MORE SENIORS ARE BEING BURIED BY HOUSING DEBT

Original Story: usatoday.com

WASHINGTON (AP) — Al and Saundra Karp have found an unconventional way to raise money and help save their Miami-area home from foreclosure: They're lining up gigs for their family jazz band.

They enjoy performing. But it isn't exactly how Al, an 86-year-old Korean War vet, or Saundra, 76, had expected to spend their retirement.

Of all the financial threats facing Americans of retirement age — outliving savings, falling for scams, paying for long-term care — housing isn't supposed to be one. A Rochester estate planning attorney represents clients in the preparation of wills, codicils, and trusts. But after a home-price collapse, the worst recession since the 1930s and some calamitous decisions to turn homes into cash machines, millions of them are straining to make house payments.

The consequences can be severe. Retirees who use retirement money to pay housing costs can face disaster if their health deteriorates or their savings run short. They're more likely to need help from the government, charities or their children. Or they must keep working deep into retirement.

"It's a big problem coming off the housing bubble," says Cary Sternberg, who advises seniors on housing issues in The Villages, a Florida retirement community. "A growing number of seniors are struggling with what to do about their home and their mortgage and their retirement."

The Baby Boom generation was already facing a retirement crunch: Over the past two decades, employers have largely eliminated traditional pensions, forcing workers to manage their retirement savings. Many Boomers didn't save enough, invested badly or raided their retirement accounts.

In Las Vegas, Janet Snyder, struggling with a financial burden left by her late husband, is bracing for what happens if her lender proceeds with plans to evict her from her home in July.

"I'll live on the streets, I guess," she says ruefully, contemplating homelessness at age 74.

The Consumer Financial Protection Bureau's Office for Older Americans says 30% of homeowners 65 and older (6.5 million people) were paying a mortgage in 2013, up from 22% in 2001. Federal Reserve numbers show the share of people 75 and older carrying home loans jumped from 8% in 2001 to 21% in 2011. A Denver banking lawyer represents both lenders and borrowers in a diverse array of financing transactions.

What's more, the median mortgage held by Americans 65 and older has more than doubled since 2001 — to $88,000 from $43,400, the financial protection bureau says.

In markets hit hardest by the housing bust, a substantial share of older Americans are stuck with mortgages that exceed their home's value. In Atlanta, it's 23% of homeowners 50 and older, according to the real-estate research firm Zillow. In Las Vegas, it's 26%.

In the worst cases, hundreds of thousands of older Americans have lost homes to foreclosure. A 2012 study by the AARP found that 1.5 million Americans 50 and older lost homes between 2007 and 2011. The numbers are probably higher now, says Lori Trawinski, a director at the AARP's Public Policy Institute. And among homeowners 50 and older, foreclosure rates are highest for those 75 and up.

Foreclosures help explain why homeownership among those 50 to 64 dropped 5 percentage points to 75% from 2005 to 2013, according to Harvard University's Joint Center for Housing Studies.

In mid-2010, Tod Lindner lost his oceanfront home in California's Marin County. He ran into trouble after the finance company that employed him was acquired and the new owners refused to pay him fees he thought he was owed and which he was counting on.

Lindner had bought the house for $330,000 in the late 1980s. But he'd refinanced to pull out money to invest, swelling the mortgage to $680,000. Lindner tried to work out a modified mortgage, but his bank foreclosed instead. He and his wife sought bankruptcy protection, rented an apartment and slashed their spending.

"At age 70, I just started working for another company" in banking, Lindner says. "My plan would have been to retire."

Seniors fell into housing trouble in varying ways. Some lost jobs in the recession or its aftermath. Some overpaid for homes during the housing boom, thinking they could cash in later.

Prices crashed instead.

Some made unwise decisions to refinance mortgages and pull cash out to meet unexpected costs, help their children or go on spending sprees.

