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If you’re looking for flexible funding, you can tap into your home equity with a home equity line of credit (HELOC). A HELOC is a revolving line of credit that uses your home as collateral. Using a HELOC can be risky, so homeowners typically use them for major life expenses, not daily expenses.

Let’s learn about the best and worst ways to use a HELOC, along with alternative credit options that might better fit your needs.

Best Ways To Use a HELOC

You can use a HELOC to help you improve your financial situation, like building equity or consolidating debt so you can pay it off faster or with lower interest. Here are some of the best ways to use a HELOC.

Home Improvements

One common way to use a HELOC is for home renovations and repairs. You draw on a HELOC whenever you need to and only pay interest on what you borrow. This gives you the flexibility to spread home improvement projects over years. You can also take advantage of tax deductions if you use HELOCs to substantially renovate your home.

Debt Consolidation

If you have multiple high-interest credit balances, you can use a HELOC to pay down your debt faster and reduce the interest you pay. With a HELOC you can consolidate credit card and personal loan payments at potentially lower interest rates. Using a HELOC to consolidate debt can make your debt easier to manage.

Higher Education

HELOCs can be used to cover the costs of a college education when federal student loans are not an option. Federal student loans have fixed, low-interest rates and offer benefits like loan deferment and loan forgiveness without putting your home at risk.

However, federal student loans have caps on the amount you can borrow. A HELOC may provide funding for tuition, housing, dining, and textbooks when you have maxed out your student loan options.

Emergency Fund

You can use a HELOC as an emergency fund for medical bills, car repairs, or other unexpected expenses. Having easily accessible funds can give you peace of mind when unexpected events, like losing your job, threaten your finances. And you won’t need to rely on credit cards or dip into your retirement savings.

Keep in mind that you’ll need to apply for a HELOC long before you need the money. HELOC applications can take weeks to process because they require a home appraisal and lenders need time to review your credit history.

Worst Ways To Use a HELOC

Your home is likely your most valuable asset. So, in many cases, like for unnecessary or smaller expenses, taking out a HELOC that uses your home as collateral is not worth the risk. Here are some examples of ways you want to avoid using a HELOC.

Luxury Purchases

Try to avoid using a HELOC for unnecessary expenses. Vacations, weddings, handbags, and other luxuries offer little to no long-term value, so they aren’t worth risking your home. Instead, consider saving toward your purchase goals and using cash, or using a credit card that provides rewards for luxury expenses.

Down Payment on a Home

You can use a HELOC as a down payment to buy a second home. While this has several advantages, like helping you preserve your savings, it also has disadvantages.

Buy a Car

Using a HELOC to buy a car can offer you negotiating power and lower interest rates, but it may not be ideal because of the length of the repayment terms. HELOC repayment periods are usually between 10 and 30 years, which is significantly longer than car loan repayment periods.

If you pay off your HELOC quickly with no penalty, it may provide a more affordable financing option for a car. However, if you sell or trade in your car during the HELOC repayment period, you could be making payments on a car for longer than you own it.

Retirement Fund

Many older Americans use their home equity to fund living expenses in retirement. In doing so, they miss out on the opportunity to increase their home’s equity and have additional savings. Depending on your financial situation, HELOCs can be more difficult to repay if your income is lower, as it is for many people in retirement.

Alternatives to HELOCs

HELOCs do tend to have lower interest rates, but there’s more to consider when choosing which type of loan is right for you. Here are some alternative credit options and why they could potentially be better suited for your needs.

Home Equity Loans

A home equity loan also uses your home as collateral, but it acts more like a regular installment loan. With a home equity loan, you receive the funds in a lump sum payment. You may use a lump sum to make a one-time payment upfront, like for a kitchen remodel.

Cash Out Refinance

If you’re looking for another way to borrow against your home equity, consider cash-out refinancing. A cash-out refinance allows you to pay off your existing mortgage with a larger loan and pocket the difference.

A HELOC does not change your first mortgage. So, you could miss out on lower interest rates that could come from a cash-out refinance, depending on the interest rate environment. Like a HELOC, you can use this extra money to pay for home upgrades, education, or emergency expenses.

Personal Loans

If you’re not willing to put your home up as collateral, a personal loan may be a better option for you. Personal loans can be unsecured and can be used for many of the same expenses as a HELOC, like debt consolidation and home improvements. Personal loans have relatively short terms in contrast to the 10-year draw period and 20-year repayment period common to HELOCs.

Credit Cards

Credit cards will have a higher interest rate than a HELOC, but they are a better alternative if you need quick access to funds for emergencies or daily expenses. They tend to be more accessible than HELOCs because you don’t need to own a home or go through a lengthy application process. Credit cards can also give you cash-back rewards on purchases.

Frequently Asked Questions (FAQs)

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Reverse mortgages are special types of loans that give older homeowners a way to turn their home equity into a source of income they can use during retirement. When they move out or die, the lender usually takes and sells the home to repay the loan.

There are some benefits to reverse mortgages, but there are also some significant downsides to keep in mind. While they might not be a ripoff, reverse mortgages are not for everyone.

