DEAR BOB: After much research, my husband, who is now 74, decided to get a senior citizen reverse mortgage on our home. Since I was only 60 at the time, I quitclaimed my interest in the house to him because I was too young. We chose the reverse-mortgage line of credit and have withdrawn only as much as our savings would cover if my husband dies. I know I could get a reverse mortgage, as I am now 62, but our question is whether our house will have to go into probate court when my husband dies since I am no longer on the deed. How can we avoid this because our home is our biggest asset? –Sheila P.
DEAR SHEILA: That’s easy. I was expecting a tough question. Your husband can transfer title from himself to his revocable living trust, which, presumably, will name you as the successor trustee and the future beneficiary if he dies first.
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Reverse-mortgage lenders have no objection to borrowers placing title to their homes into their living trusts after the reverse mortgage is recorded. By placing the home title into your husband’s living trust, probate costs and delays will be avoided if he dies first.
Equally important, if your husband should become incapacitated, such as with Alzheimer’s disease or a severe stroke, as the successor trustee you can then manage the living-trust assets, including selling or refinancing of refinancing the house. Details are in my special report, “24 Key Questions Answered: Living Trust Secrets Reveal How to Avoid Probate Costs and Delays,” available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010, or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com.
UMBRELLA INSURANCE SAVES MONEY AND INCREASES PROTECTION
DEAR BOB: Thank you for writing about umbrella insurance policies some time ago. Until I read that, I had been carrying $1 million liability coverage on my house, three rental properties and $5 million on my automobile policies. My insurance agent advised the high liability coverage because of my high net worth. When I clipped your article and faxed it to my insurance agent, he said I could reduce the liability coverage on each property and my automobiles to $300,000 each, and obtain a $5 million liability umbrella policy for slightly lower total premiums as I was paying. Your great advice for better coverage more than paid for a lifetime subscription to the newspaper. –Dr. Carl W.
DEAR DR. CARL: Thanks for your compliments. For readers who have no clue what an umbrella liability policy is, it is an insurance policy that takes over coverage on large liability losses exceeding the basic insurance policy coverage. It is best to have all your property liability policies with the same insurer so there is no conflict between insurance companies.
To illustrate, suppose you are at fault in a bad automobile accident that injures or kills several people. Your basic auto policy will pay the first $300,000 of liability coverage. Then your umbrella policy will take over and pay any additional liability losses up to $5 million total.
If you think you need additional liability coverage above $5 million, the additional premium for a few more million dollars will be only several hundred dollars (because of the small probability the insurance company will ever have to pay such a large loss).
RENTER’S INSURANCE COVERS MORE THAN PERSONAL PROPERTY
DEAR BOB: You recently said a tenant should have renter’s insurance to pay for damage to his/her apartment. The individual reader left a dinner on the stove and the fire did about $15,000 damage to her apartment. It has always been my understanding that renter’s insurance simply covers the tenant’s personal belongings, such as clothing and furniture. But the owner is responsible for the apartment house or detached rented house. Am I wrong? –Beverly B.
DEAR BEVERLY: If a tenant has a renter’s insurance policy, it covers loss due to theft and fire affecting the tenant’s personal property. But it also provides liability coverage for the tenant’s negligence.
For example, if I visit a friend’s apartment, trip over a loose rug, and am injured, the tenant’s rental insurance policy will pay for my injuries due to the tenant’s negligence. The same renter’s policy also provides liability coverage if the tenant’s negligence causes damage to the landlord’s premises, up to the policy limit.
Similar insurance policies are available to condominium owners who should always carry condo owner’s insurance even though the condo homeowner’s association insures the condo complex’s common areas, including the building structure for fire and liability coverage. For details, please consult your insurance agent.
The new Robert Bruss special report, “2007 Realty Tax Tips: Eight Chapters of Tax Savings for Homeowners and Realty Investors,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010, or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this column are welcome at either address.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
