Transcript Slide 1

By
Numbers
By the
the Numbers:
$4.3
TRILLION
Seniors hold approximately
$4.3 TRILLION
in home equity!
By
Numbers
By the
the Numbers:
Nearly two-thirds
of today’s seniors rely on
Social Security for
half of their income
By
Numbers
By the
the Numbers:
Average cost of nursing
home care in California:
$6,306 per month
Average cost of assisted
living in California:
$2,709 per month
By
Numbers
By the
the Numbers:
Only 10% of Baby Boomers say it
is very important for their
parents to leave them financial assets
or real estate
96% of Baby Boomers
said their parents
don't owe them an inheritance
So, what should you do with your money?
•
•
•
•
•
•
•
Travel
Long-term care insurance
Pay off debt
Invest for future generation
Buy additional real estate
Home improvement
Estate Planning
Questions
QuestionsI Iwould
would have
have: …
1. Who is EquityKey™?
2. How does the
EquityKey™ program
work and how does it help
me?
3. Can you walk me through
some examples?
History
of of
EquityKey™
The
History
EquityKey™
• Created in San Diego by Financial
Advisors frustrated by lack of
options for senior clients
• Began product development in 2004
• 2 years of legal, insurance and real
estate review
• Began product distribution in 2006
• Offices in San Diego, Irvine, and
New York
• Acquired by KBC Bank in 2006
Who is KBC Bank?
• Major European Bank serving
11 million customers
• Employs 50,000 people worldwide
• Publicly traded with over
$450 Billion in assets
• Ranked Aa3/A+/AA- by Moody’s,
S&P, and Fitch
A New Generation of Seniors
• Seniors are the fastest growing
age group in America.
• Seniors are more active than
ever before.
• Average life expectancy has
increased 7 years since 1970.
A mixed blessing…
AAGrowing
Dilemma
Growing Dilemma
• Shrinking Social Security benefits
I need
more income
than I
thought!
• Rising cost of living and medical
expenses
• Expensive new retirement dreams
• Longer life expectancy
ARE YOU REAL ESTATE RICH, BUT CASH POOR?
“ I own $1,000,000 in real
estate and still struggle
to pay my bills.”
Pat – 71 years old
If you want more money…
…what are your options?
Continue working.
Sell your home and rent.
Traditional mortgage.
Reverse Mortgage.
There
are ways
waystotoaccess
access
cash…
There
ARE
your
cash…
…but they may erode your estate.
 Conventional loans and
mortgages
 Reverse mortgages
Reversemortgages
Mortgagesare
are helpful,
helpful, but…
Reverse
but…
• High origination costs and fees.
• Creates new accelerating debt.
• Erodes valuable equity.
• Interest rate is variable.
• Must live in home full-time.
• Only applies to primary residence.
Still a great product!
THE EquityKey™ SOLUTION
EquityKey™
- Your
Partner
Growth
EquityKey: Your
Partner
in in
Growth
Equity Key will provide
debt-free cash
to the homeowner in exchange
for a percentage of
the future appreciation
of the property.
Your current equity remains YOURS
EquityKey™
- yourPartner
partner
growth
EquityKey: Your
ininGrowth
Example
In 2017:
$1,000,000
In 2007:
$600,000
Original equity of
$600,000
remains YOURS.
“How“How
muchMuch
moneyCan
willI Get?”
I receive?”
One Qualified Homeowner - 50% Participation
Example:
Home value
of $600,000
12% - 15% Home Value
$72,000 - $90,000
Two Qualified – Can choose 100% Participation
24% - 30% of Home Value
$144,000 - $180,000
Actual amount paid depends on the health and age of the
homeowner as well as the condition and location of the home.
So, what would you do with your money?
•
•
•
•
•
•
•
Travel
Long-term care insurance
Pay off debt
Invest for future generation
Buy additional real estate
Home improvement
Estate Planning
What if my property appreciates in value?
• YOU keep the money you
received from EquityKey!
• EquityKey shares in 50% of
any appreciation over the
Initial Appraised Value of the
property.
What if my property depreciates in value?
• YOU keep the money you received
from EquityKey!
• The money distributed is not a debt.
EquityKey accepts the risk of the real
estate depreciating in value.