Pros and Cons of a Reverse Mortgage

Pros Explained

• You can keep living in your home while you have the mortgage: If you want to sell your home to get equity out of it, that usually means you can’t live in it anymore unless you rent from the new owners. Reverse mortgages let you stay in your home.
• No payments: Other ways to get equity out of your home, such as a home equity line of credit or loan, involve monthly payments. You only repay a reverse mortgage when you move out.
• Turn home equity into a source of cash or income: With a reverse mortgage, you can convert your home equity into a regular stream of income that you can use to pay other expenses.
• The income is tax-free: Because the money you get from a reverse mortgage is considered proceeds from a loan, you don’t pay taxes on it.
• Your risk is limited, in some cases: If you get a Federal Housing Administration (FHA)-insured reverse mortgage, your risk is limited. At the end of the loan, if the lender takes your home and it is not worth enough to pay off the outstanding balance, the government will cover the remainder.

Cons Explained

• Reverse mortgages come at a cost: It’s easy to forget that reverse mortgages are loans, which means interest will accrue over time. You also have to pay lender fees such as origination fees.
• May not get as much value out of your home: If getting the most value out of your home is the goal, reverse mortgages won’t help. The ongoing fees and interest typically mean you’ll get less than if you’d sold the home.
• Restrictions on what you can do with your home: When you obtain a reverse mortgage, the loan lasts for as long as you keep living in the home. If you want to move, spend a significant amount of time elsewhere, or need to go into a nursing home or care facility, you might be forced to sell the home.
• Risk of foreclosure: When you get a reverse mortgage, you agree to keep the house in good condition and pay required costs, such as property tax and insurance. If you fail to meet your end of the agreement, the lender could foreclose on you.

Spotting Reverse Mortgage Scams

Reverse mortgages are targeted at older homeowners. In fact, you have to be at least 62 to be eligible for an FHA-insured reverse mortgage.

Unfortunately, that means that reverse mortgage scammers looking to prey on the elderly are fairly common. It’s important to protect yourself from scams.

Some scams are easy to spot. Anyone using high-pressure sales tactics or trying to convince you to sign documents without letting you read them carefully or consult an attorney are likely scammers that you should avoid.

However, some scammers are less obvious.

It’s essential that you do your own research and due diligence, read documents carefully, and make sure you’re working with a trustworthy lender.

Should You Get a Reverse Mortgage?

Reverse mortgages can be a good idea for some homeowners, but they aren’t for everyone.

When It Makes Sense

Reverse mortgages can be a good choice for certain types of homeowners.

For example, if you plan to stay in your home for a long time and have no expectation of moving or spending large amounts of time in a second home, a reverse mortgage can be a good way to get cash out of your home.

This is especially true if you’re very tight on funds and can’t afford to make payments on something like a home equity loan—or just need more income to pay for necessities.

Reverse mortgages can also be a good choice for people with poor credit. They can be easier to qualify for than other types of loans that often require stronger credit scores.

When It Doesn’t Make Sense

Reverse mortgages might not be the right choice for some people.

One scenario where one would be a bad idea is if you own multiple homes and split time between them. You can only get a reverse mortgage on a primary residence. If it’s difficult to prove which of your homes is your primary residence, you might face foreclosure.

Further, you should avoid a reverse mortgage if someone other than your spouse lives with you. While qualifying spouses can stay in the home after you move out or pass away, other family members and roommates don’t get that protection if they’re not co-borrowers.

Alternatives to Reverse Mortgages

If a reverse mortgage isn’t right for you, there are other ways to get equity out of your home.

Home Equity Loan

A home equity loan uses the equity you’ve built to secure a loan. Like most typical loans, you get a one-time, lump-sum payment that you can use for almost any purpose. This makes these loans a good choice for people who have a one-off expense to cover but don’t need a stream of income.

Home Equity Line of Credit

Home equity lines of credit, or HELOCs, let you pull cash out of your home when you need it, up to a set limit. You only make payments and pay interest on the amount you’ve borrowed, similar to a credit card.

HELOCs can be useful for homeowners who might need multiple cash infusions because they let them avoid having to apply for a new loan each time they need cash.

Move to a Smaller Home

Many older homeowners are able to downsize their homes. For example, if you originally needed a larger home to house children who have grown up and moved out, you might have the option to move to a smaller house now.

If you sell your home and buy one that’s less expensive, you can use the extra proceeds to cover your expenses.

Frequently Asked Questions (FAQs)

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Definition and Example of an Enhanced Life Estate Deed

An enhanced life estate deed is an estate-planning instrument that transfers real estate to one or more beneficiaries during the owner’s lifetime. This avoids the need for probate at the time of the owner’s death. You might bequeath your home to your adult child in this way in your later years with the understanding that you’re not moving out. You retain the right to live there and maintain control over the property until your death.

An enhanced life estate deed is sometimes called a “Lady Bird deed.” The Florida lawyer who created this type of deed in the 1980s arbitrarily named it after President Lyndon B. Johnson’s wife. There’s no evidence that the President ever transferred property to Lady Bird Johnson in this way.

This type of deed is recognized in five states as of 2022: Florida, Michigan, Texas, Vermont, and West Virginia.

How Does an Enhanced Life Estate Deed Work?

The initial owner of the real estate, referred to as the “life tenant,” retains control over the property during their lifetime. The life tenant retains the right to mortgage or sell the real estate without the consent of their beneficiaries or the remaindermen named in the deed. They haven’t actually given the home to them yet. The real estate doesn’t actually transfer until the life tenant’s death.

Life Estate vs. Enhanced Life Estate Deed

A standard life estate deed also transfers ownership of a property prior to death, but the owner cannot mortgage or sell the home without the permission and “joiner” of their remaindermen. This type of deed effectively gives the remaindermen the property in the present time. The owner merely retains a “life estate,” the right to remain living there until death. “Joinder” means that these individuals are parties to any mortgage or sale.

