Q: How can my mom add me to her deed?
My mom has a reverse mortgage and wants to add me to the deed. When she passes I am planning on buying the house from the reverse mortgage company. I am not sure how we go about getting this taken care of.
A: You cannot add your name to a property that has a reverse mortgage on it and any attempt to do so could cause the reverse mortgage to call the loan due no. Even aside from the reverse mortgage, it is rarely a good idea to add a child's name to a property while the parent is alive as there can be a loss of valuable tax benefits. To protect both you and your Mom, both of you should have appropriate estate plans in place, which likely includes a revocable living trust for your mother.
A: Your mother can’t add you to the title (which would give you partial ownership) because the reverse mortgage company could say the entire loan is due NOW. The mortgage company used your mother’s home as collateral for the loan and, if your mom gives away part of her property, she is effectively taking away part of the one thing the mortgage company can easily go after if the loan isn’t repaid. In other words, when some of the collateral is taken away, the mortgage company’s risk goes up, so they’ll call the loan. There are more reasons estate planning lawyers rarely, if ever, recommend parents add their children to their real estate during the parents’ lifetime: (1) You will likely have to pay higher property tax and definitely have to pay higher capital gains tax when the house is sold. (2) If a child is on title to property and has any sort of debt, liability from a car accident, or judgment in a lawsuit, the creditor can put a lien on the entire property because it is just as much the child’s as the parents. It will be MUCH BETTER to have your mother set up a revocable trust and put the home in a trust — with the OK from the mortgage company, so it doesn’t call the loan immediately due. Putting the home in a trust will save your siblings and you from a spending time and money in a year(s) long court process called probate. Have your mom see an estate planning lawyer. Many of us offer free initial consultations in person or via Zoom.
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