• Banks and Mortgage Companies

Banks today provide a wide variety of services. They allow us to deposit our income and our savings. Depending on the accounts we have chosen, a bank may allow us to manage our funds by phone or on our computer, to write checks, to automatically pay certain bills from our accounts, and may pay us interest on the funds we have in the bank.

Mortgage companies loan individuals money to buy or refinance real estate (a home or other property). Banks also offer mortgages.

Some banks and mortgage companies offer reverse mortgages, which allow an older adult to borrow against the equity in her home for living expenses. Reverse mortgages can be helpful for some individuals, not for everyone, and the type of reverse mortgage and the bank or mortgage company and its history with reverse mortgages, should be thoroughly researched and understood by the consumer (you) before applying for a reverse mortgage. There will be costs and fees associated with a reverse mortgage and you must be clear on the interest rate and exactly what will happen to your home when you decide to sell the home or when you die. When you borrow money against your home for a reverse mortgage, you now own a smaller percentage of your home than you did before, especially if you had paid off your original mortgage previously. At some point, the funds you borrow will have to paid back to the bank or mortgage company (usually from your estate or from the sale of your home); be sure you understand exactly how this will work. While reverse mortgages can be complex, they may be helpful to pay for in-home health care or to supplement a low retirement income.

WARNING - JOINT ACCOUNTS ARE NOT ALWAYS GOOD: Bankers mean well, but they have an alarming tendency to suggest to any customer with a hint of gray in his hair that he might want to open a joint account with a family member, such as a child. Unfortunately, the low-level banker who suggests this may not have a good understanding of the legal consequences of opening a joint account. For example, if Mrs. Smith opens a joint checking account with her son Johnny, then the money in that account legally (if not ethically) now belongs to Johnny as well as to Mrs. Smith. If Johnny has an auto accident and is sued, if he divorces his spouse, or if he loses his job and must file bankruptcy, Mrs. Smith's money may be included in Johnny's assets and may have to be used to pay Johnny's debts. Johnny and Mrs. Smith may eventually be able to prove the money in her account is all hers, but it will take time and expense to do so. If Mrs. Smith's goal is to let Johnny write checks on her account to help pay Mrs. Smith's bills, then she could grant Johnny a financial power of attorney; this would allow him to help manage her money, without granting Johnny any ownership in the money. If Mrs. Smith's goal is simply to make sure Johnny inherits the money upon her death, her bank could set up a "pay on death" or "transfer on death" account to name Johnny as the beneficiary, but not as an owner during Mrs. Smith's life time. Both options are less risky for Mrs. Smith, and potentially for Johnny. Putting Johnny on all of Mrs. Smith's accounts might hinder Johnny's ability to apply for financial aid for college for himself or a child, or to apply for Medicaid benefits for himself. With some investments, joint tenancy can create a greater tax liability for Johnny upon Mrs. Smith's death. While joint tenancy is not always bad, please consult an attorney about the consequences (including tax consequences) of creating joint tenancy accounts or investments (including real estate) and about the options offered by powers of attorney, will and trusts and "pay on death" designations. Please do not assume that your well-intentioned local bank teller (who may be all of 20 years old with no more than a high school diploma) will advise you properly about the implications of joint accounts; it is not the teller's responsibility to do so and most do not have the proper training to advise customers. Please do not rely on information on this section of our web site either; we do not know your specific situation. Consult your attorney, or an elder law or estate planning attorney, for advice that addresses your needs.