The deed must still be prepared, signed, and recorded in the county land records office just like any other deed. A property that’s transferred by either of these deeds would require probate if the remainder beneficiaries should die before the life tenant.

Life Estate Deed	Enhanced Life Estate Deed
Owner can continue living there	Owner can continue living there
Owner cannot sell or mortgage the property without permission of the beneficiaries	Owner can sell or mortgage the property without the consent of the beneficiaries

Consider asking an estate planning attorney to draft the deed if you’re thinking about using one as part of your estate plan. You might accidentally create a standard life estate deed instead of an enhanced life estate deed if you make a mistake and if you happen to live in a state that recognizes both.

Life Estate vs. Transfer-on-Death Deeds

You might want to consult with an attorney to consider another estate-planning mechanism if you don’t live in one of the five states that recognize Lady Bird deeds. Transfer-on-death deeds function in a manner similar to enhanced life estate deeds. They don’t take effect and transfer property to beneficiaries until after death, but the language in the deed must specifically state this.

The property doesn’t require probate. It doesn’t become part of the decedent’s probate estate because a mechanism—the deed—is already in place to transfer ownership from the deceased owner to one or more living beneficiaries. More than half of all states recognized transfer-on-death deeds in their statutes as of 2020:

• Alaska
• Arizona
• Arkansas
• California
• Colorado
• District of Columbia
• hawaii
• Illinois
• Indiana
• Kansas
• Maine
• Minnesota
• Mississippi
• Missouri
• Mountain
• Nebraska
• Snowfall
• new Mexico
• North Dakota
• Ohio
• Oklahoma
• Oregon
• South Dakota
• Texas
• Utah
• Virginia
• Washington
• West Virginia
• Wisconsin
• Wyoming

Enhanced Life Estate Deed	Transfer-on-Death Deed
Recognized in five states	Recognized in 27 states
Transfers property after death and avoids probate	Transfers property after death and avoids probate
Owner retains control while alive	Owner retains control while alive
Not subject to Medicaid “lookback” rules	Property can be seized at death to repay Medicaid

You can revoke a transfer-on-death deed to transfer the property back. A conventional deed would require that a new deed be created to supersede the first one.

The Effect on Medicaid

The government imposes a five-year “lookback” period on Medicaid eligibility if a time should come when you require long-term care and you apply for these benefits. This means that you can’t transfer ownership of assets within five years of making the application. Some people have done this in an effort to “spend down” their assets in order to become eligible for Medicaid assistance, which is needs-based.

note

Medicaid requires that you use your own assets to pay for care first before you can become eligible for benefits. It’s not uncommon for homeowners to attempt to transfer their property to their children to avoid this, thus the “lookback” rule.

The extent of your Medicaid eligibility depends on the value of assets you own at the time you apply. Less is more. Many people believe that they can simply give property away before applying, but that isn’t the case. Assets given away during this five-year time period can be “pulled back” into the value of your estate for qualifying purposes.

An enhanced life estate deed technically doesn’t count as a transfer. You retain control over the property. That control doesn’t transfer until your death. This isn’t generally the case with transfer-on-death deeds, but it depends on state law.

Your home might still be considered available to pay back your Medicaid benefits after death, however. Federal law mandates that all states have an “estate recovery program” in place to recover benefits, but some states will only take from probate estates. Your property would be spared in this case if you were to transfer it by Lady Bird deed. Otherwise, your remainder beneficiaries might be forced to sell the home.

Do I Need to Pay Estate Tax?

A home transferred via a Lady Bird deed contributes to the value of the homeowner’s estate for estate tax purposes. The property is considered to be an inheritance granted to your remainder beneficiaries. Only estates with values ​​in excess of $12.06 million are subject to the federal estate tax as of the 2022 tax year.

note

You won’t incur gift tax for transferring property this way, because you’re granting the home at your death, not during your lifetime.

Several states also have estate taxes, however. Some of their exemption thresholds are much lower.

Your beneficiaries will receive a “stepped up” basis for purposes of any capital gains tax that might come due if they sell the real estate after your death. Their basis in the property is its value at the time of your death, not its value at the time you originally acquired it, as would be the case if it were transferred to them during your lifetime. This can make a considerable tax difference.

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Definition and Example of the Fair Housing Act

The Fair Housing Act is a law enacted in 1968 and has been updated several times since its inception. The law is enforced by the US Department of Housing and Urban Development (HUD).

The Fair Housing Act prohibits lenders, landlords, sellers, and agents from discriminating against homebuyers and tenants on account of specific characteristics, including race, color, religion, sexual orientation, nationality, disability, or family status. For example, thanks to the Fair Housing Act, it is illegal to refuse to rent a home to someone because they practice a different religion.

Individual states and local governments can add to the law, providing more protections, but they can’t take away from it. According to the Policy Surveillance Program from Temple University’s Beasley School of Law, 49 states and the District of Columbia have adopted additional protections.

note

Examples of additional protections in certain states include ancestry, gender identity, source of income, military status, and pregnancy.

• Alternate name: Title VIII of Civil Rights Act of 1968

How Does the Fair Housing Act Work?

Under the Fair Housing Act, property owners cannot discriminate against people in protected classes. They cannot refuse to provide reasonable accommodation to people who need it, such as people with disabilities. A reasonable accommodation is a change to the policies and practices of a property that will allow an occupant to use and enjoy it.

