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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.

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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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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Average 30- and 15-year mortgage rates climbed back toward their recent peaks, the latest in a series of up-and-down swings.

The average on a conventional 30-year fixed mortgage rose to 5.92% from 5.77% the previous business day. Last month it reached 6.19%, its highest point since at least 2019, and likely much farther back. (Our daily mortgage rate data only goes back to April 2021, but our data on yearly highs and lows dates back to 2020, so we know rates weren’t higher in 2020, and if other measures are any indicator, may have hit their highest point in over a decade.)

The average rate on a 15-year mortgage rose to 5.06% from 4.97% the previous business day. Its recent peak was 5.26%, also the highest since at least 2019.

Fixed mortgage rates tend to track the direction of 10-year Treasury yields, which usually rise with heightened inflation fears (and fall when those fears subside). Yields have generally spiked over the last two months—albeit with some up-and-down days—as inflation and the Federal Reserve’s effort to lower it with higher interest rates have intensified. Last week, the Fed announced a second rate hike of a half percentage point to its benchmark fed funds rate, double the size of its first increase in March.

During the pandemic, relatively low rates bolstered buying power, allowing house hunters to buy more expensive homes with the same monthly budget and helping to fuel a fiercely competitive residential real estate boom characterized by rapidly rising prices. But now that interest rates have spiked, the cost is increasingly putting homes out of reach for prospective buyers. Freddie Mac’s weekly measure of the average 30-year rate is at its highest point since 2009, although it’s still relatively low compared to the double-digits of the 1980s and early 1990s.

Borrowers pay discount points, or upfront fees, to obtain a lower interest rate, spending more initially to save in the long run. Whether or not you should pay points depends on how long you plan to keep the loan. Here’s how to calculate that.

30-Year Mortgage Rates Jump

A 30-year fixed mortgage is by far the most common type of mortgage because it offers a consistent and relatively low monthly payment. (Shorter-term fixed mortgages have higher payments because the borrowed money is paid back more quickly.)

Besides conventional 30-year mortgages, some are backed by the Federal Housing Authority or the Department of Veterans Affairs. FHA loans offer borrowers with lower credit scores or a smaller down payment a better deal than they might otherwise get; VA loans let current or past members of the military and their families skip a down payment.

• 30-year fixed: The average rate rose to 5.92%, up from 5.77% the previous business day. A week ago, it was 5.87%. For every $100,000 borrowed, monthly payments would cost about $594.42, or $3.20 more than a week ago.
• 30-year fixed (FHA): The average rate rose to 5.71%, up from 5.56% the previous business day. A week ago, it was 5.85%. For every $100,000 borrowed, monthly payments would cost about $581.03, or $8.91 less than a week ago.
• 30-year fixed (VA): The average rate rose to 5.68%, up from 5.46% the previous business day. A week ago, it was 5.88%. For every $100,000 borrowed, monthly payments will cost about $579.13, or $12.73 less than a week ago.

15-Year Mortgage Rate Rises

The best advantage of a 15-year fixed mortgage is that it offers a lower interest rate than the 30-year and you’re paying off your loan more quickly, so your total borrowing costs are far lower. But for the same reason—that the loan is paid back over a shorter time frame—the monthly payments will be higher.

• 15-year fixed: The average rate rose to 5.06%, up from 4.97% the previous business day. A week ago, it was 4.94%. For every $100,000 borrowed, monthly payments would cost about $793.92, or $6.25 more than a week ago.

Jumbo Mortgage Rates Climb or Hold Steady

Jumbo loans, which allow you to borrow bigger amounts for more expensive properties, tend to have slightly higher interest rates than loans for more standard amounts. Jumbo means over the limit that Fannie Mae and Freddie Mac are willing to buy from lenders, and that limit went up in 2022. For a single-family home, it’s now $647,200 (except in Hawaii, Alaska, and a few federally designated high- cost markets, where the limit is $970,800).

