Research Paper on "Elder Law"

Research Paper 4 pages (1400 words) Sources: 4

[EXCERPT] . . . .

Elder Law

The preponderance of older Americans would prefer to grown old in their own homes. The high amount of long-term care paid by government, however, suggests that few seniors have enough money to pay these costs for very long. Until lately, older homeowners had inadequate options for improving their financial situation. They could sell their house, or if they had sufficient incomes, they could take out a first or second mortgage. A new solution that has emerged is that of tapping the equity built up in ones home (Use Your Home to Stay at Home, 2005).

The preponderance of older Americans are homeowners. Many have accrued sizeable amounts of home equity, including families whose other retirement resources may be very meek. Over half the net worth of seniors is presently tied up in their homes and other real estate. With so much wealth unavailable in the home, the decisions that today's elder homeowners make about this fiscal asset can considerably impact the nation's ability to better balance public and private funding for long-term care and to react more rapidly to customer preferences for aging in place (Use Your Home to Stay at Home, 2005).

Reverse mortgages are a financial product that is comparable to home equity loans except that the borrower does not pay back the loan until they die or permanently moves out of the house. These were first introduced about twenty years ago. "The most common type of reverse mortgage loans is the Home Equity Conversion Mortgage (HECM), insured by the Federal Housing Administration (FHA) and constituting over 90% of all reverse mortgage loans originated in the U.S. market. Despite its economic appeal, using reverse mortgages to finance consumption after retirement has been the exception rather than the rule among elderly homeowners" (Bowen Bishop & Shan, 2008).

Seniors can decide to take the cash from a reverse mortgage as a lump sum, in a line of credit or in monthly payments. If they decide to take a lump sum they might choose to retrofit their home to make kitchens and bathrooms safer and more accessible, which is especially important to those who are becoming frail and in danger of falling. If they choose a line of credit or monthly payments, a standard reverse mortgage applicant could use the funds to pay for nearly three years of daily home health care, over six years of adult day care five days a week, or to help family caregivers with out-of-pocket expenses and weekly respite care for almost fifteen years. They could also use it to buy long-term care insurance if they meet the requirements (Reverse Mortgages Can Help with Long-Term Care Expenses, Study Says, 2004).

Reverse mortgages are specialized loans that allow seniors to tap their home equity while they keep on living in the home. "With an estimated amount of over $72,000 available on average to older households from these loans, reverse mortgages can help impaired elders pay for several years of daily home care visits, over a decade of out-of-pocket expenses and respite for family caregivers, or substantial home modifications. Despite the promise of this financing option, older Americans have not been encouraged to tap into their substantial housing assets" (Use Your Home to Stay at Home, 2005).

In the United States, reverse mortgages are the main financial instruments accessible to seniors who want to transfer some of their home equity into cash. The quantity of funds that could become available by liquidating home equity is considerable:

Reverse mortgages hold the prospective to augment private sector funding for in-home services and supports in total by over $953 billion.

Homeowners who get Medicaid benefits, or who are at financial risk of needing Medicaid should they become impaired, could possibly get over $300 billion in total from reverse mortgages (Use Your Home to Stay at Home, 2005).

In order to look at the potential role of reverse mortgages, it is significant to first appreciate the challenges of affording home and community-based long-term care services. Under the present system, long-term-care expenses are mainly financed by government, through Medicare or Medicaid. Yet, neither of these public programs is intended to meet the requirements of impaired seniors who live in the community.… READ MORE

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