Following a series of health scares, your parents, both in their early eighties, recently made the decision to move into a local high-end continuing care community. Once their home is sold, the proceeds should be more than enough to cover the six-figure upfront “buy in” cost, but they do not have sufficient liquid and investment assets to cover the payment without affecting their ongoing lifestyle needs. You don’t want your parents to be under tremendous pressure, trying to coordinate the timing of selling the home, paying to get on the waiting list for the new community, all while making myriad decisions about décor, which furnishings to take with them, etc., especially since neither is in perfect health.

You agree that a continuing care-type retirement community is your parents’ best choice. They will start out with independent living, continuing to see their regular doctors, then later, if needed, be able to transition to assisted living without worrying about a big increase in the monthly fee.

To ease the pressure on them, you plan to pull money out of your own investments to finance the fee. At the right time, you will oversee the listing and selling of their home. (As their only living child, you would be the one inheriting the home in any event.). Meanwhile, you’ve scheduled meetings with your own tax advisor and financial planner to discuss which of your own holdings would be best to liquidate without overly severe tax consequences. (Now in your early sixties, you are not worried about early withdrawal penalties from retirement plans, but you are concerned about taxes and even about the possible estate planning ramifications of a six-figure gift to your parents.)

As opposed to liquidating investments in order to finance the community “buy-in” fee for your parents, consider tapping into the equity in your own home in the form of a reverse mortgage, designed for those 62 and better. With no need to make monthly mortgage payments, you can make a lump sum withdrawal from your equity to pay the fee for the continuing care community on behalf of your parents. (Later, after your parent’s home is sold, you might discuss any gift tax  or estate planning ramifications with your  advisors, who can help determine the best mechanism for using the proceeds to “restore” the equity in yours.  

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.

As a financial advisor, you’ve tried to steer clear of extremes, believing that your clients’ retirement and tax planning should be centered around the preservation of assets with sufficient growth to outpace inflation. Particularly in recent years, you’ve focused on helping your clients avoid scams and “get-rich-quick” schemes.

Because your clients tend to be in the above-average net worth category, you have never felt the need to include reverse mortgages in your discussions of retirement planning. Although you read in the Journal of Accountancy that “practitioners should be prepared to discuss the advantages and disadvantages of reverse mortgages, you perceive that your more elderly clients have limited ability to comprehend the complexities of such a transaction involving their most treasured asset.

“Reverse mortgages are a scam,” Jamie Hopkins of Carson Coaching hears this all too often, he says, not only from consumers, but even sometimes from financial advisors like you.  In fact, however, HECM (Home Equity Conversion Mortgages) represent one of the most highly regulated and secure financial products out there, backed by the Federal Housing Authority.

 But, just as is true of all products, Hopkins reminds viewers, reverse mortgages in and of themselves are neither good nor evil. They must be used as part of a plan. In fact, using reverse mortgages strategically – and early in retirement, he emphasizes – can prove a very smart strategy.

If your home is just an asset, Amy Fontinelle writes in Investopedia agrees (as opposed to one that’s been in the family for decades or generations), “leveraging it for a more comfortable retirement might be the best way to use it. And, as Jamie P. Hopkins of Carson Coaching so cogently expresses the concept, for advisors and their retiree clients alike, it’s time to think of housing wealth as a line of first resort.

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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Now in your third year of retirement, (in both your cases precipitated by COVID-related downsizing), the two of you are becoming concerned with all the pundits’ warnings of oncoming recession. The original plan was for you to work three more years and retire at age 67 (66 for her).Thankfully, you had each been employed for years in companies that offered generous retirement plan matches. With no children and a strong savings mentality, you have been able to totally avoid credit card debt and even own both your automobiles outright. In mere months, your mortgage will be totally paid off.

You have not applied for Social security benefits and are still hoping to wait until Normal Retirement Age (for you in a year, for her, two), and have been making regular withdrawals from both rollover accounts, with one-time necessary purchases coming out of your jointly owned savings and investments.

You follow the financial news, noting that, while the S&P500 is up significantly, you’re starting to read dire predictions such as this one in U.S. News” “Geopolitical risks are adding to that fear of further market decline..” Still in the starting years of retirement, you’re concerned about your own long term financial future. The term “sequence of returns”, describing the potential disastrous effect on retirees when income is derived from portfolios subjected to low returns and high inflation.

https://money.usnews.com/investing/articles/will-the-stock-market-crash-risk-factors#:~:text=In%202023%2C%20the%20S%26P%20is,toward%20the%20end%20of%202023.

Consider “reversing the sequence of returns“ by using housing wealth for support. Applying for a reverse mortgage on your home, you can establish an equity line of credit, In the event of a market downturn, you would replace withdrawals out of your investment and retirement accounts with withdrawals from the equity line of credit. You might even explore using the reverse mortgage to defer Social security benefits for one or both of you, allowing the benefit to increase.

“ Unfortunately, the odds of an economic contraction remain elevated” Mark Hamrick of Bankrate wrote recently. But, whether that prediction proves accurate or not, you have the opportunity to be proactive in managing your long-term retirement finances by using the equity in your home.

https://www.bankrate.com/banking/federal-reserve/economic-indicator-survey-recession-risks-october-2023/#:~:text=Our%20forecast%20is%20for%20a,likely%20path%20for%20the%20economy.