Nor can the property owner prevent a tenant from making a reasonable modification, at the tenant’s expense, that will allow them to use and enjoy the property. To be reasonable, the changes must not cause harm or be an undue burden (financially or administratively) to the housing provider.

Enforcing the Fair Housing Act

Because the Fair Housing Act is a federal law, it’s enforced by HUD. If you believe you’ve been a victim of illegal housing discrimination, you can choose to file a lawsuit in state or federal court, or you can file a complaint directly with the HUD.

If you file a complaint with the federal agency and it finds there’s reasonable cause to believe your rights were violated under the act, it will prepare charges of discrimination. You’ll then have 30 days to decide whether to have the charge tried in a HUD administrative court or a federal court.

If you proceed with the former, you’ll be represented by HUD attorneys. This process typically goes more quickly than a federal trial with a judge or jury, but you’re only eligible for compensatory damages—punitive damages won’t be awarded. With a federal trial, you’ll be represented by attorneys from the US Department of Justice (DOJ), and you could receive both compensatory and punitive damages from the defendant.

note

The Fair Housing Act can be difficult to enforce because many forms of discrimination aren’t overt and, therefore, cannot be documented. However, if you have documentation of discrimination, such as recordings or written records, contact an attorney or local fair housing agency to understand your rights and next steps. When a formal complaint is filed, HUD will investigate the allegation.

If HUD finds a pattern or practice of discrimination or the defendant has discriminated against a group of people to the point that it’s an issue of general public importance, it may refer the matter to the DOJ, which may directly file a lawsuit against a defendant on on behalf of the victims.

Penalties for Violating the Fair Housing Act

Civil penalties for violating the Act range from $16,000 for a first offense to $65,000 if there have been two or more violations during the previous seven years. If the case is tried in federal district court and the plaintiff wins, the defendant may have to pay actual, punitive, and compensatory damages as well as legal fees.

Types of Discrimination

If you’re not sure what counts as discrimination under the Fair Housing Act, here are some examples:

• A seller refuses to work with a prospective buyer because of their race or color, or because they don’t fit the demographics of the neighborhood.
• A landlord makes an apartment available but tells a tenant it’s been taken when they find out the candidate is a member of the LGBTQ community, only to tell others that it’s still available.
• A mortgage lender charges a higher interest rate because the borrower’s name appears to be from another nationality.
• A condominium complex doesn’t comply with accessibility requirements, such that a prospective tenant who uses a wheelchair won’t be able to access the units or parking.
• A landlord refuses to rent to a single woman with children.
• A real estate agent directs a prospective homebuyer to a different locale when they find out the buyer’s religion doesn’t match the predominant one in the area.

What It Means for Your Family

The Fair Housing Act is designed to help protect certain classes of people who may experience discrimination when trying to buy or rent a place to live. Unfortunately, though, discrimination still occurs, and it’s not always obvious enough to document and prove.

If you’re concerned about a landlord, lender, seller, or agent violating your rights, try to keep all communication in writing and document your conversations. This way, you can refer back to these documents to provide the discrimination, if needed.

If you believe your rights have been violated, don’t hesitate to contact your local fair housing agency or an attorney to determine the next steps you should follow.

Key Takeaways

• The Fair Housing Act prohibits landlords, lenders, sellers, and agents from discriminating against prospective homebuyers and tenants based on race, color, religion, sexual orientation, nationality, disability, or family status.
• Many states have adopted additional protected classes on top of those detailed in the Fair Housing Act, but they cannot take away from the Act’s provisions.
• If you’re concerned about discrimination from a landlord, lender, seller, or real estate agent, plan communications in a way that makes it possible for you to retain records.
• If your rights have been violated according to the Fair Housing Act, you can pursue legal action against the perpetrator.

Definition and Example Elder Law

Elder law is the specialized field of law that addresses the diverse legal needs of aging populations. It focuses on the legal issues affecting senior citizens and their elderly parents. Lawyers who are versed in these issues are known as “elder law attorneys.”

Suppose that your health is wanting, or you expect it as you approach your senior years. You can work with an elder law attorney who specializes in disability planning to complete an advance medical directive with a durable power of attorney for healthcare. That is a document that allows you to name a healthcare proxy to make medical decisions on your behalf when you can no longer do so. That kind of legal planning can avoid putting you in a situation where your healthcare providers have to choose treatments or make other decisions about your health that you might not agree with.

How Elder Law Works

Legal issues that impact seniors are governed by complex regulations and laws that vary by state. They often require a unique understanding of the personal impacts of aging, which can make you or your loved ones more physically, financially, and socially vulnerable. Elder law addresses the various decisions and circumstances that come up later in life. It also deals with how your estate plan will be executed after your death.

Elder law attorneys who focus their legal practices on these issues take a holistic approach when working with seniors and their family members. These attorneys help you navigate legal matters while also working with a network of care professionals, such as your health team and social workers and psychologists.

Many people think elder law is only a concern if you have complex life situations, such as a disability or special needs, a second marriage, a high-value estate, or financially reckless adult children. Elder law is important for people with these concerns, but it’s also vital for all seniors to become familiar with elder law. You should be ready to hire an attorney in order to protect yourself and your assets in your golden years and beyond.