Ralph Kanz, 60, and Martha Lowe, 56, of Oakland bought too much house at the wrong time: They paid $487,000 for a home in Oakland, California, in 2005.

At the time, Lowe was making $51,000 at an environmental consultant. Kanz was experimenting in commercial fishing and earning around $10,000. Drawing on an inheritance, they made a down payment of $137,000 and took on a $350,000 mortgage.

They say they shouldn't have qualified for a loan that big. They alleged in an unsuccessful lawsuit against two mortgage firms and a title company that "someone" without their knowledge had inflated Lowe's income on the loan application to get the mortgage approved. (A court ruled in 2013 that "a reasonably prudent person" should have spotted "the alleged wrongdoing" in the application in 2005.) A Texarkana banking lawyer is following this story closely.

Worse, the couple took on a dangerous mortgage: They had to pay only interest for 10 years. They would then be hit with bigger payments, including the principal, for the next 20. The bigger payments are set to begin in June.

In the meantime, Lowe contracted a rare disease and went on disability. They still hope to renegotiate the mortgage.

West Virginia natives Jim, 67, and LaRue Carnes, 63, moved to Sacramento, California, in 1978 and bought a house for $54,000. For 33 years, Jim worked as a newspaper reporter and editor. They refinanced their mortgage several times and pulled money out of the house and took on higher mortgage payments.

"Foolishly, like so many Americans, we used the house as a bank," LaRue says.

In 2011, Jim was laid off, and the Carnes fell behind on mortgage payments. Three times, they dipped into their retirement savings to fend off foreclosure. Eventually, with a $25,000 grant from a state program, Keep Your Home California, they negotiated a new mortgage they could afford.

Still, they're still straining to meet the lower payments. Once a month, they eat a free breakfast at a church, bringing home bagels and fruit. They "never thought we would be partaking of such," LaRue says.

They've haven't gone on a vacation in years. When they want to see a movie — Jim is an entertainment writer — they attend discounted matinees.

Some retirees ran into trouble with reverse mortgages. These are loans against the equity in a home that provide cash but come due once the homeowners die or sell the house.

Problems can arise when only one spouse signs a reverse mortgage — in order to qualify for a bigger loan — and dies relatively soon. The lender can then demand repayment in full — and foreclose if it doesn't collect.

Janet Snyder, who gets by on a $1,215 monthly Social Security check, says she didn't even know that her husband, Theodore, had taken out a $225,000 reverse mortgage on their Las Vegas town house. When he died in 2010 at age 77, the bank wanted its money back and "would not talk to me," Janet says. To prepare for retirement, a Rochester estate planning lawyer assists clients in developing wealth management plans.

She's working with Christine Miller of the Legal Aid Center of Southern Nevada to try to keep her home. But unless they engineer a delay, "I have to move out by July 24," she says.

"I'm 74 years old… I don't know where I'm going to go from here."

When seniors seek to renegotiate mortgages they can't afford, lenders often refuse. One reason is that the elderly typically have less time to repay. And many are "just not going to have enough income to qualify for a new plan," says Brian Korte, a foreclosure lawyer in West Palm Beach, Florida.

Al and Saundra Karp bought their three-bedroom home in North Miami Beach, Florida, for $77,000 in 1980. Over the years, they refinanced, partly to pay down credit-card debt, and their mortgage swelled to $288,000.

Al, 86, kept working as a tax accountant into his late 70s. But Alzheimer's disease forced him into retirement.

The couple is getting by on about $2,500 a month in Social Security and Veterans Administration benefits, plus food stamps and help from their two sons. They stopped paying the mortgage and are fighting foreclosure in court. And they've failed to persuade the bank to modify their mortgage and lower the $1,900 monthly payments.

To ease the stress and earn some cash, they perform old musical standards as the Karp Family — Saundra on vocals, Al on sax, son Larry on keyboards.

"I'm trying desperately to stay here," Saundra says. As for Al: "He thinks the mortgage is paid. He hasn't got a clue."

