Here is a fact that most seniors do not know about reverse mortgages.
A reverse mortgage is a loan that accumulates interest over time even though there are no payments due on the loan.
The government has established a mechanism by which the estate (your kids) get a tax deduction for the entire amount of the interest accumulated over the loan.
Example: If the parent gets a reverse mortgage and over a 20 year period accumulates $40,000 in interest on that loan, at the time of settlement of the reverse mortgage debt, that interest becomes a tax deduction for the estate.
Remember, the estate has the choice of paying off the reverse mortgage debt, selling the house and gaining the profit from the sale, or if the house is worth less than the reverse mortgage debt, they can simply turn the house into the bank. The loan is non-recourse for any asset except the home itself. All the belongings in the home, the car, and all other assets besides the home itself are property of the estate.
No matter which decision they choose, the interest accumulated on that debt is a dollar for dollar tax deduction on that estate value, or it can be granted to one of the heirs as a personal tax deduction.
Bob
bob@az62.com
www.az62.com
623-214-6663
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