While lawyers and judges are the ultimate legal experts, of course, I believe that every citizen should take the time to learn a little about law for several reasons. First, it is important to know your rights, and knowing them can come in handy if anyone ever accuses you of a crime you didn't commit or threatens you legally in another other way. Second, learning about your local, state, and federal laws can help you act as a better citizen. When election time comes around, you can then truly understand ever change in law being proposed by a candidate and whether it benefits society or not. I plan to share posts about law topics explained in plain English on my new blog, so you can come back often to sharpen your legal knowledge!
Although getting a reverse mortgage may have seemed like a great way for you and your spouse to get some extra money to fund your golden years, it can quickly become a burden if the two of you decide to divorce. Here are two ways legally separating from your spouse can impact your reverse mortgage.
The Lender May Call in the Loan Early
One of the primary benefits of a reverse mortgage is it doesn't come due until the last surviving spouse no long occupies the home. While many people take this to mean until the last homeowner dies, it also means the lender can call in the loan if the surviving resident moves out of the house for longer than the allowed period of time (e.g. 12 months).
This is only an issue, though, if the home is in one person's name and that person moves out of the home during or after the separation. You are generally required to notify the lender of this type of change, after which the lender will remind you how long the person can be out of the home before it requires the loan to be repaid.
You can get around this issue by adding the name of the spouse who will be keeping the home to the loan, or by transferring the loan into that person's responsibility. The lender will then maintain the "until death" deadline and the homeowner won't have to worry about paying the loan off early.
You May Still Be Responsible for the Debt
It's a given that you'll be responsible for at least half the debt if your name is on the reverse mortgage loan. However, if you live in a community property state, you may still be liable for repaying the debt even if the loan is in your spouse's name. In community property states, all debts and assets incurred while the marriage was active are considered the responsibility of both parties.
If your spouse is awarded the home and remains in it, the loan won't come due until he or she dies or moves out permanently. In either event, unless the home is sold or the loan is paid off early, you will need to account for the debt in your estate plan. You can avoid this by negotiating to have your spouse assume full liability for the reverse mortgage, which he or she might do in exchange for more of the marital assets.
Find a divorce attorney on websites like http://www.hartlawofficespc.net for more information about reverse mortgages and other concerns related to spousal separation.