Alternatives to an Elder Law Attorney

Not all issues relating to aging require the expertise of an elder law attorney. Hiring one when you don’t need one can come with unnecessary and high costs. For example, interpersonal or health issues may call for a social worker, psychologist, or doctor instead.

When in doubt, consult a family member, friend, or clergy member, or your primary care doctor. They can help you determine the scope of the concern and decide whether you need a lawyer. If you are caring for an elderly relative in an assisted living facility, the staff there may be able to recommend resources or experts who can help you find the right kind of help for your situation.

Types of Elder Law

Most elder law attorneys don’t specialize in all areas of the law. It’s important to seek out the right expert when you or your family members need legal assistance. Major areas of elder law include:

• Disability and special needs planning
• Long-term care planning
• Estate planning and settlement
• Guardianship or conservatorship
• Elder abuse

Disability and Special Needs Planning

This area of ​​elder law focuses on the support systems that the aging put in place to protect themselves in the event that they become physically or mentally incapacitated. There are some key legal documents that you may want to prepare in advance of such a scenario. These include:

• A durable power of attorney appoints someone as a legal agent to make certain financial decisions for you when you can’t.
• An advance medical directive outlines your healthcare wishes in case you become incapacitated, including a durable power of attorney for healthcare.
• A living will sets out which treatments you do and don’t want.

Without these documents, the court may leave these decisions up to a guardian (discussed below) who may not be of your choice.

In many cases, individuals with disabilities or special needs and their family members will be eligible to receive government benefits (Social Security disability benefits, for example). You’ll still need to do some planning to ensure that the individual qualifies for, and will receive, adequate assistance for their needs, though.

Long-Term Care Planning

This type of elder law focuses on the services that seniors often use to live safely when they cannot take care of themselves. They include nursing homes or assisted living facilities and long-term health insurance, along with the means by which they obtain these benefits (Medicaid or the Department of Veterans Affairs, for example).

Medicaid planning involves repositioning and transferring assets to qualify for Medicaid nursing home benefits. Veterans’ benefits concerning elder law encompass providing for the long-term healthcare needs of veterans of the US military.

Estate Planning and Settlement

Estate planning is the process of deciding who will receive your property after you die and who will be in charge of making sure your final wishes are carried out. It includes disability planning, as discussed above, as well as planning to:

A comprehensive estate plan might include the last will, a durable power of attorney, an advance medical directive, and, if needed, a revocable living trust. Also known as a “living trust,” a revocable living trust allows you to appoint someone else to make decisions about assets held in a trust.

Probate is the court-supervised process for settling a deceased person’s estate. It may or may not be necessary, depending on how your assets are titled at the time of your death. If you have a revocable living trust, the estate may be settled without the supervision of a probate court.

Guardianship or Conservatorship

If a person becomes incapacitated and did not put in place a durable power of attorney or advance medical directive, then a family member, a friend, or, in some cases, a stranger will have to go to court and petition for a guardian or conservator to be appointed on behalf of them. Guardianship, also referred to as “conservatorship” in some states, is sometimes referred to as “living probate” as it is the court-supervised process of administering an incapacitated person’s estate.

By contrast, if the person took the time to create a disability plan with the help of an estate lawyer who is versed in guardianship, then he or she would have the right legal documents in place to dictate who will make financial and healthcare decisions on their on behalf.

Elder Abuse

Unfortunately, as people age, they become more prone to personal or financial abuse. This misconduct can range from Social Security fraud (for example, a non-spouse family member continues to receive benefits after the person has died) to the outright theft of assets.

Financial elder abuse can also occur through the use of a durable power of attorney or by undue influence. For example, someone may wrongfully coerce an older adult to give away their assets or to change their will or revocable living trust. Such abuse has led to this specialized area of ​​litigation aimed at preserving, and, if needed, recovering, an older person’s assets.

How To Get a Lawyer Who Specializes in Elder Law

One way to find a lawyer is through the National Academy of Elder Law Attorneys (NAELA). This non-profit association was founded in 1987. Its lawyers are trained and experienced in the nuances of elder law and adhere to a set of what it calls “aspirational standards” that hold them to a high standard of professional conduct. The “Find a Lawyer” page on its website allows you to search for an attorney by name, location, area of ​​practice, or other criteria.

You can’t get a power of attorney to act for someone after they have died, and an existing power of attorney becomes invalid upon the death of the principal—the individual who gave you the right to take certain actions on their behalf.

Someone is still going to have to take care of their affairs after their death, but it won’t necessarily be the agent appointed in a power of attorney during their lifetime.

Does Power of Attorney Last After Death?

Perhaps your parent recently passed and you were named as their agent in a power of attorney (POA). You’re the individual they wanted to take care of certain personal business matters for them. The POA gave you the authority to act on their behalf in a number of financial situations, such as buying or selling a property for them or maybe just paying their bills.

You might think that you should continue paying those bills and settling their accounts after their death, but you should not and you can’t—at least not unless you’ve also been named as the executor of their estate in their will, or the court appoints you as the administrator of their estate if they didn’t leave a will.

Who Has Power of Attorney When There’s a Will?

People can no longer legally own property after they’re deceased, so probate is required to transfer their property to living heirs. Your parent’s will must, therefore, be filed with the probate court shortly after their death if they held a bank account or any other property in their sole name.

This begins the probate process to legally distribute their property to their living beneficiaries. The executor named in their will is responsible for doing so and guiding the estate through the probate process.

Who Has Power of Attorney When There’s No Will?

