The discussion in these pages during the past few weeks on reverse mortgages has taught me a great deal about human nature. The underlying subject, of course, is inheritance. Despite having very firm views on the subject, I have concluded that there is no right or wrong in this matter.

That’s quite a significant change of mind on my part, which doesn’t happen often, since I know everything, or at least thought I did prior to the start of the inheritance debate.

I now accept that different people act differently and are motivated differently. Not everyone wants to do what’s best for themselves or for their family, and many prefer to take steps that are less than financially sound, because they are easier to take than other, perhaps more sensible steps.

So I say: Good luck to you. If your money matters more to you than your children, or your parents, do what you’ve got to do.

Last week’s mailbag raised a couple of interesting questions. The most frequently asked was why I had reservations about reverse mortgages. In case you’re new to the discussion, here is a summary of the background to the question.

A couple of retirement age has a house, bought and paid for, and few other assets. Should they eke out the balance of their days, scrimping and saving, so as to leave their children a meaningful sum, or should they take out a reverse mortgage? That’s a loan the bank will make on the security of the house, to which the owners keep the title and pay the outgoings. The money derived from a reverse mortgage can be spent on anything. Reverse mortgages do not require repayments, on the principal that the value of the house will increase as the interest on the outstanding loan mounts. When the last surviving member of the couple dies, the house is sold and what’s left, after the bank is repaid, is given to their heirs. (Such loans are, of course, also available to single people.)

A number of correspondents pointed out that real estate has gone up consistently for decades, and that the reverse mortgage is therefore a win-win proposition.

In investing, you will often see the phrase: “Past performance is not an indication of possible future performance.” In other words, just because a company’s stock has become more valuable in the past, there is no guarantee that it will continue to become more valuable in the future.

On the face of it, Bermuda real estate is always likely to rise in value, if everything else is equal. Bermuda has a fixed amount of land and a seemingly constantly growing demand for ownership of that land. Plus, Bermudians who sell houses tend not to accept what the market will offer, but hold out for their idea of what their property is worth, for as long as it takes. Under such circumstances, owning a house is seen as a guaranteed investment, a “can’t lose” moneymaker.

Beware. Whenever you hear the word “guaranteed” in connection with financial matters, you must analyse what the guarantee means. A legal promise in writing by a bank, say, is only as good as the bank. A bank guarantee is useless if the bank goes out of business and leaves you high and dry, as Bank of Credit & Commerce International did after guaranteeing its high interest rates.

While Bermudian real estate owners have no written guarantee that their investment will be a good one, there is every chance that it will. Well, almost every chance. If Uncle Sam one day bans foreign insurance companies from selling insurance in the US, which is hugely unlikely, the value of Bermuda houses would collapse. If a future Bermuda Government were to adopt policies unacceptable to the world community, in an attempt to achieve some political end, house values might equally fail to hold up.

A Category 5 hurricane that crippled the Island’s ability to do business for a year; the socialisation of insurance in the US spreading from Florida to all 50 states; the Causeway bridge breaking down permanently; a lack of sufficiently well-schooled Bermudians to run the Island’s businesses — any of these might threaten house prices.

Today, there is nothing on the horizon to suggest that Bermuda house prices are about to fall, but the possibility exists and that’s why blindly signing on for a reverse mortgage loan is a potentially dangerous exercise.

Like all risks, you must assess the likelihood of loss. You may have a rosier view, or a more pessimistic one, than I do. But if a reverse mortgage puts at risk (to any degree) your only asset, you should think twice before taking one out.

Another concern I have is that interest rates are not always as stable as they have been recently. If we were to experience inflation at the rate we saw in the early 1980s, your reverse mortgage could exceed the value of your house before you die. Then you’d be out in the street. Unlikely? I hope so. But possible.

Finally, the matter of children. Not having any, I am ill-qualified to comment, but I have met some children, of various ages. Once you sign financial assets over to someone, you have only their word (and perhaps a legal contract) to say that they will do what they must. I have greater confidence in my investment manager than I would have in my children (if I had any), because the manager is subject to laws and his business relies on him not bilking me. Children subject only to moral laws may feel they have nothing to lose if they disinherit their parents, as it were.

Am I excessively cautious in these matters? Probably. Caution is a personal matter. Look before you leap is always wise advice, as is not putting all your eggs in one basket. Before you sign anything, read it, think about it, and seek answers to every question you have, answers you can understand. After signing on the dotted line is too late. If you’re going to put your only asset into play, be aware that in the game of finance, as in the game of life, there are winners and losers.