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[quote=Anonymous]Parents need additional money for retirement.  We have the ability to buy their home outright, but wonder if it makes more sense to structure it as a private reverse mortgage.

It seems like the pros of the reverse mortgage are that we can continue to invest and earn interest on the money and give it to parents as needed, while still getting an equity interest in their house in return rather than structuring it as a gift.  That way, we can exceed gift tax limits in the amount we give them a year if necessary.  Also, there are some concerns about parents' money management, so giving them the amount over a longer period of time has some appeal.  The cons would be the expense/time to set up the reverse mortgage, and that it would accrue interest that parents' would need to pay.  My question is, can we forgive the interest on an annual basis?  I know this would be considered a gift, but I assume the accrued interest would be below the gift tax exclusion since there are two couples involved (and the house is worth less than $500k total).

The pros of buying the home outright are that it would be simpler and parents wouldn't owe interest, but the cons are, we would have a substantial amount of money invested in an asset that likely won't appreciate much.

We would also consider structuring this as a life estate, but think it's likely that parents may need to move into assisted living before the end of their lives so I think that likely doesn't make sense.  We could also consider transferring ownership to an irrevocable trust on either option since parents will likely need Medicaid assistance one day (hopefully in 5+ years), but since their house is under $500k, is there actually any benefit to doing so?

Are there are other pros/cons/questions I should be considering?  [/quote]

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