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#54 Housing Wealth Provides Fallback After Big Gift

Housing Wealth Provides Fallback After Big Gift

David Garrison
Home Equity Retirement Specialist
NMLS # 1595194
Serving the State of Indiana
p (317) 644-2595 c (765) 516-0130
e [email protected]

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

Starting with assets inherited from parents and grandparents, the two of you have succeeded, through your own endeavors, in building those assets into a significant estate. With no children of your own, you have helped with education funding for nieces and nephews and their children, also contributing to various charities. You live in the inherited “family “castle”, an overly large home on the outskirts of a college town, which you’ve remodeled and in which you’re hoping to spend the rest of your days. According to your current estate plan, upon the second of your deaths, the primary beneficiaries of your estate will be three different charitable organizations, with one of those to inherit the home.

Although the current value of your estate is far less than $11.7 million dollars, like many of your friends, you are extremely concerned about how the proposed estate tax law changes will affect your plans. If you make very large gifts to charity this year and next, for example, and the exemption amount is later lowered, would the gift and estate tax be retroactively applied? Even more important, you are concerned about keeping control of your financial assets in order to maintain your own lifestyle. With no children, you must also be assured of adequate “rainy day” money for healthcare needs throughout both your lifetimes.

A reverse mortgage on the “castle” might offer a solution, with the line of credit serving as your “rainy day fund”, allowing you to move forward with the charitable gifts. Part of your housing wealth could be kept in reserve to cover unforeseen medical costs, and part can be drawn on for lifestyle needs. The interesting aspect of a reverse mortgage is that, to the extent you do not draw down the line of credit, the reverse mortgage includes a growth feature (the untouched balance will increase by the mortgage interest rate).

Having a reverse mortgage “rainy day fund” in place for tomorrow can allow you to go ahead with those large charitable gifts today.

(Note: While this column offers no tax advice, it is worth noting that the Treasury Department confirmed that when exclusion amount drops after 2025, there will be no “clawback” of exemptions. See )