I want to talk about a home equity retirement plan. A home equity retirement plan means that you’re separating the equity from the interest in your house. Now, if you’re upside down financially, this plan is not for you. There are many plans out there that may be good for somebody else, but not for you.  Understand that I talk about concepts. I cannot make a wise decision specifically for you until I understand your whole situation. . . until I know your financial life. But see if this makes sense to you. Let me give you an example. . .

I have a daughter and my daughter has an interest-only loan that she got a couple years ago. She pays $2,100 a month for an interest-only loan. If she wanted to take a thirty-year amortized mortgage she’d be paying $3,200. There’s $1,100 difference between those loans. So, now she separates that money. She puts those extra thousand dollars away every month in her side account. She’s able to save that money every month. At the end of 30 years, based upon a rate of return that the S&P 500 has done over the last 25 years, she will have over two million dollars in the bank. This is a lot better than paying that $500,000 dollar mortgage, don’t you think? This is the power of separating home equity. This is not a short-term plan, It’s a long-term plan, and If done properly you will have a tax free income for the rest of your life. For a first time home buyer this is a no brainer, and everyone should look at this option. The equity is safe, liquid, and has a rate of return.

Do not do this plan on your own or with an unqualified planner. Many planners say they understand this concept but it takes special knowledge and training. To contact a planner in your area email me at aklfinancial.com or on this website. 

Alan

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Those of us who own businesses, highly appreciated stock, commercial or residential investment real estate assets are often reluctant to sell because of capital gains taxes associated with the sale. But what other choice do we have other than a 1031 property exchange? Is there another way to deal with the capital gain tax liability that so many investors experience when they sell their real estate assets? The answer may lie in the “Deferred Sales Trust.”

This capital gains tax deferral and estate transfer tool could save you thousands of dollars, and at the same time, make a profit on the money you would have paid to Uncle Sam in the year of the sale. Obviously, this strategy is gaining popularity among those who have highly appreciated assets. The “Deferred Sales Trust” can also be more simply described as a no risk “seller carry-back” financing structure.

The process starts with a property owner, transferring ownership of the property to a dedicated trust. The trust then sells the property or stock to the buyer of same. Next, the trust pays you. The payment isn’t in cash, but with a payment contract called an “installment contract.” The contract promises to make payments to you for the rest of your life, and said payments can even continue to future generations or a term. There are zero taxes to the trust on the sale since the trust “purchased” the property from you for what it sold it for.

You can choose to defer the start date of the principal payments. You may have other income and don’t need the payments right away. The tax code doesn’t require payment of the capital gains until you start receiving installment payments. The capital gains tax paid to the IRS is only that portion of the capital gains due in proportion to the number of years established in the term of the installment agreement.

The “Deferred Sales Trust” has the ability to generate substantially more money over the long run that a direct and taxed sale. It is also superior to a direct installment sale as concerns of a defaulting buyer in said installment arrangements are eliminated.

Primary benefits:

1. Tax Savings: when appreciated property is sold, tax on gain is deferred until receipt of payments

2. Estate Tax Savings: accomplishes an estate freeze for estate tax purposes

3. Maintains Family Wealth

4. Estate Liquidity: converts an illiquid asset into monthly payments

5. Retirement Income: provides a stream of income for retirement

6. Probate Avoidance: with proper estate planning

7. Eliminate Risks Associated With Ownership: by utilizing the Deferred Sales Trust, you have taken an asset that is otherwise liability prone and converted it to a no risk asset

FOR MORE INFORMATION CALL OUR OFFICE AT (925) 287-6400

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