The Housing Inheritance Myth and Reverse Mortgages

The reason I call it the “Housing Inheritance Myth” for people considering reverse mortgages is that the gap between desire and reality is so wide. Yes, myth may be a bit strong, but bear with me a bit while I try and explain myself.

Passing one’s home along to one’s children is part of the American Dream of home ownership. We inherited that dream from our parents who inherited it from theirs. However, if we go back to our grandparents, we find there was a catch to the gift.

Yes, grandpa might have inherited his house from a parent, uncle or aunt, but that relative came along with the house! He took care of the aging loved one, who often died in situ, and then paid for the burial, if no money came along with the property.

So, passing along the house was a vehicle to insure care for the elderly as much as it was a way of keeping the place in the family. Since the 50’s, families have been more dispersed. We have systems in place for providing care, places like retirement homes or communities and graduated care facilities. Most of our parents prefer to maintain their independence and not be a burden, than to have us be their care providers.

Besides, they are much richer than our grandparents could have imagined. Our folks didn’t wait to inherit. An incredible number were the first in their families to buy their own homes (many on the GI Bill).

While our parents may want to pass the home along to us, most of us already have homes. Like them, we enjoy far more luxuries than the preceding generation. We Boomers not only have homes, but they are often considerably nicer than our parents’.

Just as our parents want independence, so do we. Our problem isn’t what we will inherit. Our problem is what it will cost us if our parents aren’t able to maintain their own lifestyles.

It is amazing how many times the greatest objection to going forward with a Home Equity Conversion Mortgage (HECM) reverse mortgage is, “I just hate to spend the kids’ money.” Almost every time that melts away with a call to the kids who invariably say, “Mom/Dad I don’t want the house. I want you to be happy. Do what is best for you. I am just fine.”

In fact, more of my clients have been encouraged by their adult children to look into getting a HECM than have been discouraged from proceeding because an adult child wanted the house.

My family was no different. My sisters and I were far more supportive of our dad enjoying all his wealth, including the house, than he was comfortable doing it. What my dad (and many of my clients) failed to appreciate is that his generation raised one of the richest generations in the history of the planet. Few cohorts have been blessed with more material wealth than the Boomers. My dad didn’t realize that my sisters and I already had our inheritance in the form of fabulous educational opportunities and great income prospects.

Another difference is Dad and Grandpa had pensions and enjoyed a fairly stress free retirement. Today’s retirees are mostly out there with just their 401K’s and investments to get them through the next 10, 20 or 30 years.

Plus our children are facing a much tougher time getting established than we did. Among Boomers, 59% have contributed something to the support of their adult children.

Now what is important is independence. It is important to our wellbeing. It is also important for our children, because if we can’t afford our expenses, it can become our children’s problem. That is why one of the ways I explain what I do is, “I protect middle-aged people from their parent’s problems”.

So, how do you feel about passing the house along to the kids or inheriting your parent’s home? As always, I look forward to reading your comments.

Parting Thought: “Great marketing only makes a bad product fail faster.” David Ogilvy

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About the author

Scott Funk has specialized in Home Equity Conversion Mortgage reverse mortgages for over a decade. He is a recognized Aging in Place advocate in his home state of Vermont. His monthly newspaper column Aging in Place has run for 7 years in 24 papers around the state. Scott is brings a lighthearted approach to his talks on Boomers, retirement and aging on purpose.