The deceased’s property must still pass through probate to accomplish the transfer of ownership, even if they did not leave a will. The major difference is that their property will pass according to state law rather than according to their wishes as explained in a will.

The court will appoint an administrator to settle the estate if the deceased did not leave a will. You can apply to the court to be appointed as administrator, and the court is likely to agree if the deceased left no surviving spouse, or if their surviving spouse and their other children agree that you should do the job.

Estate Executor vs. Power of Attorney Agent

In either case, with or without a will, the probate court will grant the authority to act on a deceased person’s estate to an individual who might or might not also be the agent under the power of attorney. The two roles are divided by the event of the death. In some cases, however, the agent in the POA might also be named as executor or administrator of the estate.

What Does Someone With Power of Attorney Do After a Death?

The POA you hold for your parents is useless and serves no purpose after their death. The deceased person no longer owns anything for you to handle for them because they can’t legally hold money or property.

The POA might authorize you to make financial transactions for them, but they technically no longer own the property or the money over which the POA placed you in charge. Their estate owns it, so only the executor or the administrator of their estate can deal with it during the probate process.

Some very small estates don’t require probate, or your parent might have used a living trust as an estate-planning method rather than a last will and testament so probate would not be required. A successor trustee would take over after the deceased’s death if they left a revocable living trust, but these exceptions are limited.

The POA becomes invalid in both cases anyway.

Power of Attorney and Rights of Survivorship

It can also change things if your parent’s bank account or other property is not included in their probate estate for some reason. Probate is only necessary for assets that your parent owns in their sole name. These assets require a legal process to transfer to living beneficiaries.

But if your parent lists you as co-owner of their bank account or even on the deed to their home, giving you “rights of survivorship,” the account or the property passes automatically and directly to you at their death. Probate of these assets would not be necessary.

You would retain control over these assets, but you would no longer be responsible for paying your parent’s debts from that money because probate also handles their final bills. You would be responsible for paying debts on which you co-signed with the deceased, just as you were during their lifetime.

Frequently Asked Questions (FAQs)

Definition and Example of a Fungible Investment

Fungibility is the ability to substitute one unit of a financial instrument for another unit of the same financial instrument. This works with paper money when you swap your dollar for someone else’s. It doesn’t work if you try to trade a US dollar for a Canadian dollar—they don’t share the same value.

In trading, fungibility implies the ability to buy or sell the same financial instrument in two or more different markets. A financial instrument (such as a stock, bond, or futures contract) is considered fungible if it can be bought or sold on one market or exchange, and then sold or bought on another market or exchange.

There are many fungible financial instruments, with the most popular being stocks listed on multiple exchanges, commodities (such as gold and silver), and currencies.

For example, if you can buy 100 shares of a stock on the Nasdaq in the US and sell the same 100 shares of that stock on the London Stock Exchange in the UK, with the net result being zero shares (100 bought and 100 sold) , then the stock is fungible.

How a Fungible Investment Works

In simplest terms, fungible securities allow investors and speculators to buy low and sell high to make a profit. This works through a process known as “arbitrage.” A trader takes advantage of a price difference in two different markets, buying at a lower price in one market and selling at a higher price in the other market.

For example, consider a stock that’s listed on both the Austrian and German stock markets. One market has the shares trading at 6.23, and the other has them trading at 6.27 (both priced in euros). A trader can buy the shares at 6.23 on the one exchange and sell them at 6.27 on the other, netting 0.04 euro per share.

It becomes more complex when a stock or other asset is priced in different currencies on each exchange. For example, there can be more than 300 (the number fluctuates) listed on both the Canadian and US stock markets.

The stocks on the Canadian market are listed in Canadian dollars, while the same stocks will be priced in US dollars on the US exchanges. Since stock prices constantly fluctuate, and so do exchange rates, fungible stocks are more likely to have arbitrage opportunities. Because of the exchange rates, though, spotting good opportunities requires more effort.

What It Means for Individual Investors

Suppose you find a stock that trades on the US exchange, currently with an ask price of $10 and a US dollar (USD)/Canadian dollar (CAD) exchange rate of 1.30.

If the best deal you can get is a USD/CAD rate of 1.30, then it is expected that the stock would trade at about C$13 on the Canadian exchange. ($10 US stock times 1.30 equals C$13.)

From second to second, there may be small discrepancies, as the currency rate changes and the stock is subject to its own price changes from buying and selling pressures. If traders see a large enough arbitrage opportunity to make a quick profit, they will step in. This pushes the underpriced market up (by buying) and the overpriced market down (by selling), bringing the two markets back into equilibrium.

HELOC	Home Equity Loan
Secured by your home equity	Secured by your home equity
Low interest rates	Low interest rates
Usually variable rate	Variable or fixed rate
Draw funds multiple times	One-time payout
Upfront and annual fees	Upfront fees, but no annual fees

Secured by Home Equity

Both home equity loans and HELOCs are secured by the value of your home. The amount of equity that you have directly impacts the amount that you can borrow. More equity means a higher borrowing limit.

Interest Rates

An advantage to securing a home equity loans and a HELOCs with your home is that it greatly reduces the lender’s risk. That means these loans have some of the lowest rates of any type of debt.

One important difference between the two is that HELOCs tend to have variable interest rates. That means the rate can change over time based on market rates. With a home equity loan, you usually have the choice of variable or fixed rates.

Access to Funds

An important difference between HELOCs and home equity loans is when you can access funds.

