By Dr. Edward Seiler, vice president of Economic Research at Dworbell, Inc
When working with borrowers (and their children) it is important to understand their bequest motives—how they go part in parcel with the decision to obtain a reverse mortgage and once obtained, how inheritance factors affect borrower draw patterns.
In addition to bequests, inter-vivos transfers also play an important role in seniors’ budgets. Data from the University of Michigan Health and Retirement Survey (HRS) show that 40 percent of older households gave transfers to children and grandchildren (while only 5 percent received inter-generational transfers).
The table above, based on 2008 and 2010 HRS data, shows that when transfers are made they are sizable. For example, of the 33 percent of age 75-84 households that made transfers in the two-year period, the average amount was $14,704. Transfers are also higher for higher income families.
When building a budget for potential borrowers, we need to ensure that no spending categories (e.g., intergenerational transfers) get overlooked so we can accurately tailor products and services to serve senior homeowners.