For seniors struggling to make ends meet, home equity and life insurance contracts are two possible sources of additional funds.
The first option, home equity, can offer funds through a reverse mortgage. If you’re at least age 62, you might be able to take out a reverse mortgage, allowing you to borrow against the equity you’ve built in your home while still continuing to live there. As long as the money you receive is being used in the same month it’s distributed, the funds are not taxable and do not affect your income or any Social Security or Medicare benefits. You get your pick of how you would like to collect your reverse mortgage loan, whether you prefer a lump sum, line of credit, or fixed monthly payments. After the last borrower’s death, any remaining equity in the home goes to heirs while any leftover loan balance must be paid but cannot exceed the home’s value.
Secondly, for those facing chronic or terminal illness, life insurance benefits may be available to a policyholder prior to death. Known as a viatical settlement, this type of arrangement is typically tax free and applies to individuals who have been medically certified to have a life expectancy of no more than two years. The insurance policy is sold by the owner to an outside party who assumes responsibility for future premiums. When the insured dies, the proceeds of the policy become the property of the new owner.
When money is tight during your senior years, you do have options other than credit cards that charge exorbitant interest rates and conventional loans requiring monthly repayment. To help make a wise decision, contact the tax professionals at Taxation Solutions, Inc. We can work with you to help you decide which tax-free finances are right for you. Reach us in the San Antonio area today!