Can I transfer a home with a reverse mortgage to a revocable living trust?
For the most part, the answer to this question is, yes. A reverse mortgage is loosely defined as a type of home loan for retired or elderly individuals which allows them to access the equity in their home to supplement retirement income. The most common type of reverse mortgage is a Home Equity Conversion Mortgage, typically called an HECM, which is the only reverse mortgage insured by the Federal Government and is available only through a Federal Housing Administration (FHA) approved lender or bank. For more information, see the U.S. Department of Housing and Urban Development (HUD) at: http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hecm/hecmhome
A revocable living trust, also known as an inter vivos revocable trust, is a trust that is created during an individual’s life. An individual who has a HECM type reverse mortgage on their home is able to transfer the home into a revocable living trust without causing any issue to the lender or bank which holds the reverse mortgage so long as the revocable living trust language meets all of the requirements of HUD. HUD’s requirements for the language of the trust differs depending on whether the home is part of a trust which is already in existence at the time the individual applied for the HECM reverse mortgage or whether the trust is created after the home is already subject to the HECM reverse mortgage. In either case, because the revocable living trust language needs to be carefully drafted to meet the requirements of HUD, anyone seeking to transfer their home with a reverse mortgage into a revocable living trust should seek an attorney’s advice. For more information about the above two scenarios, see HUD at: http://portalapps.hud.gov/FHAFAQ/controllerServlet?method=showPopup&faqId=1-6KT-1837