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.

While your career earnings and savings have enabled the two of you to accumulate a very respectable net worth, you have not needed to worry about federal estate taxation.  However, you’ve become aware that unless Congress acts before the end of next year (you don’t have a lot of confidence in Congress’ ability to act, given recent developments), the estate tax exemptions will revert to where they were in 2017. If that happens, your estate could be vulnerable to a tax as high as 40%, since a great deal of your wealth is in the form of real estate properties.

You know there are tactics involving a family limited partnership, but you would prefer to keep all the real estate in your own joint name while you are both alive, and you have resisted converting your IRAs to Roth IRA accounts.

You have been discussing with your estate planning attorney the idea of taking greater advantage of annual exclusion gifts to children, grandchildren, and even to other potential heirs.

One choice about which you are both enthusiastic is, next year, funding five years’ worth of annual exclusions by Pre-funding 529 Plans for each of your three grandchildren (who are now in high school or beginning college).That would mean contributing $170,000 for each grandchild in 2024, essentially half a million dollars. The issue would be liquidity, with taxable withdrawals from qualified plans and loans against real estate holdings being the only two possible sources for that level of funding.

Consider accessing the wealth you’ve established in the form of your own home equity to pre-fund those 529s for the grandkids. With a reverse mortgage set up as an equity line of credit, whether or not Congress makes its move to avoid the “sunset”, you will have put in place a flexible strategy, allowing you to avoid taxable withdrawals from retirement accounts while keeping your real estate holdings lien-free. Whatever portion of your credit line has not been used will be guaranteed to grow at the same rate as the interest being charged on the loan.

“Proactive” gifting in the face of a possible estate tax exemption sunset can prove to be a valuable strategy, but with a reverse mortgage, you’ll have established a management tool  no matter the near term outcome on the Congressional front.

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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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.

At recent gatherings of friends in senior hobby groups, it seems the conversation invariably centers around how much of a deposit each couple or individual has put down to reserve their spot in one of the local upscale retirement communities. I seems the two of you are the only ones planning to “stay home.”

On the other hand, you’ve come to realize that an “aging-in-place” choice comes with costs of its own. Other than in your bathroom, you are both dead set against what you call the “nursing home look”, with railings and “grab bars; you’ve been researching different re-design options to add safety without creating an “old people” look.

While your plan is to do the finishing touches such as interior painting by yourselves, the kitchen, bedroom, and bathroom remodels are going to represent substantial costs over a six to nine-month period of time. While your estimated costs, even spread over a couple of years, will undoubtedly prove be far, far less than the “forever” obligations your friends are contemplating, your monthly cash flow is going to be severely impaired. Not only will you be substantially tapping your joint investment account, you’ll need to draw funds from each of your retirement plan portfolios.

In creating a safe and aesthetically pleasing setting in which to spend your active senior lives,   why not consider using the equity you’ve spent decades accumulating in the home itself? With a reverse mortgage, you can avoid “impairing” the monthly cash flow from investments, while avoiding taxable withdrawals from retirement accounts.  With a HECM line of credit, whatever portion of your credit line has not been used will be guaranteed to grow at the same rate as that being charged on the loan.

At an upcoming gathering, you can confidently inform your friends that while they have decided to move into a retirement facility, the two of you will be “staying home by choice”.

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.

With your wife’s father and both of your own parents now gone, you have maintained a very close loving relationship with your wife’s mother, who unfortunately has endured a series of health setbacks in recent months. After considering various facility options, you have come to the conclusion that she will be best off living with the two of you, bringing in home health care services.  In fact, you are in the process of hiring contractors to remodel your home and create an “apartment” for her.

Your mother-in-law has Medicare and a supplemental health plan, but does not have the means to pay for the ongoing assistance and companionship she is going to need. Both of you, now each in your late sixties, are employed outside the home at least three to four days each week., The plan is for that work and the income it generates to remain in place for at least the next couple of years.

You’ve learned that the tax law allows you to help pay for whatever part of your mother-in-law’s medical costs that is not covered by her own insurance, and that there would be no gift tax implications. Still, those extra costs are sure to put a lot of pressure on your own budget,. Therefore, you are looking into second mortgage options (your original 30-year mortgage has only a year and a half left to go).

A reverse mortgage set up as a line of credit might prove a better approach, particularly since you don’t yet know what the non-covered costs of your mother-in-law’s care will be. With a a government guaranteed HECM loan, so long as you keep up your property taxes and insurance, you will not need to make any monthly mortgage payments. You can use the equity you’ve built up over the years to a) pay off the original mortgage loan b) fund the remodeling project, and

c)  help pay medical care costs as needed. Meanwhile, whatever portion of your credit line has not been used is guaranteed to grow at the same rate as that being charged on the loan.

This will truly be a gift of love, putting your own housing wealth to use in helping your mother-in-law enjoy being with you while receiving the care she needs.

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.

