Scenario #2: Utilizing a Reverse Mortgage Line of Credit
Charlene is a 72-year-old widow. She owns her own home, which she would like to stay in for the rest of her life. She has sufficient income from her investments, pensions, and Social Security, and a hybrid life insurance/LTC policy to manage any long-term care needs.
She has three grandchildren, all of whom will be in college over the next 10 years. She would like to be able to assist with their education expenses, but if she draws down her invested assets to do so, it will not only reduce her future income potential but also cause her to incur income taxes.
A solution for Charlene is a reverse mortgage line of credit, where she can withdraw a projected $40,000 per year, based on her age and the value of her home, for the next 10 years to help achieve her objective. She will make payments directly to the grandchildren's colleges to avoid gift tax liabilities as well. By leveraging her home with the reverse mortgage, she can experience the joy of giving while still alive, with no impact on her current lifestyle.
About the author: Stephen Resch
Stephen Resch is the vice president of retirement strategies at reverse mortgage lender Finance of America Reverse LLC. The views expressed in this article are those of the author alone and do not necessarily reflect the views and opinions of his employer. This article is not intended to provide financial planning, wealth management, or tax advice. For tax advice, please consult a tax professional.