A recent health scare (fortunately, you have been pronounced fully recovered) has focused your attention on an intensive estate planning review. While you can hardly be described as “super-wealthy”, your three highest value assets are your IRA Rollover account and to pieces of real property — your own primary residence (you hope to continue living at home for the remainder of your days) and a commercial property with a combined recently appraised value of just under $2.5 million.As an early buyer of long term care insurance, you feel confident that your life pension (dating back to the days when defined pension plans were a “thing”); combined with your social security benefits and annual IRA withdrawals, will be more than sufficient to cover your present and future needs. Long divorced, you contemplate naming your granddaughter, (to whom you’ve been making annual cash gifts) as your sole heir, along with one charitable medical research organization that you would like to benefit as part of your legacy.

As part of the very intensive and insightful approach you are taking in planning your affairs, you might discuss with your legal and financial advisors the combining of three “tools”: a reverse mortgage on your residence a Charitable Remainder Unitrust funded with a contribution of your commercial property, and annual qualified charitable distributions out of IRA.

Part One (a CRUT): The ownership of your commercial property would be transferred to the medical research charity you favor, with the stipulation that annual distributions be made to your granddaughter. (These distributions would replace the annual cash gifts you’ve been making to her). Upon your death, the assets in the trust would become the property of the charity, totally eliminating any capital gains tax that might become payable if you decided to sell the property. (This tactic also protects against capital gains taxes should the laws be changed to eliminate the “step-up in basis” (as has been considered).

Part Two: a (HECM) You would take out a reverse mortgage on your residence, set up as a home equity line of credit which you could tap as needed for your own income needs. This reservoir of funds will act as a buffer against the increasing costs of your long term care insurance, as well as covering any major repairs or adaptations needed to allow “aging in place” in your home.  

Part Three: (QCDs) Because you will now be able to supplement your pension and social security income with tax-free withdrawals from home equity, you might, rather than taking your Required Minimum Distributions out of IRA each year, instead make a qualified charitable distribution to charity directly out of your IRA (you are allowed to transfer up to $105,000 a year, while satisfying your RMD requrement.)

Implementing such a “combo” plan is definitely no Do-It-Yourself project; it would involve seeking expert legal advice. You might think of it as a 3-for-1 approach to estate and charitable planning.

https://mutualreverse.com/david-garrison/

Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here (and scroll down).

With your relationship ending, you find yourself faced with some daunting financial realities. While you maintained sole ownership of your home (originally purchased together with your now-deceased first wife), it was helpful to have two incomes supporting the ongoing upkeep and maintenance costs. Your soon-to-be ex “roommate” is still working’ you, downsized months earlier from your full time position, have been supplementing the severance pay with a series of temporary work assignments. Your home, fortunately, is fully paid for, but there are some significant looming upkeep costs, including roof repair and a new heating system.Having recently turned 64, you had hoped to continue to defer claiming Social Security benefits for another three years; that may no longer be possible. Meanwhile, both high interest rates and your lack of full time employment render a mortgage refinance impractical.

Consider tapping the equity in your home through a reverse mortgage. While you’ll still need to maintain the home, paying real estate taxes, and insurance, you’ll be able to make tax free withdrawals to fund the needed repair projects. Should you land full time employment, you can choose to make loan repayments.  Any unused portion of your “housing wealth” will be credited with interest at the same rate as that being charged on the loan. The main benefit would be that, by using your own housing wealth, you might be able to cover living costs without “turning on” social security payments before “normal retirement age”.

Turning to your own housing wealth might make financial realities less “daunting”.

https://mutualreverse.com/david-garrison/

Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here (and scroll down).

Please consult a tax advisor. Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees. David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org Equal Housing Lender

At age 66, you plan on working two more years; your wife has plans to retire in a little over a year from today. With your children fairly well established in careers of their own, the two of you have been quite diligent about making maximum contributions to your 401K and Health Savings Account as well as to your spouse’s 403b, even foregoing some luxury spending in favor of adding to your jointly held investment portfolio. With your home fully paid for and well-maintained, you are glad to have been able to benefit from the past year’s stellar stock market performance as you look ahead to retirement.

A recent article in the Indianapolis Business Journal recommending deferring withdrawals from HSA accounts has given you cause to rethink some of your strategies. You had planned, between here and retirement, to finance your share of the costs for both eye surgery and some major dental work by making tax-free HSA withdrawals.  With your wife scheduled for joint replacement surgery two months from now, you were going to tap your HSA account to finance whatever part of those costs are not covered by her insurance plan.

“With triple-tax benefits, the humble HSA (Health Savings Account) emerges as an effective way to save for retirement,” IBJ columnist John Russell reminds readers, urging them to take a longer view, leaving their HSA accounts alone for now, so the investments can continue growing. While your joint tax bracket is undoubtedly higher now than it might be years after you retire (making tax-free withdrawals economical in terms of covering out-of-pocket medical costs in the near term), a more important concern, you now realize, involves ballooning healthcare costs later on. Unlike withdrawals you might make from your own rollover account (from your 401K or from your wife’s 403(b), withdrawals from an HSA will continue to be tax free when used for healthcare expenses in retirement.

