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Can a trust take out a reverse mortgage?

My mother transferred her house to an Irrevocable Trust whereby I am the trustee and beneficiary.
I live in the house and pay all the bills. She resides in an assisted-living community (she is 94 years-
old). Can the trust take out a reverse mortgage to help pay for her assisted-living expenses?
Status: Open    Aug 24, 2015 - 08:55 AM

Elder Law, Senior Real Estate

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Expert Answers

Aug 27, 2015 - 12:21 PM

In most cases, Yes. Irrevocable Trust are asset holders, they are set up with your lawyer to protect and provide a legacy plan. Irrevocable trust are used to position assets for the next generation, or to protect assets from family with expensive tastes. You need to ask the reverse mortgage agent their specific policy on the acceptance of the irrevocable trust owing the property. Also have your lawyer involved, it's crucial that they understand your reasioning and goals for the funds from the RM. The FHA does allow some Irrevocable Trust Reverse Mortgages, Generally the borrower has to collect income from the trust or the property be income producing (rent) and with the FHA version borrower usually has to be allowed to stay in the house as long as they lives. There are numerous restrictions around RM and Irrevocable Trust. Also revocable trusts have simular restraints. The number one thing to remember is ... ask your lawyer before you start the process to make sure your heading in the right direction!


Aug 31, 2015 - 10:47 AM

Revocable and irrevocable trusts may qualify for a reverse mortgage. Not all lenders accept the irrevocable trusts. It is important that the trust grants the power to the trustee to borrow money, the residence to be used as collateral for the loan, and upon the beneficiary’s death the trustee must have the right to sell the residence to pay off the debt. There are other requirements too. The beneficiary (the borrower) must reside in the property. The borrower must be 62 or older. Is your mom a beneficiary? Are you a contingent beneficiary? Without knowing the specifics of the trust I will not venture to advise whether or not your trust will be acceptable. All trusts are reviewed by the lenders attorney to determine if they will be acceptable for a reverse mortgage.

Sep 01, 2015 - 09:32 AM

The first step is to look at the irrevocable trust agreement itself to look for authority to do this. Typically, the trustee's powers are addressed in the trust agreement. There should be something in the document itself that addresses the trustee's power to handle property and take out loans. If the trust is silent on this particular issue, which is unlikely, the next step is to confer with the beneficiaries of the trust about this type of action. If you are the sole beneficiary of the trust, then taking out a reverse mortgage on the home is unlikely to be a problem.
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