Dear Liz: Our dad is 93 and has a reverse mortgage on his house, where he lived until recently with my brother and my brother’s friend. In August, we had to move Dad into assisted living. Shortly after that, the “friend” locked my brother out of the house and has been a squatter ever since.
We hired an attorney, and the case was reviewed by judges near the end of last year, but we still don’t know the outcome. Hopefully, we will get him out, but the house has so many costly repairs required, even before the squatter, that we don’t think we would clear enough from selling it to pay what is owed to the bank. Probably the most that we could get for the contents is $5,000 to $10,000.
The question is: once the house is gone, are there many fees we will need to pay to settle our dad’s estate? He has named my brother and me as co-executors. Since we both still work full-time, is there a way to avoid being the executor? What happens if there is no executor named?
Answer: What a nightmare. If it helps, take comfort in knowing that you won’t be on the hook if the house doesn’t sell for enough to pay off the loan. That’s part of the deal with a reverse mortgage. If there’s equity left over, the borrower (or their heirs) can keep it. But if the debt exceeds the sale proceeds, that’s the lender’s problem.
In fact, you may not have to deal with a sale at all. Once you get rid of the squatter, your dad can sign over the deed to the lender (a recourse known as “deed in lieu of foreclosure”) rather than go through the hassle of selling the property. Discuss the situation with your attorney — who should be keeping you updated about the status of the eviction, by the way — and contact the lender to find out its process for this option. The lender needs to be informed anyway since reverse mortgages come due when the borrower dies, sells or permanently moves out.
You also won’t be on the hook for settling the estate once your dad dies. That can be costly, but the expenses come out of the estate itself, not the heirs’ or executors’ pockets. If there isn’t enough left over to pay all the bills, there’s a legal process for prioritizing what gets paid and how much.
As mentioned in previous columns, no one can be forced to be an executor. The probate court can appoint someone to settle the estate if necessary. Serving this function, though, can be a way to honor our loved ones.
Dear Liz: I am 85, and my husband is 87. We are both retired. He has not paid our income tax for three to five years. I have given up trying to get him to do it. I know it’s partly my fault, as I should have taken more responsibility. What should I do? Whom should I call?
Answer: Presumably, when you write that your husband has failed to pay your taxes, you also mean he’s failed to file your returns. Failing to file actually incurs much larger penalties than failing to pay, but either way, your tax debt is likely to have grown over the years due to inaction.
Some good news: AARP Foundation Tax-Aide offers free help with tax returns, including catching up on prior year filings. Tax-Aide is designed to benefit low-to-moderate income people, particularly those 50 and older, but anyone can use its service unless their returns are particularly complex. You can find the various preparation options in your area using the locator tool at https://www.aarp.org/money/taxes/aarp-taxaide/locations/.
Another option is to ask friends and family for a referral to tax professionals they trust. You can use the IRS Directory of Federal Tax Return Preparers to verify credentials.
Recognizing and coping with cognitive changes can be terribly difficult. Your husband may have been too proud to say that he’s no longer capable of this chore. But as you noted, taxes are typically a joint responsibility and now it’s your turn to step up and get the help you both need.
Liz Weston, Certified Financial Planner, is a personal finance columnist. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.
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