You might consider using the equity built up in your home as a resource of for covering near-term healthcare costs, allowing you to defer HSA withdrawal and continue the potential for tax-free asset growth. With a HECM mortgage, you can use housing wealth to finance near term medical costs. With a reverse mortgage set up as a “line of credit”, you can use tax-free withdrawals to cover the costs of your dental care and eye surgery, as well as your wife’s orthopedic treatments. Whatever portion of your home equity is not being used will continue to be credited with growth at the same rate as the interest being charged on the outstanding loan balance. (In an investment overview, the reverse mortgage line of credit would be part of the “loaner” segment of the portfolio, balancing the stock “ownership” segment in your asset allocation plan.)

A reverse mortgage might preserve the power of your “powerhouse” Health Savings Account.

https://mutualreverse.com/david-garrison/

Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here (and scroll down).

Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees. David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org Equal Housing Lender

Over the past few months, perhaps due to the plethora of TV ads for reverse mortgages, you’ve been receiving a number of inquiries from your financial planning clients about reverse mortgages. With a quarter to one third of your client base now in their sixties and seventies, their home equity represents a significant portion of their wealth.

Still, you are concerned about even discussing, much less promoting, any tactic or product which, in addition to having little potential to add to your own bottom line, represents an area in which you have no specialized training, and which is an area of planning not specifically covered in the compliance rules of your own broker dealer. On the other hand, you want to continue offering comprehensive advice relevant to the changing needs of your clients as they age.

As noted in Financial Advisor Magazine, American College professor Wade Pfau describes two very strong advantages of Home Equity Credit Mortgages taken out early in retirement:: a) “the HECM allows borrowers more comfort with investing other assets in a relatively aggressive manner” and b) “a HECM line of credit can be tapped after down-market years so that retirees aren’t forced to sell other assets at depressed levels to make ends meet”.

Specifically addressing areas of concern you mention: In terms of training and compliance, there are many courses available (both through the Certified Financial Planner Board and the CPA  Academy) on reverse mortgages. You can seek out and recommend experienced reverse mortgage professionals (regulated by the Housing and Urban Development) to help your clients understand their options and make appropriate choices.  In terms of “adding to your own bottom line”, when your clients use their largest asset as an incremental source of income, that allows them to keep more of their financial assets invested.

As a financial advisor, consider of reverse mortgages not as investment “instead-ofs”, but as “complements to” investment portfolio management.

Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here (and scroll down).

https://mutualreverse.com/david-garrison/

Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees. David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org Equal Housing Lender.

 A longtime believer in asset allocation in investing, you have been “in charge” of guiding the choices in your wife’s 401K (she is still working), as well as in your own SEP-IRA account (you continue to generate modest income as a self-employed metallurgics consultant), as well as in your jointly owned portfolio.

While 2023 turned out to be an excellent year for stocks, you can’t help but worry about the near future and the effects the world unrest along with upcoming election turmoil might have on stocks, at least in the short term.  You’ve begun to make some shifts in the two qualified accounts, but now realize the top-heavy issue in the jointly owned account is  harder to fix without generating significant taxable gains.

Without in any way attempting to offer either investment of tax planning advice, we’d like to suggest you consider your own housing wealth to be an important element in your asset allocation planning. Assuming that your intention is to continue living in the home for the foreseeing future, you can apply for a HECM reverse mortgage, set up as a line of credit (which would significantly increase the “fixed income” portion of your allocation strategy. (The unused portion of your home equity would be credited with growth at the same rate of interest as that being charged on the portion that represents borrowed funds.)

Consider bypassing the tax ramification of an asset allocation rebalance using a reverse mortgage balance..

Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here (and scroll down).

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Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees. David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org Equal Housing Lender.

After hearing so much about reverse mortgages, the two of you have become interested in exploring that option as a way of establishing a funding source as major updates become urgent on your seventy-year old home. Your big hesitation in moving forward is that, early in 2023, you spent a lot of time and money on finalizing your estate plan, and you do not want to have to redo all your documents.  As part of that plan, upon the second of your deaths, the home is to go to your daughter (the only one of the three children who lives nearby and who does not own a home), with other assets going to the others to “balance out” the inheritance values. If the home were to have a loan against it, you fear that would upset the balance you were trying to achieve.

Establishing a reverse mortgage line of credit would not necessitate a total reworking of your estate plan, and your documents can continue to state that your daughter will inherit ownership of your home. With reverse mortgage loan in place, upon the second of your deaths, your daughter would need to pay off the loan balance in order to keep possession. Were she to decide to sell the home instead, she’d retain any proceeds in excess of the loan balance. On the other hand, in the unlikely event that the home were to be appraised at less than the outstanding mortgage balance, your daughter would not need to pay back any money, because a reverse mortgage is a non-recourse loan.

 One tactic you might consider is to use a portion of your home equity to fund a survivorship (second-to-die) life insurance policy with your daughter named as beneficiary. That would ensure she’d have enough money to pay off the reverse mortgage balance.

