Dear Harry: I'm a 72-year-old widow living on my husband's Social Security and a very small pension of my own. Lately, it has been tough to get along without hitting my small savings account. My two sons are reasonably well-off, but by no means rich. They have proposed to buy my house in exchange for a lifetime annuity. I have no mortgage. They discussed this with a friend who works for an insurance company. He suggested that the annuity give me $1,050 a month for as long as I live. That would work out well, especially because the maintenance and taxes would be paid by my sons. My bank wanted to sell me on a reverse mortgage with an estimated $1,200 a month. Which way do I go?

What Harry says: Your sons' suggestion has one potential problem. There is no rent to be paid by you to them (as the new owners). This could lead to potential gift- and income-tax problems. On the other hand, banks too often overestimate the reverse mortgage payments, and they tell you about the up-front charges when it's almost too late to back away. Let's consider a reverse mortgage from your sons. Sure, there's a little extra paperwork up front, but no special tax problem as long as they charge at least the IRS minimum for a long-term loan. Ultimately, they will inherit the property, so there are no back-end problems, either. Good luck!

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