• Jumbo 30-year fixed: The average rate rose to 5.15% from 5.02% the previous business day. A week ago, it was 4.90%. For every $100,000 borrowed, monthly payments would cost about $546.03, or $15.30 more than a week ago.
• Jumbo 15-year fixed: The average rate was 5.02%, the same as the previous business day. A week ago, it was 4.90%. For every $100,000 borrowed, monthly payments would cost about $791.84, or $6.25 more than a week ago.

Refinance Rates Increase

Refinancing an existing mortgage tends to be slightly more expensive than getting a new one, especially in a low-rate environment.

• 30-year fixed: The average rate to refinance rose to 6.32% from 6.05% the previous business day. A week ago, it was 6.04%. For every $100,000 borrowed, monthly payments would cost about $620.28, or $18.16 more than a week ago.
• 15-year fixed: The average rate to refinance rose to 5.38% from 5.21% the previous business day. A week ago, it was 5.11%. For every $100,000 borrowed, monthly payments would cost about $810.73, or $14.19 more than a week ago.

Methodology

Our rates for “today” reflect national averages provided by more than 200 of the country’s top lenders one business day ago, and the “previous” is the rate provided the business day before that. Similarly, the week earlier references compare the data from five business days earlier (so bank holidays are excluded.) The rates assume a loan-to-value ratio of 80% and a borrower with a FICO credit score of 700 to 759—within the “good” to “very good” range. They’re representative of the rates customers would see in actual quotes from lenders, based on their qualifications, and may vary from advertised teaser rates.

Have a question, comment, or story to share? You can reach Diccon at dhyatt@thebalance.com.

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If you’re like most people, you’ll need to take out a mortgage to buy a home. According to the US Census Bureau, 94% of people who bought a home in 2021 purchased it with a mortgage.

When you start shopping for a mortgage, it’s easy to get overwhelmed. There are lots of different types of mortgages, each of which is better for some people than others. Here’s how to tell which type of mortgage might be best for you.

Fixed-Rate Mortgages

Fixed-rate mortgages are mortgages with a single interest rate that stays consistent over the entire life of the loan, whether that’s 15, 25, or 30 years. Your interest rate will never change, regardless of what the economy does.

Each type of mortgage can be described with more than one classification. For example, every mortgage has either a fixed rate or an adjustable rate. You can have a fixed-rate FHA loan, for example, or an adjustable-rate conventional mortgage.

Why Homebuyers Use This Type of Loan

• It’s easier to budget for your mortgage payment because it’ll stay the same for the whole term.
• You won’t have to worry about your payment drastically increasing if interest rates go up.

Limitations

• Interest rates are usually a bit higher for fixed-rate mortgages than for adjustable-rate mortgages.
• If you buy your home when interest rates are high, you’re stuck with that rate unless you refinance.

Adjustable-Rate Mortgages

If you have an adjustable-rate mortgage (ARM), your payment amount may fluctuate a lot more than a fixed-rate mortgage would. Each ARM loan agreement describes how often the rate might adjust, how much it can adjust in any one step, and the lifetime limits on how high it can go.

Why Homebuyers Use This Type of Loan

• Interest rates are usually lower than for fixed-rate loans—at least at the start of the loan.
• Some homebuyers use ARMs to keep their payments lower near the beginning of the loan. This can work in their favor if they plan to resell or refinance the home, especially before the ARM’s first-rate adjustment.

Limitations

• ARMs can be a lot more confusing than fixed-rate loans.
• Your payment can change significantly over the life of your loan, making it difficult to afford your mortgage in the future.

Conventional Mortgages

A conventional mortgage is a term for any mortgage given out by a lender that is not part of a government-backed program. If you don’t qualify for any special mortgage programs, this is likely the type of mortgage you have. It’s the most common mortgage type, making up 74% of all mortgages in 2021, according to the US Census Bureau.

Typically, your lender will sell these conventional mortgages to either Fannie Mae or Freddie Mac. For your mortgage to be sold to one of these entities, it must conform to their guidelines, hence why these mortgages are often called conforming loans.

Why Homebuyers Use This Type of Loan

• They may not qualify for other types of mortgages with more favorable terms, like VA loans.
• Interest rates may be lower than for some other types of loans, such as FHA loans.

