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#25 Reverse Mortgage Preserves Highly Appreciated Assets for Next Generation


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

At 73 and 72 years old, you’re juggling a set of decisions that make feel both fortunate and frustrated. The outdoor and interior renovations you’ve planned for your home over the coming fall and winter season are going to cost approximately $75,000; the plan is to take out a home equity line of credit to cover those costs. Your son has agreed to oversee the remodel while the two of you spend nearly half a year vacationing on the West Coast.

You’d like to have an extra $3,000 a month in income over that four to five month period of time. Other than the regular pension and social security income you each have coming in, you’ve established a systematic withdrawal plan out of your jointly owned investment accounts; increasing the draw, you fear, might affect a drain on the portfolio value.

The big dilemma? Your largest single investment holding, which you bought with $15,000 twenty years ago, is now worth more than $700,000. Selling that stock will result in a very unwelcome capital gains tax burden. In fact, part of your estate plan includes having your two children inherit that stock with no need to pay capital gains.

Rather than taking out the second mortgage on your home, consider accessing your housing wealth in a different way. A reverse mortgage on your $600,000 home might enable you to take a cash lump sum, both financing the renovations and generating the additional monthly income during the time you are away from home. Even after those cash withdrawals, there would remain a growing line of credit accessible as needed. There will be upfront costs of establishing the Home Equity Line of Credit, but those will prove small in comparison to the benefit of avoiding – and helping your children later avoid – tax liability on the capital gain.