AUNT AND UNCLE’S HOUSING WEALTH CAN HELP YOUNGER RELATIVE HELP HERSELF
With no children of your own, the two of you (both retired for ten years) have always tried to be there for your six nieces and nephews, in terms of opening your home to them, taking them on trips, offering modest cash holiday gifts, contributing to 529 plans for them, and naming them as beneficiaries in your estate plan. With one of your nieces intellectually disabled and unable to attend college, you instead funded an investment account for her, allowing her to make withdrawals. You’ve been very pleased to see that she has decided to use some of the money to enroll in online courses, along with buying supplies to create jewelry which she sells on Etsy. (Your niece’s siblings and cousins are very supportive of her and have never resented the fact that your gifts to her surpass what you’ve given to them.)
By the time you learned about INvestABLE accounts, your niece had passed the age of 26, and had therefore become ineligible to start such an account. Now, at a recent seminar sponsored by a local charity that assists the physical and intellectually disabled, you’ve learned that the age for establishing an Indiana ABLE account was raised this year to 46. You now intend to set up an ABLE for your niece and begin contributing to that account instead of to her regular investment account. More than that, you are giving thought to altering your estate plan in general, doing more for all the nieces and nephews, yet finding ways to do that without jeopardizing your own financial security or crimping your own lifestyle.
As you re-examine all your gifting and estate planning options going forward, you might consider accessing your housing wealth in the form of a reverse mortgage. With no need to make monthly mortgage payments,* there should be no “lifestyle crimping” involved. In fact, cash withdrawals you make for gifting to the nieces and nephews will be non-taxable. Furthermore, the unused portion of your equity will grow at the same rate of interest as that being charged on the borrowed amounts.
Your niece, meanwhile, will be allowed to add funds she earns through her jewelry crafting to her own ABLE account. By the way, if your other nieces and nephews still have funds in their 529 accounts, those monies can be used for professional certifications or ongoing education expenses, even rolling over the money to Roth accounts.
The two of you are to be congratulated on keeping abreast of changes in the financial arena, and on continuing to think of the needs of loved ones along with your own.
*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