• If your property loses value at the
time of your death or sale, then
EquityKey will lose the money they
paid you.
The Rest of the Story
• National annual appreciation over
the last 40 years:
6.1%
• 2006 – Change in CA home values: -2%
• 2006 – Change in # of homes sold: -23%
• 2007 – Projected U.S. home prices: -8.7%
Why would EquityKey take the risk?
EquityKey believes that real estate over
the long term is a good investment.
With a long-term investment horizon,
EquityKey is willing to invest some
money today for a return in the future.
EquityKey purchases, pays for and
holds a Life Insurance policy on every
client.
Why a life-insurance policy?
•Protects EquityKey in the event of
your untimely passing.
•Enables EquityKey to purchase your
home upon your passing and pay
your estate quickly.
EQUITYKEY PAYS THE FULL COST
OF INSURANCE
“How
Dodo
I Qualify
With
How
I qualify
for EquityKey™?”
EquityKey?
• Must be at least 65 years old
• Must be a property owner
• Must be insurable
(reasonably healthy)
What are the costs?
•
A small refundable deposit of $300
–
–
•
Refunded if not medically qualified
Refunded if you sign the EquityKey
Investment Agreement
Acquisition Cost = Actual costs we
incur to sell your property after we
have acquired it…if we acquire it.
We will hold back 8% of the FMV to cover
the costs to sell the home if we take
possession.
What does the Acquisition Cost cover?
The actual costs to sell the home.
These costs include:
• Making the property ready for sale at end of
agreement – normal reconditioning costs.
• Real estate listing commissions
• Closing costs
Keep in mind that your heirs will incur
costs to sell the property with
or without EquityKey.
With EquityKey, we take care of it!
3 Uses for EquityKey™
• Cash Flow
• Income Replacement
– For Future Medical Needs (LTC Ins.)
– Upon Death of Spouse (Life Ins.)
• Estate Planning / Tax Reduction
How does EquityKey help me?
Cash Flow Example
Example only. Please consult your advisors to see
if this example is appropriate for you and your situation.
Bob’s Story
This is Bob. He is 73 years young.
Bob is a good-looking, healthy male.
His home today is worth $500,000.
Let’s assume he will live 12 more years.
Each year, home prices go up by 3.2%*.
EquityKey will pay Bob $67,500.
* Source: Moody’s Economy.com – San Diego 10 yr projection
Bob’s Story
12 years
later, upon
Bob’s death
Final Appraised Value of Home
$800,000
Initial Appraised Value of Home -$500,000
Home Appreciation
$300,000
Bob’s Story
Final property value:
EK share of appreciation:
Acquisition costs:
Bob’s estate receives:
$800,000
- $150,000
- $64,000*max
$586,000
*Actual selling costs ended up at $48k, so $16,000
was credited back to the estate.
AND
Bob received $67,500 from EquityKey
Total that Bob and/or his estate received:
$669,500
What about the taxes?
The tax on the money received is not
determined until:
1. Our client passes
– or –
2. The home is sold
Based on our extensive legal review, we believe
the money received will be calculated as long term
Capital Gains at the time the house is sold, not
when you receive the money.
Of course you must consult your tax advisor.
How does EquityKey help me?
Income Replacement Example
Example only. Please consult your advisors to see
if this example is appropriate for you and your situation.
John
& Irma
Smith
John
& Irma
Smith’s
Story
Smiths: John 73, Irma 70 - Good Health
Home Value: $750,000 with no debt
$24,000….John’s Pension (50% Survivor Benefits)
$19,200 ………… Soc. Sec. (John)
$10,200 …………. Soc. Sec. (Irma)
$53,400 …………. Total Income
John & Irma Smith’s Story
The Smiths’ challenge:
What happens to Irma if John
passes away first?
$12,000 …………. John’s Pension (now cut in half)
$19,200 ………… Soc. Sec. (Irma keeps John’s)
$
0 …………. Soc. Sec. (Irma)
$31,200 …………. Total Income (loss of $22,200/yr)
John & Irma Smith’s Story
The
1. Started with a free, no-obligation
consultation to discuss the EquityKey™
option.
EquityKey™ Plan
for the Smiths
2. Solution was a fit and John was able to
qualify.