Limitations

• You may be required to pay an extra fee for private mortgage insurance (PMI) if you make a down payment of less than 20%.
• It can be more difficult to get approved if you have a lower credit score or recent credit dings.

Mortgages Backed by Government Programs

VA Loans

If you’re a veteran or active-duty service member, VA loans can be very lucrative. Overseen by the Department of Veterans Affairs, these home loans generally offer the cheapest rates of all the different types of mortgages. VA loans require no down payment (although sometimes it’s good to put as much down as you can). If you have a lower credit score or negative credit information on your file, it may also be easier to get approved for a VA loan than for other types of mortgages.

FHA Loans

Regulated by the Federal Housing Administration, FHA loans are designed to make homeownership more accessible for people who might not otherwise qualify because they don’t have the greatest credit score or haven’t managed to save up a large down payment. FHA loans tend to be more expensive than conventional loans, but you may be able to get approved with a credit score as low as 500 and a down payment of just 3.5%.

USDA Loans

If you live in a rural area and you’re not a high-income earner, the USDA loan program might be right for you. You won’t need a down payment (but you might still want to put down as much as you can afford). You may also have to pay an extra fee for mortgage insurance, but even so, these loans are usually cheaper than FHA loans.

Why Homebuyers Use These Types of Loans

• VA loans are typically the cheapest mortgage options for current and former service members.
• FHA and USDA loans can unlock home ownership for people who might not otherwise be approved for a conventional mortgage, either because of credit issues or a lack of down payment savings.

Limitations

• These loans may take longer to close because properties need to be inspected and meet loan requirements.
• USDA and FHA loans are typically more expensive than conventional loans for people with good credit and larger down payments saved up.

Jumbo Mortgages

Jumbo mortgage is a broad term for any type of mortgage that is bigger than the limits of common mortgage programs.

For example, if a conventional mortgage is larger than what Fannie Mae or Freddie Mac will buy, then it’s a jumbo non-conforming mortgage. “Non-conforming” comes from the fact that it doesn’t conform to the limits set by those organizations. Similarly, a veteran may be able to use a VA loan to buy a house that costs more than the program’s limit. In this case, the borrower would have a jumbo VA loan.

Why Homebuyers Use This Type of Loan

• Jumbo loans can be used to purchase expensive properties, such as luxury homes.
• In areas with a high cost of living, a jumbo loan may be required to purchase even a medium-value home.

Limitations

• May require better credit and a high income for approval.

How To Tell Which Loan Type Is Right for You

The right mortgage for you will depend on your circumstances, including your:

• Credit score and history
• Down payment
• Income
• Ability to take advantage of special types of mortgages, like USDA or VA loans

Frequently Asked Questions (FAQs)

That’s the last time (before now) the S&P 500 had fallen five weeks in a row, showing why the stock market’s recent deterioration is so hard to take.

The nearly 11-year stretch without such losing streaks was the longest in the history of the index going back to 1928, according to analysts at Deutsche Bank, suggesting that the “relentless march” of US stocks over the last decade was a fluke characterized in part by “a buy the dip narrative.”

“The last decade has very much been the exception rather than the norm,” they wrote in a commentary.

The benchmark stock index only fell 0.2% last week, but that fifth straight down week left it 9.3% lower than at the beginning of April. And there was no relief on Monday, either. It dropped 3.2% to close at 3,991.24, its lowest point in more than a year, and even farther into correction territory—down 17% from the record high reached in January.

The S&P 500’s recent decline highlights just how many factors have converged to undermine stock prices. Investors are increasingly wary of fallout from rampant inflation. Federal Reserve officials are raising the central bank’s benchmark interest rate to fight higher prices, but many estimate they may trigger an economic recession if they go too high too fast. On top of that, the war in Ukraine and COVID-19 lockdowns in China threaten to further disrupt already gnarled supply chains.

“Wall Street remains uninspired to ‘buy the dip’ as inflation seems poised to remain stubbornly high, which will force the Fed to tighten policy to levels that will jeopardize the soft landing most traders were expecting” for the economy, Edward Moya, a senior market analyst at OANDA, said in a commentary. “No one can confidently answer the question of when stocks will hit the bottom.”