A COMMON, COSTLY SLIP: OUT-OF-DATE BENEFICIARY DESIGNATIONS

Original Story: CNBC.com

Do you have a will that you've looked at in the past couple of years and updated if necessary?

That's important, but don't assume that it's enough to ensure that all your wishes are carried out in the event of your demise. It isn't.

What about the beneficiary designations on your qualified retirement accounts, individual retirement accounts, annuities and life insurance policies? Are those up to date and exactly as you want them to be?

It's very important to be aware of beneficiary forms. Naming the wrong people or failing to update those financial documents can create a mess for your heirs.

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A fact that people seem to miss is that these designations override wills. Many families have learned that too late, and to their detriment, after a loved one died believing that his or her will took precedence over everything.

If it's been years since you opened your accounts, you might not recall whom you designated as beneficiary on some of them. What if that person has died or others have been born since? What if your relationship has changed and you no longer want that person to get your money when you die? (Think marriage and divorce, the death of parents, birth of children or the breakup of an old friendship.)

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Regardless of what your will states, whoever is named as beneficiary on the various financial accounts mentioned above is who will receive those specific assets. Period. End of story.

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But that's not the only costly mistake that is common in naming beneficiaries. Here are six others you will want to avoid:

1.Not naming a beneficiary. If you don't name anyone, your estate becomes the beneficiary. That means the asset could be subject to a lengthy, expensive and cumbersome probate process—and people you might not prefer could wind up with the asset.

2.Failure to list contingent beneficiaries. If your beneficiary dies first and you haven't named a contingent (or secondary) beneficiary, it's the same as having no beneficiary. If you and your spouse die at the same time (say, in an auto accident) and you've not named the kids as contingent heirs, your estates go into probate. Naming a contingent has another advantage, too: If the primary beneficiary doesn't want the asset for some reason (perhaps because of tax implications), he or she can waive rights to it, allowing the money to pass to the contingent beneficiary. Many surviving spouses do this for their children, and it can be a smart way to avoid or reduce taxes. But if you fail to name a contingent beneficiary, this opportunity is lost.

3.Lack of specifics. Simply listing "my children" as your beneficiaries can be a problem, especially in a blended family. Many states don't recognize stepchildren when the word "children" is used. Or some family member you've lost contact with and with whom you don't intend to share your assets could suddenly turn up and try to claim all or part of the estate. Finally, what happens if one child predeceases you? Unless you get specific, that child's share will go to your other children instead of to that child's children. Unless it's your intent to disinherit some of your children or grandchildren, you need to be more specific.

4.Using shortcuts. If you have three children and you want all three to receive an asset, you need to name all three as beneficiaries. Too often, we find that a client has listed only one child, believing that this person will then give the others their shares. That is a very big mistake. Even assuming the child is so inclined (legally, they don't have to), the IRS might interfere by levying taxes on the amounts redistributed. Shortcuts are never a good idea with legal documents.

5.Missing beneficiary designation forms. Let's say your forms are on file with a custodial company but that firm is acquired by another in a merger. Records are sometimes lost or destroyed in that situation. Without a verifiable form to prove beneficiary status, the default provision of the plan applies, which often is: "spouse first, if living; then the estate." Keep copies of your beneficiary forms in a safe deposit box, and make sure your financial advisor, estate attorney and executor have copies.

6.Not considering the financial or emotional readiness of beneficiaries. Your heirs will get the money in your IRAs, retirement accounts, life insurance and annuities almost immediately upon your death, with no restrictions. If this worries you, consider naming a trust as beneficiary; then you can place limits on when and how the money is to be used.

Never borrow from your 401(k)

You devoted a lifetime to accumulating assets, so make sure the disposition is managed the way you want them to be or your efforts could be for naught. That's why it's essential for you to take the time and the proper steps to work closely with an estate attorney and with your independent, objective financial advisor.