HELOCs let you draw funds multiple times as the need arises. That makes them ideal for people who might need cash quickly or who need to withdraw cash multiple times.

Home equity loans give a one-time distribution of cash, which makes them better for one-time expenses such as paying for a home renovation.

Fees

Both HELOCs and home equity loans include fees. Both loans usually carry origination fees and closing costs that you pay upfront. However, only HELOCs have annual maintenance fees that lenders charge to keep the line of credit open. Home equity loans don’t tend to have ongoing fees to pay.

How To Get a HELOC

If you think that a HELOC is right for you, here’s how you can find one.

Compare Lenders

The first thing to do when you’re looking for any type of loan is to shop around and compare different lenders. Each lender will offer different rates, fees, and other features for their loans. If you take the time to look at a few different options, you might find one that’s offering a much better deal.

Gather Your Information

Before applying, make sure you have all the necessary documents ready. You’ll need things like:

• Personal identification, including Social Security number
• Income information and employment history
• Home documents, including a recent mortgage statement
• Proof of homeowners’ insurance
• Property tax bills
• Information about other outstanding debts
• A list of your assets and account statements

Submit an Application

Once you’re ready, you can submit an application for a HELOC. Provide all the requested documents and work with your lender to verify the details of your home value, employment and income history, and answer any other questions they might have.

Appraisal

If your lender approves you for a HELOC, they’ll want to confirm that your home is worth enough to properly secure the loan. They’ll order an appraisal of your home to determine its value. The result of this appraisal can play a role in determining how much you can borrow with your HELOC.

Closing

If the appraisal comes back and shows you have sufficient equity, the next step is closing. You’ll sign all of the loan documents and paperwork. You will have three days to cancel the HELOC if you change your mind.

Use Your Line of Credit

After the three-day waiting period, your HELOC is officially open and you can start accessing the line of credit. You will have a draw period—typically 10 years—from which to access the funds as needed. During this time, you will start making monthly payments to include a portion of the principal (the amount you borrow) plus accrued interest.

Alternatives to HELOCs

HELOCs are one option for homeowners looking to get cash out of their homes, but there are alternatives to consider.

Home Equity Loan

A home equity loan provides a one-time distribution of funds that homeowners can use for things like paying a large medical bill, funding home improvement, or consolidating debt.

Home equity loans are typically fixed-rate loans and are ideal for one-time expenses. They’re not the best choice for situations where you might need to withdraw funds multiple times.

Cash Out Refinance

A cash-out refinance lets you refinance your entire mortgage and take some of the equity out of your home as cash. For example, if you owe $200,000 on your mortgage and have a home worth $300,000, you could refinance your mortgage with a new, $250,000 loan to replace the existing loan and get $50,000 in cash.

Like home equity loans, cash-out refinances are best for one-time expenses because they offer a one-time payout of funds. However, because they replace your entire mortgage, they tend to be most useful when you can refinance to a lower rate or want to trade an adjustable-rate mortgage for a fixed-rate one.

Reverse Mortgage

A reverse mortgage lets homeowners age 62 or older turn their home equity into a source of income during retirement. These loans are far more complex than HELOCs and other equity-based loans, so it’s important to do your due diligence before getting one.

In general, they can be a good choice for older homeowners who need to supplement their income but aren’t useful for many other situations.

Frequently Asked Questions (FAQs)

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Definition and Example of a Stock Quote

Stock quotes give information about a particular stock’s recent trading activity on a given exchange. How close this data is to real time will depend on the exchange and where you are looking for the information. During the trading day, you can usually see both the prices buyers are willing to pay (bids) and the prices sellers are offering (asks), along with a range of other information. These quotes enable buyers and sellers to find each other and make trades.

For instance, if you wanted to know information about how shares of the Coca-Cola Company were trading, you’d look for the company’s stock quote. You’d see its ticker symbol, which is KO. You’d also see the price of each share, which was $64.74 on May 6, 2022. The stock quote shows you much more than just the current share price. It includes valuable data that you can use to evaluate the company’s shares as you decide whether to buy or sell.

How Stock Market Quotes Work

Both buyers and sellers require data about a particular stock to make a decision and execute a trade. At the very least, they’ll need the name of the stock, its ticker symbol, agreed upon price, and the number of shares they want to buy or sell.

Whether you’re trading on the New York Stock Exchange, the Nasdaq, or another stock exchange, a given stock quote will show some or all of the following information, often in an abbreviated format:

• Open: This is the stock’s opening price. This and all prices are quoted to a hundredth of a cent.
• 52-week high and low (or range): These two numbers record the highest and lowest prices at which the stock traded during the previous 52-week period, but they do not include the previous trading day. The numbers may be adjusted for stock payouts or large dividends.
• Stock symbol (SYM): This is the stock ticker symbol. You can find the symbol for a given company on many financial websites by simply typing the name of the company.
• Dividend (DIV): A dividend is a portion of profits paid to a company’s shareholders. Unless noted in a footnote, this reflects the annual price per share based on the last regular disclosure.
• Yield percentage (Yld%): The yield percentage expresses the dividends and any other disbursements paid to stockholders as a percentage of the stock’s price.
• Earnings per share (EPS): This is a company’s net earnings divided by its total number of shares. A higher number indicates greater profitability.
• Price-to-earnings ratio (P/E): The price-to-earnings ratio is the price of the stock divided by its EPS. This number helps investors compare stock prices more directly to those of other companies.
• Sales volume (Sales 100s): This shows the total amount of stock sold that day, expressed in hundreds. In other words, sales volume is expressed with two zeros missing. For example, if the number reported is 1,959, that means sales volume for that stock was 195,900 for the day.
• High: This is the highest price paid for the stock during the previous day.
• Low: This is the lowest price paid for the stock during the previous day.
• Last (or close): This is the last price at which the stock traded on that day. It does not mean that is the price at which the stock will open the next day, however.
• Change: This describes the difference between the last trade and the previous day’s price.
• Year-to-date percentage change (YTD% CHG): This number is the stock price percentage change for the calendar year. The percentage is adjusted for stock splits and dividends of more than 10%.
• Net change (CHG): The net change is calculated from the previous day’s close, so you are comparing what the stock closed at today to what it closed at yesterday.