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	Starter home	Forever home
Definition	A home you plan to own for a short period before buying another one	The only home you plan to buy
Home features	May have drawbacks in size, location, or other features	Must meet both current and future needs
Cost	Typically cheaper	Typically more expensive
Mortgage	May prefer an ARM	May prefer a fixed rate
Incentives	Last the life of the loan, but don’t carry over to the next loan	Last the life of the loan
Equity	Builds equity	Builds equity

Home Features

A starter home gets you out of renting and into ownership, with the expectation that you’ll eventually move on to another home. It might not be perfect—maybe it’s a little too far from work, it only has one bathroom, or is in dire need of upgrades. Since you aren’t planning on living in it permanently, those drawbacks might not be deal-breakers.

A forever home, meanwhile, is the only one you plan on buying. That means you’ll need to find a home that suits your current needs and all your future needs, too. If you plan to get married, have kids, or work from home, you should consider how these decisions will affect your need for features like outdoor space, more bedrooms, or nearby schools. While you can eventually renovate an outdated kitchen, you can’t change your home’s location.

Cost

The perspective described above plays into perhaps the biggest difference between a starter home and a forever home: the cost. Because starter homes typically need a little TLC, they’re often cheaper than newer, larger, or fancier homes in the same area. Homebuyers who only plan to stay for a few years may be more willing to overlook a few flaws or may have a plan to improve them.

Because a forever home needs to meet your future needs, it might be newer or larger than you need right now. For example, a couple might consider buying a four-bedroom forever home because they plan to have kids eventually, but they’ll likely spend more than they would on a home big enough for just the two of them.

Mortgage

If you plan on moving on from a starter home after a few years, an adjustable-rate mortgage (ARM) could be a good choice. An ARM typically starts with a low interest rate, which becomes variable after a certain period of time. If the length of the introductory rate lines up well with the amount of time you plan to own your starter home, an ARM could be a good choice since you can sell your property before the rate increases.

Those seeking a forever home may prefer to opt for a steady 30-year fixed mortgage, where rates won’t ever jump around. While this type of mortgage may come with a higher interest rate than the initial rate of an ARM, it’ll stay put over time—whereas the ARM’s rate has the potential to increase. If you plan to own your home for decades, you may prefer the predictability of a consistent payment.

Incentives

First-time homebuyer programs offer benefits like reduced down payments, down payment assistance, and special interest rates. Programs vary by state, and many have specific income and credit score requirements. In addition, many programs specify a maximum purchase price, so you may need to keep that in mind during your home search.

In many cases, the incentives last for the life of the loan. If you’re buying a forever home, that’s great news—you can continue to enjoy the benefits for years or decades. However, if you buy a starter home, you’ll lose the program’s advantage when you eventually sell it and move on to another property.

Equity

Perhaps most importantly, the money you pay toward your mortgage builds home equity. Whether you buy a starter or forever home, putting money toward your own property means you’re building your own equity instead of paying rent and building your landlord’s equity.

Equity isn’t just built by paying off your mortgage; it also builds as your home’s value increases. For example, 2021 had a historically high year-over-year increase in home prices, with homeowners selling their properties for a median of $85,000 over the price at which they purchased them. That $85,000 is equity, and this type of appreciation is one reason that real estate is often considered a good investment (although there’s always the chance that property values ​​could decrease).

The chance to start building equity sooner is one especially compelling reason to opt for a starter home rather than a forever home if it will take you much longer to save for the latter. Every year you wait before buying is a year you’re not building equity. And when you sell your first home, you can use your home equity to help finance the purchase of your next property. If you buy a starter home, you’ll take advantage of this option sooner than if you choose a forever home.

Starter Home vs. Forever Home: Which Is Right for You?

So how do you choose whether a starter home or a forever home is right for you? In the end, it’s a personal decision, and everyone’s situation is different. For example, one person might consider buying a downtown condo as a starter home, while another might see that condo as the perfect forever home. It all depends on your perspective and plans.

Let’s take a look at some factors that might help you choose one option over the other.