Ever since the pandemic, the two of you have been wrestling with the decision of moving to the Washington, D.C. suburb where your daughter and grandchildren make their home. Basically retired (you each take on part-time speaking gigs from time to time to supplement the budget), you are concerned about the big increase in cost of living which the move would be certain to mean. You are not interested in either paying rent nor in taking on a mortgage payment after so many years, but you are more than willing to drastically downsize in terms of home size.

An important aspect in the discussions you’ve had with your daughter is the fact that she is in the healthcare field. In your mid-seventies, you have each enjoyed good health. Still, there is some concern about ailments that are part of the family history on both sides, and there would be comfort in being in close reach of your daughter.

One important option to explore is the HECM for Purchase reverse mortgage program, in which you would deploy the “housing wealth” in your Indiana home to finance approximately half your new home purchase out East. In a single transaction, (with only one set of closing costs) you would complete the mortgage and the new home purchase. 

Referring to your reluctance to take on either a rent or a mortgage payment, with a reverse mortgage you would not be required to make monthly payments at all. (You would still be responsible for paying property taxes, homeowners’ insurance, maintenance costs, and any homeowners association fees that might apply to the new residence.  

In fact, the reverse mortgage loan balance won’t become due until and unless the home is sold, vacated for more than a year, or when the last remaining borrower passes away. (Upon the second of your deaths, your daughter would have the option to either keep the home and pay off the loan or sell it and keep any proceeds remaining.  

While the costs of health care, good, taxes, recreation, and general expenses will undoubtedly prove greater near D.C. than those in the Midwest, using your housing wealth to help with the housing piece of the equation might ease the pain of moving into those “higher price altitudes”!l

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/

The two of you have owned your Indianapolis home for many decades and, notwithstanding certain health issues, hope to remain there for the rest of your lives. Your only regret is that both your children live in other states. In fact, there was a time when you considered moving to Virginia to be near your daughter and her children. Since her divorce decades ago, this daughter has never owned a home, finding apartment dwelling more conducive to her lifestyle. Now her situation has changed – the grandchildren are grown and off in different parts of the world, and your daughter’s position has been recently eliminated. Since so many jobs allow remote work nowadays, she’s considering relocating her “home base” to be nearer to you.

You would like to help financially, and have even met with some contractors to discuss remodeling your own home to create a separate “apartment” for your daughter, complete with its own garage and entrance. In the process, your home could be made more suitable for you to “age in place”. The contractors you’ve consulted seem to think that with your acreage and building structure, you would have little trouble getting such a plan approved. Most importantly, your daughter is on board with the entire concept, knowing that her parents are not the type to intrude on her privacy and independence.

You’ve been to seminars talking about using a reverse mortgage to remodel a home in order to make a dwelling more older-age appropriate, but in your case, a reverse mortgage can help you with your second goal of creating a cozy living space for your daughter. With no need to make monthly mortgage payments to the lender (the equity in your home will serve as sole collateral for the loan), there will be no need to compromise your own standard of living in any way (in fact, you’ll be improving the safety and ease of your lifestyle.

You’ll need to keep up regular maintenance of the property, and there may be changes in property tax and insurance levels. Still, overall, it seems, your housing wealth can offer a wealth of possibilities for the two of you as well as for your daughter.

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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With no children of your own, you and your late husband always maintained a strong connection with your brother’s kids and grandkids in a neighboring state. Now, you’ve become aware, your older grand-nephew, who recently completed a Masters of Fine Arts, is facing somewhat of a financial crisis. As of this very month, he has had to resume payments of more than $1,200 a month towards his student loans. Since he, together with a partner, have recently opened a design studio, this is a financial burden of the first order for him. Your brother and sister-in-law are wrestling with medical expenses right now and truly cannot provide the needed help. The younger grand-nephew still in college, but your understanding is that his loans will not be affected now; you would be willing to offer help to him as well if and when the time comes.

Your general plan is to actually send your grand-nephew the exact amount each month starting this month, which will pose no problem financially.  However, you are not sure, going into next year, what the best source of funds would be, and you’re reluctant to draw down your investment portfolio or retirement plan money. You are essentially debt-free yourself, with the exception of about six months’ remaining payments on your mortgage.

A path to consider is a home equity reverse mortgage on your home.  So long as your intent is to remain living in that house, the equity can serve to a) pay off your existing mortgage b) give you the flexibility to withdraw money as needed to help your grand-nephews with their student loans. (As your grand-nephew’s new business grows, he might be willing and able to reassume payments on his student debt; you don’t know yet what the job situation might be for the second young man.)  The reverse mortgage will relieve you of the need to make monthly mortgage payments and help you avoid making withdrawals from your tax-deferred retirement accounts.

The withdrawals from the reverse mortgage line of credit will be tax-free,* and whatever portion of your available housing wealth is not being used will be credited with growth at the same rate as the interest being charge on the loan balance.

Whether or not the student loan forgiveness program is ever reinstated, as their great-aunt, you’ll be “standing in” for Uncle Sam when it comes to fulfilling your great-nephews’ loan repayment!

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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*Please consult a tax advisor.