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By Liza Horvath


Further Win-Win Investment Strategies


Q. Your article “Create a win-win in investment returns” answers an important question: Where do you find safe returns in today’s market but, what if you don’t have a second home to sell? You suggest the technique you describe can apply also to a primary residence, but how? Is someone going to buy your home and let you live in it for the rest of your life? How about a follow up article?


A.  Thank you for writing and I am pleased to expand on the topic. My original column outlined the frustration that some seniors are feeling with the low interest rates being offered on traditionally safe investments like bank certificates of deposit and outlined the suggestion that investment property be sold on a lease with option to buy. This technique can create an income stream, defer or eliminate capital gains taxes and also keep principal reasonably safe. That scenario focused on investment properties but similar strategies can be used with your home.


Common among most seniors is a desire to remain at home or “age in place,” the need for additional income and, most likely, a low cost basis in their home which could lead to capital gains tax payments if the home is sold. This combination creates an impetus to seek creative solutions. The Taxpayer Relief Act of 1997 created an exemption that allows homeowners to shelter capital gains of up to $250,000, if single, and $500,000, if married. However, even if you are able to eliminate capital gains tax by using the exemption, it is still a challenge of where to invest sales proceeds to create a respectable stream of income. Also, most of us want to stay in our homes for as long as possible.


Because we live in this fine and free country, agreements can be made between responsible adults that are only limited by imagination – in addition, of course, to the requirement that agreements must be legal and not contain terms that are contrary to public policy. A “contract to buy” can create income and also keep you living at home. In such a contract, an investor gives you a deposit, agrees to make monthly payments and commits to purchase your home after you die. You and the buyer identify a purchase price – the present day value or some future value – and you settle on a “trigger” for the completion of the sale. The purchase date can be your date of death or after the death of the last to die of you and your spouse. The investor will likely want included in the agreement that, should you move to another home or a care facility, they can immediately complete the purchase or, to protect their interest, take possession of the property.


Again, the options are only limited by imagination. If capital gains taxes are not a concern, a buyer/investor can buy your residence now and allow you to stay for life – also known as a life estate. The buyer, in this case, would most likely be looking for a discount in the purchase price. These techniques have legal, tax and financial implications so always have them structured by your legal and tax advisors to make sure your interests are fully protected and that the plan works with your overall estate plan.

Liza Horvath has over 30 years experience in the estate planning and trust fields and is the president of Monterey Trust Management, a financial and trust management company. This is not intended to be legal or tax advice. If you have a questions call (831)646-5262 or email










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