When a Starter Home Is the Best Choice

If you’re keen to begin building equity in your own investment as soon as possible, a starter home might be right for you. Since starter homes are typically more affordable, they might appeal to buyers who want to take advantage of low interest rates by buying sooner rather than later.

A starter home can also be a good option if you’re not sure what your life will look like in five or 10 years. For example, while you hope to eventually have several kids, you don’t have any now—so you don’t necessarily need those extra bedrooms right away. Or perhaps you love living in the city in your 20s but see yourself moving to the suburbs by the time you’re 40. Buying a starter home means you can focus on your current needs rather than trying to predict what you might want later.

When You Should Choose a Forever Home

Perhaps you don’t plan to have kids or your family is already complete, and you love the neighborhood where you plan to buy. Maybe you see yourself hosting gatherings in the same living room for the next 30 years. If you have a clearly defined vision of the future and little desire to move around, a forever home could be a good option.

It’ll likely be more expensive than a starter home, which is an important factor to consider, especially if you live in an area with a high cost of living. It may take you longer to save enough money to cover the down payment and closing costs. However, if this is your first purchase, you can take advantage of first-time homebuyer and down payment assistance programs. Plus, many programs last for the life of your home loan, so staying for the long term means you can make the most of them.

The Bottom Line

In the end, whether you end up buying a starter home or a forever home is your choice. There are plenty of reasons to decide on either option—and you might wind up choosing a combination strategy by purchasing a starter home and then moving to a forever home when you’re ready.

Frequently Asked Questions (FAQs)

Whole life insurance is a type of permanent coverage that’s offered in a range of “styles” to suit different needs. Since permanent coverage, including whole life, is more expensive than temporary or “term” coverage, many of the different types of whole life insurance have evolved to help owners manage the cost of premiums. But other types are built to maximize the death benefit or the cash value “savings” element.

Before you purchase permanent life insurance, consider the range of available options to determine which best suits your needs.

What Is Whole Life Insurance?

Whole life insurance provides both death benefit protection and a form of tax-advantaged cash buildup (a “cash value” account) that can be accessed by the policy owner. It and universal life insurance are the two most commonly sold types of life insurance policies on the market.

A “standard” whole life policy requires premium payments for the life of the policy for a dollar amount of coverage—the death benefit—that’s determined when the policy is issued. Since this structure can be unnecessarily restrictive, other types have been developed that allow more flexibility. Each type has its own benefits and drawbacks.

Participating Whole Life Insurance

• Dividends, fixed payments, fixed death benefits.

This type of whole life insurance pays dividends into the cash value of the policy when the issuing life insurance company makes a profit. These dividends come from the company’s excess investment earnings and are usually not guaranteed. But they can increase the overall return you receive from the policy.

Participating policies are most commonly issued by “mutual” life insurance companies, which are owned by the policyholders instead of being publicly traded. The dividends that are paid to policyholders are not classified as taxable income (unlike dividends that are paid from stocks). Instead, this form of income is generally considered to be partial repayment of the premiums that were paid and therefore a tax-free return of principal.

Non-Participating Whole Life Insurance

• Lower premium payments that are fixed, fixed death benefit.

Non-participating whole life policies do not pay dividends. The cash value in this type of policy still accrues interest, but the life insurance company doesn’t pass along any of its current profits to holders of these policies. Non-participating policies are known for their fixed costs and more economical premium payments.

Non-participating policies are most often (but not always) issued by publicly traded life insurance companies. Policyholders who want to participate in the profits made by these companies will have to buy stock in the company instead of a life insurance policy.

Indeterminate Premium Whole Life Insurance

• Premiums that adjust according to company performance.

This type of whole life insurance resembles non-participating whole life insurance in that no dividends are paid, but the premiums can be adjusted by the insurance company. The amount of premium you owe is based on the current financial health of the company. So when the insurer is doing well, premiums may go down. Conversely, they may increase during lean periods. However, they can never exceed the maximum amount specified in the policy documents, regardless of the company’s current financial condition.

Indeterminate premium whole life may be a good fit if you’re confident in the company’s financials and expect it to do well in the future. You could pay less in policy premiums over the long run, but if expectations aren’t met, you could pay more relative to a whole life policy with a level premium structure.

