If you have a large amount of equity in your home, it might be a good choice to use a reverse mortgage to fund your life insurance policy. This would give you control over – and help retain the value of – your estate for the benefit of your heirs.

A few key points:

• You would lower the total value of your estate that would be subject to taxes. This is because the full value of your home is subject to estate tax; a reverse mortgage will reduce the value. Thus, the estate tax due will be lower. Additionally, if your heirs are the beneficiaries, they will receive the life insurance payout in tax-free dollars.
• Your heirs will be ensured a guaranteed sum upon your death. When using funds obtained by your reverse mortgage to purchase a life insurance policy, you will know exactly what you are able to leave behind for them.
• Upon your death, when your home is sold, the equity that exceeds the loan amount will be subject to taxes. However, the remainder will go to your heirs.
• When you use the funds obtained from a reverse mortgage to pay for additional life insurance premiums, that purchase will be made with tax-free dollars, which means a larger death benefit.

If you have equity in your home, and you want to visit these options, meet with a reverse mortgage specialist to determine if this is the best option for you to have control over your estate plan.