Housing wealth is a very viable source of contingency funding for future remodeling needs, and a reverse mortgage need not mean a total “updating” of your carefully thought out estate plan.

Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here (and scroll down).

. .

Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees. David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org Equal Housing Lender

As a financial advisor, you’ve found, the trickiest aspect of advising clients who come to you at the brink of retirement, is helping them select an appropriate and “safe” system of withdrawals from their investment accounts to support their lifestyle needs. As Morningstar observed in its White Paper on “The State of Retirement Income 2023, many couples seek a “paycheck equivalent” in retirement, aiming to withdraw the same amount every month, (adjusted for inflation) for the duration of their lives.

Often, as an advisor, you spend time explaining to clients that for most retirees, spending patterns hardly turn out to be that regular. In reality, retirees tend to spend most during the beginning years of retirement, with spending leveling off in the middle to later years of retirement, when health concerns often escalate. The right level of withdrawal is going to need ongoing review and discussion. Obviously, a lot depends on variations in the investment markets, and you and your clients need to allow for the “sequence of returns” that has the power to sink or support even the most careful of withdrawal plans.

For clients who not only own their home, but who contemplate continuing to reside in that home for the rest of their lives, part of  your income planning discussion with them might include reverse mortgage funding. “Freeing up” the equity in their home allows their housing wealth to serve as a retirement income “buffer” injects greater elasticity into the income withdrawal calculation.

Set up as a line of credit (with the unused portion being credited with growth at the same rate as the interest being charged on the borrowed funds, the reverse mortgage can add a “client comfort factor that gets clients closer to an “aah-just-right” feeling about their brink-of-retirement income planning. 

Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here (and scroll down).

. .

Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees. David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org Equal Housing Lender

Over the years, when the grandkids were younger, the two of you always made efforts to help fund their college costs by both making direct cash gifts at holiday time and also by contributing to both their educational savings accounts. Now widowed yourself and with both grandchildren now started on their respective professional careers, you considered the college funding challenge a thing of the past. To your dismay, during the Christmas gathering, you discovered that lingering student debt continues to be a big challenge for both the grandkids and their parents. (Apparently, a recent Supreme Court ruling cancelled some debt relief on which they’d been counting.)

Years ago, as part of your estate planning, you’d included student loan payoffs as part of your legacy to your son and daughter (to the extent they had signed for student loans for their children), but thought that issue was largely a thing of the past. Now in the process of updating your estate planning documents, you’re thinking in terms of more immediate assistance. At the same time, you need to consider what impact significant monetary gifts might have on your own retirement finances.  (With a fully paid for home in excellent condition, you are still concerned with possible future health costs.)

Consider using the equity in your home to help the two graduates and their parents repay the student loan debt. With a Home Equity Conversion Mortgage, or HECM, you will be able to tap your housing wealth in the form of a line of credit, using the funds to bring meaningful relief to your children and grandchildren while the student loan debt relief issues are being debated by the U.S. Department of Education. Most important, you will not be impacting your own retirement finances.

A reverse mortgage can be a way to offer relief to your adult children, allowing the grandchildren to focus on building their careers and you to enjoy your own retirement.

Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here (and scroll down).

. .

“I’m not sure just where I’ll be going, but I can’t put up with all the repairs and upkeep this place needs. There are always things that need to be fixed and they are taking up more and more of my time, so I’ve decided to move to a retirement facility this spring. I’ve enjoyed hosting the monthly pitch-in lunches and book discussions, but I’ll be spending the next couple of months sorting things out and getting rid of a lot of stuff, and so will no longer be able to continue hosting our book club.”  This recent email has caused you to consider your own living arrangements.

A few years younger than this friend (a widower now in his eighties), you’ve taken for granted being able to continue living in your own home for many years to come, hopefully for your entire lifetime. You’ve kept the house in good shape, with a fairly new roof and a new heating/hot water system. A widower yourself, you are reassured by the fact that both your adult children, while they live out of state, are in constant touch with you. With a solid Long-Term Care insurance plan in place, you believe remaining in your own place is feasible.

On the other hand, you can’t help viewing that email message from the book club host as something of a warning call. You feel reasonably confident that your retirement assets will be sufficient to cover your regular lifestyle needs, but if major things were to go wrong with your home (or if home health care expenses were to exceed your insurance coverage). In short, you’ve been forced to confront some scary “what ifs”.

You might considerusing the equity built up in your home as the answer to those “what-if” scenarios. With a government-insured reverse mortgage, you’ll have a source of funds to use for “aging in place” home adaptations and to fund possible home health care needs. You will not be obligated to make monthly mortgage payments, with the home itself serving as collateral for the loan, so your current budget will remain unaffected. In fact, whatever portion of your home equity is not being used will continue to be credited with growth at the same rate as the interest being charged on the outstanding loan balance.

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Facing future uncertainties can feel a lot more comfortable with a reverse mortgage plan in place.

Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here (and scroll down).