Economatic Whole Life Insurance

• Incorporates term coverage for a larger death benefit at a lower cost.

This is a more complex type of whole life policy. It combines a portion of participating whole life insurance along with a portion of decreasing term insurance.

Since the whole life portion is “participating,” it confers dividends, which are used to purchase additional paid-up coverage (coverage for which no additional premiums are due). In other words, the dividends are used to purchase increments of permanent coverage to replace the term coverage as it decreases and eventually expires.

The risk is, if the value of the dividends doesn’t turn out to be enough to replace the term coverage, the value of the net death benefit will decline as the term coverage decreases. The tradeoff for that risk is that this type of policy can give the insured a larger amount of coverage from the outset at a price that’s lower than that of a whole life policy that does not incorporate a term insurance element.

Limited Payment Whole Life Insurance

• High premiums for a set number of years, and then continued coverage with no premiums.

This type of whole life insurance requires a limited number of premium payments until an end date specified in the policy—for example, until age 65. The policy remains in force for the rest of your, or the insured’s life, but does not require any additional payments. This type of policy is popular with policyholders who don’t want to be burdened with premium payments that would otherwise still be required after they retire.

Single-Premium Whole Life Insurance

• One large upfront premium pays for a tax-free death benefit.

This form of whole life coverage, commonly known as a modified endowment contract (MEC), differs from all other types of whole life insurance in that it is funded with a single premium payment, meaning that you purchase a specific amount of paid-up coverage for life, with no additional premium payments required.

If you have money that you intend to leave your family and don’t need to access it yourself, it can make sense to purchase a life insurance policy with that money for those heirs to inherit instead. The death benefit is tax free and may be larger than what a conservative investment amount would be at the time of your death.

For example, if you have a $100,000 certificate of deposit (CD) that is earmarked for your grandchildren, you could withdraw the funds from that CD and instead purchase an insurance policy with, say, a $200,000 tax-free death benefit. Because you’d purchase the policy with such a substantial payment, it would be considered a MEC.

MECs have special tax rules and steep withdrawal penalties if you take money out of the policy in the early years. But MECs usually pay higher interest rates than CDs or other guaranteed investment vehicles.

Modified Whole Life Insurance

• Lower premiums in the early years of the policy, level death benefit.

This form of whole life coverage offers lower premiums during the early years of the policy that increase after a certain number of years. If you anticipate making more money in the future (and therefore being able to afford a larger premium), this type of policy can enable you to purchase a higher initial coverage amount than you could otherwise afford.

The period of lower payments may last anywhere from five to 20 years, and then the premiums are increased. While payments during the initial phase are usually lower than those of a traditional level premium whole life policy, the premiums after the increase are usually higher. Premiums increase only once during the life of the policy. The death benefit is level, which means it stays the same during the entire time you’re covered.

Children’s Whole Life Insurance

• Savings and coverage for babies and children.

This form of whole life insurance is offered as a means of providing a savings vehicle and insurance coverage for babies and children. The parents (or other payor) of the policy can lock in low premiums that are guaranteed to never increase and also secure life insurance for the child regardless of any future health issues. Coverage is often capped at a fairly low amount, such as $50,000, but it may be possible to increase it in the future.

Guaranteed Issue/Acceptance Whole Life Insurance

• No medical exam required, low coverage limits.

This form of whole life coverage is commonly known as burial or final expense insurance. It is usually issued to policyholders who are at least 50 years old, and it has limited or no underwriting requirements, which makes it more expensive. Since no medical exam is required and few, if any, health-related questions are asked, it may appeal if you have health problems that make getting coverage through a traditional underwriting process difficult or impossible.

Final expense coverage is designed to provide a small death benefit that can be used to pay for funeral and burial expenses along with other debts or bills you owe. The death benefit usually ranges from $10,000 to $50,000.

The Bottom Line

Each type of whole life insurance has its place and value, although not all types work for all situations. For example, young parents may be attracted to the benefits of children’s whole life insurance, while older policyholders may need the protection afforded by guaranteed issue policies.

Before you choose a specific policy, know why you’re purchasing one, how much you can afford, how much coverage you need, and how much flexibility you’d like the policy to have. This information will help you explore the range of offerings to determine which is best for you.