Initial Appraised Value of Home
$750,000
3. John and Irma received an offer of:
$100,000 Lump Sum payment from EK
John & Irma Smith’s Story
The
EquityKey™
Solution for
the Smiths
The Smith’s accepted the EK offer
and purchased a $345,000 life
insurance policy on John’s life.
If John dies first, Irma can use the $345,000 to
replace the $22,000 in annual lost income.
AND IF
Irma dies first, John cashes in or sells the policy he
no longer needs to replace Irma’s lost Social
Security
How
me?
Howdoes
does EquityKey™
EquityKey™ help
help me?
Estate Planning
Example
Example only.
Please consult your advisors to see
if this example is appropriate for you and your situation.
Planning
Catch
22
TheEstate
“Catch-22”
of Estate
Planning
Estate Before
Taxes:
$$$$$
Estate After
Taxes:
$$
Miriam’s Story
Age: 74
Miriam lost her husband 3 years ago.
She has good health, and is happy and
active, with a 14-year life expectancy.
CURRENT ESTATE
IRA
Home
$1,700,000
$1,000,000
TOTAL
$2,700,000
Miriam’s Story
Concern:
How can we reduce the growing estate tax
burden and leave more to her heirs?
FUTURE ESTATE – in 14 yrs
IRA
(If she lives off interest) $1,700,000
Home (5% appreciation)
$2,000,000
TOTAL
$3,700,000
Taxable
Miriam’s Story
Step 1
• Held a consultation with her Financial Advisor
Step 2
Signed up for the EquityKey™ program and put in place an estate
planning strategy for the money.
Initial Appraised Value of Home
Income Received from EquityKey
$1,000,000
$ 120,000
Step 3
• Miriam gifted the EK funds ($120,000) into an Irrevocable Trust
• Her Trust used the funds to purchase Life Insurance on Miriam with
a Death Benefit of $485,000.
Miriam’s Estate Value With & Without EK
Without EK Program
With EK Program
$2.215 Million Net Estate
$2.381 Million Net Estate
Gave 166k more to her estate
by using the EK Program.
What else should
I know about
EquityKey™?
How is the value of the house determined?
2 appraisals are ordered
EquityKey pays for BOTH appraisals on the
front end
Homeowner chooses one appraiser
EK chooses one appraiser
Average the 2 to determine the home’s value
Same process at the end of agreement – appraisal
costs are included in acquisition costs
What
type
ofof
properties
qualify?
What
types
property qualify?
• EquityKey wants to participate in the
growth of real estate in California.
• EK will partner with you on:
– Primary residence
– Investment Properties
– Second Homes
– Commercial Properties
Can
Can II move?
move?
Yes. You may move at any time.
Unlike a Reverse Mortgage, you do
not have to live in the property.
You can move out of the property but
will continue to share in the
appreciation with EquityKey until
you sell or pass.
What if I want to sell?
You may sell at any time…but, like a CD there is
a penalty for early withdrawal since the real
estate has not had sufficient time for appreciation.
Costs at Early Sale =
50% of appreciation (to date)
+
Early Sale Charge …a sliding scale beginning in
year 1 at 15% of IFMV and decreasing by 1%
each year.
After 10 years or upon death, there is no Early
Sale Charge.
Can I move this program to a new property?
Yes, with approval
No Early Sale Charge
What if there is an existing mortgage?
• You may qualify as long as the
mortgage owed is less than 70% of the
value of the home
• OK if you have traditional 1st mortgage.
• OK if you have Home Equity Line.
Reverse Mortgages and other Negative
Amortization loans are not allowed.
What happens when a spouse passes away?
If an EquityKey qualified homeowner passes,
the surviving homeowner may :
1. Continue to own the property and share the
appreciation with EquityKey.
2. Offer EquityKey the right to acquire the
property, or
3. Pay EquityKey 50% of the appreciation and
retain ownership of the property.
If non-qualified spouse passes:
Current EK program remains unchanged
Can
kids keep
Can the
my children
keepthe
thehome?
home?
Your children may buy out
the EquityKey portion of the
appreciation and keep the
home after your death.
Acquisition Cost is waived.
So, what should you do with your money?
•
•
•
•
•
•
•
Travel
Long-term care insurance
Pay off debt
Invest for future generation
Buy additional real estate
Home improvement
Estate Planning
Questions?