As an estate planning attorney who prepares living trusts, administers many estates and probates approximately 50 estates a year throughout California, I am always on the lookout for interesting stories to write about.  Recently the British newspaper ran the story of a Jane Ritchie who inherited over $15 million dollars – and gave it away.

Ms. Ritchie is a single 59 year old who inherited the money from a distant cousin.  She had to pay approximately $5.7 million in taxes.  Her major expenses were purchasing a new hat for a wedding that she was attending and treating herself to a stay at a nice hotel for the event.

Ms. Ritchie knew that her cousin had some money, but was surprised at the amount.  The solicitor (an English attorney) visited her at her house and told her the amount.  The Daily Mail quotes her as saying “I nearly fell off my chair.”

Ms. Ritchie made some charitable gifts and then took the bulk of her inheritance, approximately $8.5 million dollars and decided to build a job related learning center which will allow teenagers to gain an understanding of how what they learned in school relates to jobs in the real world.

Ms. Ritchie explained to the Daily Mail her generosity this way: “I’ve got everything I want.  I’ve got a nice house with two dogs and two cats.  I’m the wrong shape for fancy clothes.  I don’t drink and I don’t smoke and I don’t take holidays because I’m too busy.  I am very happy as I am.” 

She also said: “I believe if you do get something like winning the lottery you should do something good with it and that’s what I have tried to do.”

Her story certainly got me to stop and think.  As someone who prepares estate plans including living trusts for a living, I always am happy when a client indicates they want to leave something to charity.

Like almost anything in life, reverse mortgages can be great if utilized correctly and can result in financial chaos if used incorrectly. 

Reverse mortgages are marketed to older Americans as a means for people to have some extra money so that they may live comfortably.  Borrowers must be at least 62 years of age and must live in the home.  With a reverse mortgage, the homeowner always retains title to their property.  However, they may have little to show for it.

The negative to reverse mortgages is that while the borrower most of the time is not required to repay the loan provided they are living and stay in the home, upon death or moving from the home, the lender frequently becomes the virtual owner of the home.

Usually what happens is that in exchange for giving the borrower money, the lender places a lien on the property.  This allows the lender to be repaid for the loan, fees and interest.  Obviously, this will reduce, sometimes significantly the amount of the inheritance to the heirs of the borrower.  In any event, it is a nonrecourse loan – therefore the lender may not go after the heirs for payment.

As a probate attorney in Culver City, which is just outside of Los Angeles, who handles probates throughout the state of California, I see what happens after someone has passed.  Like anything else, all of the options should be considered before entering into a reverse mortgage.  For some people, it will be the best option.  Others will find that they can do something else and ultimately get a better bang for their buck. 

Consult an unbiased person.  Sometimes an estate planning or probate attorney may be helpful.