One of the biggest investments you will ever make is your home. In the event of an unexpected loss, you need a homeowner’s insurance company you can depend on to restore your home and its contents to their previous condition. One company that deserves consideration for your homeowner’s insurance needs is Shelter Insurance.

Shelter Insurance was founded in 1946 under the name of MFA Insurance Companies. In the beginning, the company only offered auto policies to residents of Missouri. From these small beginnings, the company grew to be one of the most successful regional property and casualty (P&C) insurance companies in the United States. In 1981, the name was changed to Shelter Insurance. This was taken from the insurance company’s famous slogan, “MFA is your Shield of Shelter.”

The headquarters of Shelter Insurance is located in Columbia, Missouri. States of operation include Arkansas, Colorado, Iowa, Illinois, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Nebraska, Nevada, Oklahoma, and Tennessee. Shelter Insurance writes the following types of insurance policies:

Shelter Insurance opened an international reinsurance operation in 1986.

The other Shelter Insurance Companies are Shelter Mutual, Shelter General, Shelter Life, Shelter Reinsurance, AmShield Insurance, and Haulers Insurance. Shelter Insurance employs over 4,385 employees and agents.

Financial Results

According to Shelter Insurance’s CEO, Shelter Mutual’s surplus strength grew to $2.17 billion for the year, which represents an increase of 3.3%. Assets under management surpassed $6 billion for the first time, an increase of almost 2%. In 2020, the global net income was $81.5 million, a decrease from $5.4 million over the previous year.

Financial Strength and Customer Satisfaction

Customers who choose Shelter Insurance for the homeowner’s insurance needs can feel good about the company’s financial standing.

In 2008, Shelter Insurance was named as one of the top 50 performing P&C companies by The Ward Group. The company has an A (Excellent) rating from AM Best.

Shelter Insurance has been a Better Business Bureau accredited business since 2000. The company has an A+ rating with the BBB. There are only 23 total customer complaints listed on the BBB website. Shelter Insurance has a 5 out of 5-star composite score rating with the Better Business Bureau.

The JD Power & Associates Power rating for Shelter Insurance is 4 out of 5, with the customer service rating also listed as 4 out of 5. In 2018, JD Power & Association awarded Shelter Insurance “highest customer satisfaction among auto insurers in the central region , two out of three years.”

Homeowner’s Policy

The Shelter homeowner’s policy will pay for restoration costs, which means that damaged items in your home will be replaced with new materials. The policy has a good selection of coverage options and generous homeowner’s insurance discounts.

Types of Coverage

Dwelling

You have coverage for your residence and attached buildings as well as coverage for damages to heating systems, cooling systems, construction materials, outdoor antennas or reception dishes, water softeners, and water heating systems.

Other Structures

Other types of structures coverage will pay for damages from a covered loss to buildings permanently attached to the premises such as sheds or fences.

Personal Property

Personal property coverage pays for damages to the contents of your home or other structures. If you own another home that is not your primary residence, you have coverage for contents at a reduced amount. There is limited coverage for money, securities, jewelry, silverware, and on- or off-premises business property. If you want to make sure you have enough coverage for your personal property, you can purchase a personal articles insurance policy.

Additional Living Expenses

If you cannot move back into your home because of damages caused by a covered loss, you have additional living expenses to pay for the costs of living away from home.

Personal Liability

Personal liability homeowner’s coverage pays for property damage or bodily injury to others that occur on your property.

Medical Payments

This portion of the homeowner’s policy is to pay for medical expenses if someone is injured on your property. This coverage does not apply to you or members of your family.

Other Coverage

You also have debris removal, emergency removal of your property, necessary repairs after a loss, fire department charges, and limited coverage for losses to trees, shrubs, plants or lawn damage.

Additional Coverage Options

If you have the need for additional coverage, you can add the following options to your homeowner’s insurance policy: business located on your property, farming, sewer damage, personal computer damage, earthquake damage, additional premises, docks, and piers and liability related to watercraft activities. Your Shelter Insurance agent has more information about the specific details of additional coverage available.

