Would a Retirement Plan with a Reverse Mortgage Hold Up in Court?

Reverse mortgages have long been touted as solutions to some retirees’ long-term financial plans, but using equity as a retirement asset may still be a foreign concept in the courtroom.

Writing in Forbes, financial planning writer Robert Laura points out that in legal settings, one’s retirement picture could require detailed explanations — such as in a recent scenario in which Laura was asked to serve as an expert witness in a court case.

“Attorneys and judges aren’t financial advisors, and while many of them may have a solid grasp of the key concepts, I found myself needing to explain every minor detail, including assumptions and what-if scenarios that are usually discussed but not calculated into the plan,” he wrote.

For instance, Laura was asked why he didn’t consider this particular client’s home to be an asset, given the amount of equity she had built in it. 

“Yes, it is an asset, but they also need a place to live during retirement,” he wrote. “Whether they stay put or use the equity to downsize or eliminate their mortgage, you can’t just throw every asset into the mix for retirement income.”

He also noted using reverse mortgages in retirement isn’t as widely adopted among the financial planning community as some might expect.

“While I would argue that this situation falls into a generally accepted planning category, the reality is, items like this are open for interpretation and can vary from planner to planner based on their background, experience, and whether or not they sell products related to reverse mortgages,” he wrote.

Check out the full analysis of financial plans and courtroom scrutiny at Forbes.

Written by Alex Spanko

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