You may also notice some footnotes throughout the listings. These point out any number of extraordinary circumstances, including new highs or lows, the first day of trading, or unusual dividends.

What a Stock Market Quote Means for Individual Investors

Once you understand how to read a stock quote, you can begin to make educated decisions regarding investments. With the data you gather, you can learn how to value a company and even make predictions about a stock’s performance. You’ll get to know how to read a stock’s volatility and better gauge your risk when investing.

You can follow a stock’s price throughout the day, although you should be aware that the quotes you see on many free internet sites are delayed. Data providers may delay quotes by 20 minutes or more, enabling them to sell truly live quotes at a premium.

Use a watchlist to track stocks you’re interested in over time. Although past performance does not guarantee future results, tracking your picks helps you learn to identify stocks that meet your trading criteria. It also allows you to detect patterns that can help you in your trades.

Hosting a place on Airbnb can be a lucrative undertaking—although financing the initial investment might seem daunting. To help you gain a greater understanding of financing an Airbnb business, we’ll cover the main options for funding, tips to help you successfully finance the venture, and answers to some frequently asked questions.

Can You Finance an Airbnb Business?

There are several different options for financing an Airbnb business. Keep in mind that it can typically be more challenging to procure funds for an investment property destined to be rented than a property purchased as the borrower’s main residence. This is because lenders often consider it to be a riskier investment and in general require a higher cash deposit to secure its financing.

From a lender’s point of view, if money runs tight, you’re more likely to continue paying the bills on your main residence and your second home will probably be less of a priority. Short-term rentals are also considered riskier than long-term rentals, as they require more attention to keep the space regularly occupied. A few weeks without guests could create difficulties in paying back the borrowed funds.

Airbnb Financing Options

While launching an Airbnb business can seem like an expensive undertaking, there are viable options available to help you finance your venture. Here are some of the common ways you can fund your new investment.

Mortgage

Taking out a mortgage for your rental property could give you a reliable loan with favorable interest rates. However, qualification may be difficult—you might need to contribute a bigger down payment, have a personal credit score of at least 640 to 700, maintain higher cash reserves, and have a lower loan-to-value ratio.

Home Equity Loan or Line of Credit

A home equity loan, often known as a second mortgage, can provide you with a lump sum of cash that you can then put toward an investment property. The money is repaid on a regular basis with set rates. Home equity lines of credit (HELOCs), meanwhile, work like credit cards—borrowers have access to a certain amount of funds. The funds used must be repaid with interest.

Owner-Occupied Investment Property

If you purchase a multi-unit property and live on-site, you may qualify for better terms, lower interest rates, and funding that otherwise wouldn’t be available. You must meet specific criteria in regards to how much time you live in the space, how soon you must move onto the property after closing, and more, so make sure that you understand all of the requirements beforehand.

Small Business Funding

Consider looking into small business funding options from the US Small Business Administration or through Airbnb partnerships with Fannie Mae, for example, when deciding how to back your Airbnb business. One advantage of small business funding is that the money can be used to fill most business needs you may have, whether that’s buying inventory and equipment or covering day-to-day costs.

Hard Money Loan

Hard money loans are short-term loans from private lenders that are backed by property or assets. If a borrower defaults on the loan, the lender can take possession of the collateral. These loans tend to have easier qualifications as the lender is more interested in the value of the asset or property you’re buying.

Hard money loans usually come with higher rates, higher fees, and shorter repayment terms. Borrowers often consider hard money loans after they’ve been denied more traditional forms of financing, or if they’re looking for a quicker route to funding.

Tips for Successfully Financing an Airbnb Business

Financing an Airbnb business doesn’t have to be complicated. Here are some pointers to keep in mind to ensure a smooth funding process:

• Understand the investment you’re making. Why are you investing, and what are you hoping to get out of it? Being clear about your objectives will help you identify what kind of funding to pursue.
• Shop around and compare offers from different lenders. When considering your financing options, make sure to find the best fit for your needs.
• Estimate your predicted expenses. You’ll want to consider maintenance costs and any additional insurance you may need. Also consider the time commitment of cleaning, upkeep, and responding to guests if you will be in charge of these tasks or the cost associated with them if you will hire someone else to manage them for you. Cleaning expense has been an important cost item for Aibnb entrepreneurs. Recently, Airbnb added a cleaning fee as a charge for guests to cover this recurring cost item.
• Do your research. Before purchasing a home to use as an Airbnb rental, you’ll want to familiarize yourself with the local laws regarding short-term rentals. Also, check the listings in the area to get a feel for their vacancy rates and price points.

Frequently Asked Questions (FAQs)