paper or Depends, whether it’s gas for visits or to take them to appointments, or whether it’s installing safety bars in the bathroom, caregiving can have a significant economic impact on a family. In fact – a 1998 study found that 49% of Baby Boomer women caregivers suffered “financial hardship” as a result of their caregiving.

Unfortunately, most Baby Boomer women weren’t raised to be comfortable establishing boundaries or asking for what they need – financially or otherwise. While you’re not looking to make any money from your loved one living with you, it shouldn’t cost you anything either. You may not want them to pay for anything but over time, you may end up suffering “financial hardship” as a result of caregiving and resent the cost or worse yet . . . resent your aging loved one.

So what do you do?

1. The first step to determining how much your aging loved one might pay is looking at how much money they have. If they have very little (not enough even to cover basic costs) then you will have to pay some of the expenses yourself or ask your sibs to chip in. It’s important to be prepared for that. You will also want to talk with your accountant to see if there is anything you can do on your taxes.

2. Then guesstimate all the expenses and compare that number with how much they actually have to contribute. Bear in mind that initially you’ll be guessing and you may need to revise the amount later on. If that happens tell them “We agreed to $XXXX . Unfortunately that amount turned out to be unrealistic. We need to take a look at the numbers again.”

3. Rather than getting reimbursed for expenses – and therefore having to keep track of every expense (eg: $5 deductible when you pick up their prescriptions, special foods) – have them give you a set amount – whether monthly or quarterly – that you’ll work from. Whether or not you refund any leftover money is up to the two of you.

4. Openly discuss with your aging loved one what the money is for. However, while they’re entitled to know, it need not become a “nickel/dime” issue. In other words, rather than accounting for every roll of toilet paper for example, give them a general figure for sundries.

5. Over and above expenses, you may want them to pay a set amount to help defray the cost of such expenses as the rent/mortgage, utilities, etc.

6. However, while they may only be able to pay very little, they probably want to pay something. Be creative. Perhaps they’ll pay for a meal once a month (either out or at home) and even that can be as much or as little as they can comfortably afford.

VERY IMPORTANT: Make sure they have “walking around” money – money that is theirs and for which they account to no one. Rather than having them give you all their money and then giving them an “allowance” (which is very demeaning), it’s better to have them give you what was agreed to EXCEPT for their own spending money. Whether they save for the holidays or buy drinks or lunch for friends or wager on a friendly game of Bingo – it’s theirs and how they spend it or when they spend it is their business. However, if they come back to you for more at the end of every month, then it becomes your business.

Some things to think about:

Consider the one-time expenses required to get your house ready (such as banisters, tub rails, etc) and get that reimbursed or have them pay for it directly. This would be separate from the monthly expenses.

Start by looking at and addressing the current situation with the understanding that needs will change over time. It’s important to discuss this in the very beginning. For example, you may start by getting money for miscellaneous expenses but eventually have to be reimbursed for such things as:

– in-home aide while you’re at work

– additional remodeling to accommodate their needs (eg changing the tub to a shower)

– a “fill-in caregiver when your work takes you away

If there are physical and/or cognitive issues, I strongly recommend that you get on their checking account NOW before there’s a need so you can still pay for their care even if they can no longer write checks.

I can appreciate that this all may sound kind of mercenary but consider the following . . . part of an email that came to me from a client: “She (my mother) also told us that, since we were working so hard in an effort to sell our home and buy a new home to accommodate her more comfortably, she was going to buy all the groceries and cook all the meals so that I didn’t have to food shop or cook. She gave me one $20 bill for one lunch and never mentioned it again! Now every time I make a meal I get angrier and angrier.”

Don’t let this happen to you – address the money issue openly right up front and it won’t have to!!

 
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Posted by on September 28, 2010 in Uncategorized

 

HUD cuts HECM amounts and raises monthly MIP costs!!

During a call with industry leaders last week, the Department of Housing and Urban Development said it plans to raise the annual insurance premium charged to borrowers and reduce the amount of money they can receive from the Home Equity Conversion Mortgage (HECM).

Starting Oct. 4th, the principal limits for Federal Housing Administration’s reverse mortgage program will decrease between approximately 1% and 5% from where they currently stand.  The changes will have less of an impact on younger borrowers, while older borrowers will see the biggest reduction in the amount of money available.  Additionally, the agency said it will raise the annual mortgage insurance premium from 0.5% to 1.25%.

It’s the second time HUD has been forced to reduce the principal limits in the last two years.  While not as steep as the 10% haircut from last year, Vicki Bott, Deputy Assistant Secretary for HUD said the changes are necessary to ensure the program is sustainable.

Earlier this year, the Obama Administration requested a $250 million credit subsidy for the HECM in its FY 2011 budget to offset projected losses for the program.  While an appropriation bill passed by the House of Representatives provides $140 million for the program, the Senate has yet to bring its appropriations bill to the floor.  At the moment, Senate Appropriators have included $150 million for the program in the Transportation, HUD, budget for FY 2011.

According to HUD, loans with a case number assigned prior to October 4th will still be eligible for the previous principal limits.  A mortgagee letter explaining the changes will be published in September.

In addition to these changes, HUD is expected to release a new low cost reverse mortgage product in October.

 
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Posted by on September 16, 2010 in Uncategorized

 

Need Home Modifications To Age In Place? A Reverse Mortgage May Help

Most seniors want to stay in their homes and remain independent yet often believe they can’t for a number of reasons.  Making some home modifications could make their wish of remaining in their home a reality by providing a safer more comfortable environment.

More than one third of those age 65 and older suffer injuries from a fall each year according to research from the National Center for Injury Control and Prevention.  AARP research suggests the leading cause of injury and deaths among seniors is falls.  Modifying one’s home can help to eliminate common hazards and help to improve the quality of living in one’s home.  Improving the safety of one’s home can help one have more comfort, convenience, and  remain independent and active in their community.  Some people have mobility limitations from causes other than falls and still want to stay in their home.  This too can be accomplished with some home modifications.Home modifications can help seniors remain in home

Bathing, toileting, cooking, and climbing stairs can be made easier to perform by adapting one’s home.  Modifying one’s home can be as simple as installing grab bars in the bathrooms, removing throw rugs, moving electrical cords from hazardous locations, touch buttons for turning lights on and off to installing entrances to accommodate wheel chairs and lifts to access another level.

By assessing and modifying one’s home, one can live more safely, comfortably and remain independent.  But how can one afford this?  A reverse mortgage may be the solution beyond what Medicare or insurance will pay for.

A reverse mortgage is a special loan to allow seniors to remain in their home with security, independence, dignity, and control by converting the equity into cash.  Similar to a conventional loan where a lien is placed on the home yet the borrower retains ownership.  The reverse mortgage is different from a conventional loan with no income or credit scores required and no monthly mortgage payment requirements.

The reverse mortgage loan amount is based on the age of the borrower, their home value and an Expected Interest Rate.  Due and payable when the home is no longer the primary residence, usually when they move, die or sell, a reverse mortgage can allow one to remain in their home and use the equity now.  As a non-recourse loan there is no personal liability to the borrower or their estate as long as they are not retaining ownership.  If the home is sold for more than the loan balance then the borrower(s) or their heirs keep the difference.Reverse Mortgage Helped Bob Modify His Home

Bob, a Minnesota senior who had lost his wife wanted to stay in his home.  He did the reverse mortgage and with a portion of his proceeds he modified his home to be prepared for the future such as having the doorways wider to accommodate a wheel chair and grab bars installed.  He’s thrilled that he was able to have his home modified and will be able to remain there for years to come.

 
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Posted by on September 14, 2010 in Uncategorized

 

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