Discounts

The homeowner’s policy comes with many discounts, including for alarm systems, deadbolt locks, claims-free discounts, new home discounts, and heating system discounts. There is also a companion policy discount available if you have your auto insurance with Shelter.

Getting a Homeowner’s Insurance Quote

From the Shelter Insurance website, you can get a quote for auto, motorcycle, RV, ATV, Boat, Renters, Life, Home, Condominium, Umbrella, Personal Articles, Business, and Farm Insurance.

To get a quote for homeowner’s insurance, you’ll first enter your zip code. Next, you will enter some personal information including name, address, telephone number, and email address. You are also asked if you have any other active policies with Shelter Insurance (in order to receive the companion policy discount). You’ll be asked to select a local agent and whether you prefer to be contacted by telephone or email. You can include any additional comments to the agent up to 250 characters when submitting your quote request.

Pros and Cons

Pros

• Excellent financial strength rating
• Strong customer service ratings
• Better Business Bureau A+ Rating

Cons

• There have been some customer complaints about the claims handling process, some claiming that the claims payment process was slow.
• Coverage is only available in 14 states.

Company Contact Information

For more information about a homeowner’s policy or to learn more about the other insurance products available through Shelter Insurance, you can visit the Shelter Insurance website or call 1-800-SHELTER (1-800-743-5837). You can also contact Shelter Insurance by email.

Definition and Examples of an Insurance Declaration Page

The insurance declaration page It is part of your insurance policy. It comes at the front of your paperwork and adds up the key data about your insurance.

• Alternate name: Policy declarations page, declarations page
• Acronyms: DEC page, dec page

For example, you would receive a declarations page when you purchase a new car insurance policy.

How Does an Insurance Declaration Page Work?

The insurance declaration page is part of your policy. You will get it once your policy is issued. It comes after the binder of insurance and you should have the same data that was sent to you in the binder of insurance.

Despite the name, the document may be longer than a single page. Depending on the details of your coverage, it may span many pages. You should get a new page every time you buy or renew a policy.

The dec page is a key part of your policy. It shows:

• The main coverages that lead to how a claim will be paid
• The limits for each section
• The premiums charged
• Who is insured and what is covered

The dec page contains all of the key information about your contract, including what or who is covered, how to file for a claim, and other details. You should review the dec page in detail to make sure that it is correct.

Common problems found on insurance dec pages may include:

• Errors such as a typo in a name or address
• The wrong type of coverage (for instance, a named perils policy instead of an open perils policy)
• Incorrect deductibles
• Incorrect coverage amounts
• Missing riders
• Missing discounts

All of the things you asked for or agreed to when accepting your new policy should be on the dec page. Any errors can make it hard to file a claim. If you find any, contact your agent to have them fixed.

Once you are done looking over your policy, keep your dec page in a safe place, as it is part of your contract.

What Does an Insurance Declaration Page Cover?

An insurance declaration page will sum up the key data from your policy, which should include:

• The policy number
• Name and address of the policyholder
• Whom and what is covered
• The insurer name, address, and contact info
• What type of coverage the policy includes
• Limits and deductibles
• Endorsements
• How long the policy is valid for
• Discounts and surcharges
• Cost of the insurance, often divided into payments
• Other named insureds, such as banks
• Limits of liability

Many declaration pages will also include the process of how to file a claim. If this is not on the dec page, it should be listed in a separate part of your paperwork.

Why Do You Need an Insurance Declaration Page?

In some cases, it’s helpful to have your insurance dec page on hand. In others, it’s required.

For instance, when you shop for insurance, having your dec page on hand makes it easy to compare products, and when you switch insurers, your new company will want proof of your current coverage.

If you have a loan on any insured property, the lender may require a copy of the dec page. For instance, your auto lender may ask for it, because the dec page will say what and how much coverage your car has, while your insurance ID card will not. The dec page will also show the lender who is listed as loss payee and/or additional insured on the policy. The mortgage company on your home may require the dec page for your homeowner’s insurance as well.

Many times, your insurer is the one that sends your dec page to the lender, but sometimes it gets lost, and you will need to provide a copy.